Transcripts
1. Introduction: Hey guys. My name is Peggy and I am the founder of the Pigeon Letters. I am an author, and artist, and educator. This class I'm going to be talking with you all about that ever digging question about how do you price your work. This class will be covering multiple aspects of this. Who is this class for? You can be the very beginner who has never priced work before ever, ever, ever, and you want to start doing it. You can be somebody who has made something for some friends and charge them, but you're not really sure, and you want to take it to the next level. You can be a seasoned artist who has already set pricing and is just curious, wants some validation that is this the right way to go, or maybe you have a formula that you haven't visited yet that you want to explore. So, this class is for everybody. I'm super excited to get down into the gritty with you to talk all about pricing. Again, it's a question that comes up all the time. So, I'm very, very eager to get started. I will see you in the class.
2. Getting Started: Welcome to the class guys. The first thing that we're going to jump right into to kick off is, to own your work. Confidence is your battle. The only person standing in your way of making it from here to here is you and all the reasons why you think that you can't do it. If you're starting to get the idea that you want to start involving in your practice, whatever the scope may be, but you're not sure if you're ready. I will tell you right now that probably means that you're ready. If the idea is there, you may just need to find the resources on how to do it. So, pricing is one of the big ones, and it's an obstacle that gets in the way constantly. So, I'm super happy to drive into that with you. Secondly, let's say somebody has reached out to you, and ask you to do a commission for them. That's often the prompting reason that people start wondering how to price their work. They are coming to you for a reason, and that's because they recognize the time, the effort, and the skill that it takes to hone your craft, and you now have something of value that that person wants to respect and be able to appreciate furthermore. The confidence part of things is a topic that we will consistently be revisiting, because it is the number one thing that always stands in the way. Think about it through. Everything that we have to practice. We put in so much time, effort, money, investment, learning, and practice education. I proudly say a few words multiple times, but it's true and that's how much we do it. I can say it a million times more. So, these are things of value, and you need to own that value in yourself, and know that you have reached a point now where you can put that into the world. Getting it off my soapbox about the confidence that I do want you to keep that in mind as we move forward. In the next video, we will start to talk about how to charge.
3. How to Set a Price: As a freelance designer, how do you charge your work? Oftentimes, you'll hear a lot of people mention the word hourly. I'm going to tell you something, hourly is a bad word, don't use the word hourly when you're quoting people. There are so many reasons. If I'm coming to somebody as a consumer and I want an estimate on something, when I hear, "I charge this much hourly", that gives me nothing to go off of, I have no idea what that means, it also makes me doubt them a little bit. When somebody says hourly, I think, okay, well is this person going to intentionally go slow? Are they going to lie about their hours? I don't know who this person is, I know that I like their work, it's just a fishy area. Then not to mention as a designer, you'll be leaving so much out of your estimate and you'll be undercharging yourself. You might think, "Oh, this hourly charge is really attractive to me", but then you forget the cost of gas that it takes to get to the supply store, then the supplies that you have to buy, and all of these extras that go into, whatever it is that you're creating, whether it be software or et cetera, we'll get into it later but, you're going to be dismissing all of that and selling yourself short. So, there's two reasons, hourly is a bad word, don't use it. It doesn't mean that you can't use an hourly base as a reference for yourself. So, let's talk about providing an estimate. So, if somebody is going to ask you what the cost is going to be, you're going to provide a cost for a project that you're going to do. As a consumer, when I hear a flat rate or an estimate of a flat rate, I know what to expect, I know what I'm going to be putting into this and I know how to budget for it. That gives me solid ground to then accept this flat fee that has been provided, knowing that it's an estimate, and moving forward, and being a lot more apt to put down a deposit. So, let's say that you have a large project to do and you know how long things typically take you to get done, you know whether you have to source your supplies, you know how long it will take you to do that, you know how much the supplies will be. Maybe there won't be any and maybe there will be, So, let's say that those materials including gas costs you about 50 bucks. For a reference, let's say you charge, you value yourself at $45 an hour. Based off the project and you do some math in your head and you think, okay, there's going to be a lot of sourcing, this is a super long project, I'm going to have to create this many drafts, I'm going to submit it, we're going to talk about it, there is going to be revisions, bla, bla, bla, you estimate in your head, this is probably going to take me about 20-ish hours. So, if you're going $45 an hour, times 20 hours, you're at 1,260. But then don't forget you have $50 and gas and materials to also factor in, which then reaches 1,310. If this was me, I would round this to an even 1,300 as an estimate, and I'd feel good about that. From there, somebody is going to either accept or decline, they might say this is what's in my budget. Don't negotiate with them, simply adjust your offer of what you're willing to provide because you never want to downgrade your worth. You can just provide a little bit less and see how it can fit in somebody's budget and that would be a more applicable negotiation. Then once you have that separate and somebody doesn't agree to it, the first thing that you want to do is collect a deposit. A deposit should be half of what the total balance is. Then once you receive that, that's when you begin the work. Don't begin any work until you receive the deposit because, that is your valuable time and there's no guarantee, until you have that security deposit which will be non-refundable. You know that you can please this client because you can make revisions, you can do things like that, you have wiggle room. One of the main things that I tell people is, if you don't reach those 20 hours, don't charge them for it, they don't know that you're thinking hourly, they know you're thinking in a broad spectrum of your projects and so, that's what you want to hang onto. So, if for whatever reason, it doesn't take as long or it doesn't take as much as what you thought it was, give them a realistic price and be honest about it because, if you quote them 1,300, but then their total ends up being 1,150 and their final balance is less than they expected, they know that you are an honest partner to then have to make a long term relationship. This isn't always the case, a lot of the times it evens out. That said, there are some times that you'll go over an hour or two, this is up to you if you want to add that hour on or not. If it's a huge project and I go over an hour, I'm not going to charge extra money because this is a big lump sum of a project. However, if it's a three hour project and it takes me four, absolutely, that's a time that you would want to add that hour. They're aware that this might fluctuate, because you have said that it might fluctuate. At the completed project let's say you make three drafts for a person and then you submit them, always watermark them and provide them in a low res file. If you don't watermark and you don't provide them in low res and you submit it, even if it's not a complete piece and it's not polished up, it still is three pieces of artwork that they can then use and they're paying for one, in this example. So from there, once they approve one or they might make some tweaks or whatever the case may be, when they decide on a final product that they like, collect the remainder and then provide them with the higher res file. Cool. Use hourly as a base for sure but, always quote in a full estimate because it's just a little more solidifying to the consumer, to the client, whoever it may be. The next lesson, we're going to talk about pricing specific products.
4. Pricing Products Competitively: If you're a creator and you provide physical products for purchase, you want to make sure that you are pricing competitively. This doesn't mean that you want to be the lowest rate out there. It actually means the opposite. So, here's what you can do; research your competitors in the sense that you're just gathering the quality of the item that it matches your quality, the type of item that is. If it's an illustration, look at the depth and the time that it must've taken, you want to find similar products. Make a list of the prices for these items. Make sure that the item is comparable, so you want the same size, the same type of finished product; those details matter because pricing is based off of them but then you can look at all these prices, add them up and then divide them by the amount to find the median and then you see the average price. Now, here's the kicker; you don't want to charge the average price, you want to charge slightly higher than average. Here's why: Let's say that you are at Nordstrom and you grab a pair of jeans that are 50 bucks you grab a pair that are 90 and you grab a pair that are 120 and you try them all on and for some reason there's something in your head that says those $50 jeans feel a little bit cheap. There's something about it. Even though they may be the same quality, you don't want to spend 120 bucks on those other jeans because that's a lot of money. But then there's like those $90 jeans something about them just says quality. I don't know what you guys spend on your jeans but this is just a random example to show you that people want to pay for quality and value. So, take that median number and add a few dollars to it depending on what that realm looks like and price yourself for value and for quality. If you set your price, you can always adjust it later, but this is a good starting point. If you start selling out of everything super fast, it's time to price it higher because you know that it will go and you know that your value is there. If you have an issue where you're not selling anything at all, your price might be a little too high, so these are things to think about. Now, that said, there are platforms like Etsy that are slow building and you're not necessarily going to see a bunch of sales all at once. This is something that takes a little bit of time. So, you have to factor in time and your cost and things like that. So, that's why I say that pricing slightly above average is a good starting point. So, in the next video we're going to talk about expenses and how to make sure that you actually are profiting off of your pieces and whether or not you need to re-evaluate your spending or your price points.
5. Expenses: All right. So, let's talk about pricing of products based off of monthly expenses. This is a formula that actually Etsy has something like this that even exists on their seller tools section. There's another example that's very similar to what I'm about to show you. Now, I don't love pricing this way because oftentimes I think that it's undervaluing you, but it is a really good formula to figure out if you are profiting enough from your work or if you're just breaking even and putting all of this work into something that's not taking you anywhere. If you do want to launch a business, if you do want to excel in this area and give yourself the time, the money, so that you have the time to then further create, then this is a good structure to make sure that you're pricing accordingly. That your expenses work in correlation to your price points. So, think about some things. When we talk about expenses like I did on the project for the first example, we're talking about gas and supplies. Right? But let's really break down expenses here. Let's say you rent a studio space and your studio space is $400 a month. You also have to get to your studio. So the transportation let's say whether gas or train or bus is 60 bucks a month. Then you have your office supplies. When you print you need paper and ink. Things like these, sticky notes, things to write yourself notes, things to get you organized. So, let's say 20 bucks a month in office supplies. Item materials, I don't know what you're creating. Maybe you need some, maybe you don't. I'm just going to put an estimate out there and say $50 for product supplies which will cover your creation of whatever it is for that month. Let's say you have a website domain, let's just price it at seven bucks a month. You dabble in some advertising to make sure that you have some exposure. This can even be a coupon in your actual packaging. So, you paid for those coupons or your business cards could be in advertising. These are things that you factor into your expenses. So, that's $20 a month. Let's say credit card processing fees. If you list on Etsy that's just one as an option that could be listing fees. So, fees like this. So, I'm just going to throw out $10 a month, and then packaging supplies, your boxes, your tissue paper, things like this. If you outsource to have packaging done for you on your behalf, these are things to factor into your expenses. Let's say that you spend $30 a month on packaging supplies. So, all of this amounts to $597. Okay. So, let's just say that your expenses sum up to about $600 a month. Then let's look at your sales. If you sell three items a day in a 30-day month, that's 90 items every single month. So, if you're selling 90 items a month which I hope that you are, I hope that you get there, let's look at your total expenses. You take that number, 597, divide it by the amount of items which is 90 in a month and that's going to equal $6 and 63 cents. That means that if all of your products cost the exact same amount, it would be $6 and 63 cents. That is just the amount of money, not time. Just the amount of money that you are putting into your product. So, that said, ideally at a minimum, you want to double that number for your product listing. This is another time that you can look at the market value and confirm that competitive pricing makes sense. If it still is average or slightly under average, bump it up and that's great because that's more profit for you. The point here is not to price your work, the point is to ensure that your expenses are low enough to where you can make a profit. If you have a problem after doing that formula and seeing that your price per item is more than the average price per item in the market, in your competition, then something is wrong with your expenses and it is time to re-evaluate them. Don't put yourself in the situation where you're not making money because you're spending too much. Makes sense? The next video we will talk about actual numbers, and how you can price your own value per hour.
6. Numbers - Let's go there.: So, you might be at a point where you have absolutely no idea what this number looks like and that is the case in a lot of circumstances when I will throw out a number and you might be absolutely shocked at how high it is because you might be used to working a job that makes about $17 an hour and then you hear 35 and you're just blown away like, "How is that okay?" Remember, we're talking materials and we're talking about the time spent, we're talking about all of the years and time and money and investment and education and learning and patience and practice and all these things combined, that makes your work absolutely worth it and people know that and people will pay for that value. There's nobody out there that does exactly what you do even if it's similar, it's not your style. So, trust me, there is room for you and you need to own these numbers. Now, I can't tell you how to price your value but I will say this, even as a very beginner, you haven't done much, never ever quote a price for a piece of work that values you at lower than $25 an hour. Don't ever do it. $25 an hour is barebones, you're paying for materials and you might be paying yourself 10ish, 15 bucks an hour. What you don't want to do is start dipping below living wage. Even if you're not doing this for a living, even if you're just doing this as a hobby and there's another reason why this matters, is because it's not only hurting you and your growth and where you want to take this but it's hurting other artists too. Because if somebody charges 20 bucks for a piece, that's going to hurt the person over here who charges 60 for it and then somebody else is going to start to charge lower, somebody else might start to charge lower and then it's hurting the community and the worth that we actually have earned. So, that was something that was told to me back in the day when I did hair and it came down to pricing and it was, "Gosh, pricing is tough. How do we discuss this? It's ever changing, I'm constantly adjusting mine too." But somebody told me one time, if you undercharge you're hurting not just yourself but everyone around you. When I heard that, it held me accountable and then I didn't feel so selfish by asking for money, I felt like okay, this is industry standard and once I started doing it and seeing that people were paying for it, I realized I am worth this, this is industry standard, absolutely and the confidence came as that was progressing. So, that might be helpful to hear. Now, as a beginner, you might be a hobbyist, you might not want to take this anywhere but you might be getting questions about custom work or whatever it may be. Don't sell yourself short. Remember, the confidence will come but for the sake of providing actual numbers, I know I mentioned not to go under 25 but start at 35 an hour. Remember not to quote these numbers, they're just in your head so you can provide an estimate. You know how long artwork takes you. So, take that number, 35 bucks. Let's say that a piece takes you two hours, that's a long period of time that you sat there and you worked on something, two hours. $70 is not a lot of money to ask for an original piece. Let's say that you are opting into doing this for a living, you've been doing whatever it is in your craft for about a year now, you know you have some room to grow. Don't we all? We always have room to grow. So keep that in mind. So, don't think oh I have so much I still need to learn because so do I, everybody does. But I would say $45 to $50 an hour would be inappropriate range. This is according to me, it's not according to the facts. I'm trying to be generous with the lower numbers that seem about average so, that you have a leg up on your competition but you're still valuing yourself at a higher estimate that's fair because there are people with degrees that only charge 35 bucks an hour which blows my mind, don't do that. I mean you can but just not lower than that please. Now, moving into the next here. If you're a professional artist, this is what you do full time, this is what you're known for, this is your craft, no reason that you should ever value yourself under 55 an hour. I know that there are people that charge an upwards of $100 an hour, $200 an hour, $250 an hour, I've heard of $500 an hour and it doesn't mean that they're are at some high place, it's that they're valuing their work. They're taking what they've learned, they're taking the time, they're taking the money that they put into learning and practicing and materials and all these things and they're pricing themselves accordingly. Some people can do that, and that's awesome. Good for them. So, know that if you are doing this for a living, there's no reason you should undercut yourself below 55. Don't do it. Now, this is a tricky part because let's say you really take off and people want a lot from you. Remember what we talked about, if you are selling out, if you're getting all the jobs, your pricing could probably increase a little bit because you might get overwhelmed and you might have too much going on, If you're a yes person, I'm a yes first, I totally get it so there's two things you can do. You can learn to say no or you can increase your pricing. If you increase your pricing, it still might come and then it's time to learn when to say no and creating a balance so that you actually have time to do all the other things that you want to do, whether it be in the work world or your personal world. So, some factors and you are maybe going to say no are, what's the piece itself? How much time and energy and effort is going to go into this for me? What am I having to put into this that will take away from, you name it whatever it is? That's one aspect. Another one is, what kind of client is this? Will this be good for my exposure? Will this be good for my portfolio? Will this be good for my resume? Will this be something that I can create a long lasting relationship out of? Will this be a one stop shop? Is this something that I'm just going to do and put all this time and energy into and never see them again? More times than not, you can probably gauge that from first contact and seeing what the project itself may be. For example, a design in a magazine issue that might come up monthly or quarterly versus a tattoo design. However, that tattoo design might be back for six more but building relationships with the corporate world versus building relationships on an individual level, they just take different places. So, these are things to contemplate. Let's say that somebody asks you about a day rate. Many artists have day rates. This is usually for larger projects that might take three days or so. It can't really be gauged hourly but in the back of your mind, you gauge yourself hourly, you have a value that you give yourself so, then you have an accurate quote. Because if you value yourself at $45 an hour and you are going to assume that it's about a nine hour workday, then you can comfortably charge a day rate of $400 a day. This is not something to frown out, it seems like a lot of money but there are companies that will pay $500 a day depending on the person. So, don't be afraid of these numbers that might seem large to you. In the next video, we're going to dive deeper into who is the client, what is the piece being made and how to price for that?
7. Who is the client?: Let's talk about who your client is. This will factor into the price as well. So, let's say it's direct to consumer and this is for personal use. This would be a good time to just utilize your hourly wage. Don't think about anything further. It's pretty simple and straightforward. It's usually just an original design. There's not usually edits involved. An individual use might also be a tattoo design. You might feel apt to charge less because you know that they're going to pay for the tattoo to be done but that's not, that should never be the case. You are creating a custom illustration, you should charge what your custom illustration cost is. Let's say it's personal use but it's something for weddings. That's when you get into a whole plethora of different things and this can have to do with place cards, and it could have to do with envelope writing. These are things that are very time-consuming. That said, your client is also purchasing usually in bulk, and you can use the same competitive price point exercise that we talked about. You record down some prices that are similar to what you are creating and then find the median and price slightly above. Another nice thing that you can do is, depending on the amount of place cards or envelopes that you do, it's just nice to have a slight discount. So, it could go down a couple of cents per place card. Let's say you're doing 50 cents of place card for a huge amount, and this is a low end, a lot of times they see around the dollar range for place cards per place card, envelopes $2-$3. This also varies. So, this is dependent on what you want to charge and then do think about materials? Oftentimes this client will provide paper for you. So that's something to think about too. But, these are all things that should come into play. If somebody is wanting an invitation suite, this is usually your invitation, your save the dates, your thank you cards, your reception info, sixish pieces or so of a design. This is typically done and then the files are given to them to then print at their leisure. Now, this is a suite that you've created in each individual piece is a custom artwork. So, you can bulk price this. Again, search your competition and see what they're charging, create a slightly above average cost for that type of a project. Let's say that your client is a corporate player, and they want to do some branding, that includes logo design, advertisement, maybe website design, it could be a full change, it could be just some add-ons that's similar in line for what they have, and this is a full branding suite. So, this is something that you have to consider. They are using you, you're a silent partner. This isn't something that is necessarily going to be well known that it's your work. So, it will be something that you put a lot of effort into. There's going to be a lot of time, a lot of research, a lot of brainstorming, a lot of back and forth with those companies. So, that time is valuable. This could be for an ad, one time, and then you have to put in the time and then the research to ensure that you're on brand. What if the corporate partner is wanting to do resale? Where whatever you're creating they sell it over and over and over again. This is where you recognize that they're actually making profit off of your artwork. So, that's when you get into a licensing deal, which we'll get into in the next video.
8. Licensing: What is licensing? That's a foreign word, yet, it comes up so much as does royalties. Now, these two go hand in hand. So, the way the licensing works is usually you will receive an advance. That's something that you will have to consider, sometimes you won't. Most of the time you should receive an advance. The way that that works is you receive a lump sum to create the work that you're going to do, and then you turn it over to the client. When the client starts reselling it, you will have a percentage that you will earn. Your advance is paid back from the beginning of those royalties. So, you won't get paid your royalties in the beginning, because that's coming out of your advance. Once that's paid back, whatever your advance is, let's say your advances $1,000, so, the percentage that you would be getting in that first part, until it reaches a $1,000, you won't receive your royalties. So, that gets that part of the way. Licensing is a contractual deal that will put you in a partnership with somebody based off of one piece of art. Whatever that piece of art, or design, or whatever is being resold, even if it's not a product that you made or something, whatever it may be, they sell it for whatever it is they choose to sell it for, and you receive a percentage of those sales. In the art world, a typical percentage, this number is pretty low, but a typical percentage is around 6 to 8 percent, and that's considered fair for the art world. It's a high-ish average. Sometimes I've seen low, like three percent. I've also seen up to 12. So, it really depends. But, if you can find yourself in a 6 to 8 percentage licensing deal, know that you're probably in good hands. When I first saw that number, I was just like, that's a joke, right? But I realized that's actually how the numbers work. So, it is a low amount. But that relationship is long term, and you are receiving money the more and more and more it's sold. So, it can be worth it if in the long term, it ended up making you more money than if you were to just present a custom design that they then own, if that makes sense. Now, licensing is one of those things that you have to really read the contract. There are so many contracts that will come your way, and you get so excited about a deal that you just want to sign off and then you forget about reading the details, and you might screw yourself in the long run. One of the biggest things that you can hurt yourself by not reading a contract over is a non-compete. Now, non-compete mean that you cannot provide artwork for other companies. Obviously, something that you're licensing with that particular company, you're not going to mass produce, you're not going to sell on your own, unless that's agreed upon somehow. But, usually it's designated for them. But, there are some non-competes that don't want you doing any sort of design of anything for any other company, and it says it somewhere in that contract, and then you can sign that, and then you can get into big trouble if you decide that you also want to work with company X, and then company Y, while company A is over here like, ''Hey, remember we have this contract.'' So, that could be a really bad thing. So, really make sure about non-competes. If you decide that you want to sign a contract that has a non-compete, make sure that you really want to work with that company, and that it's going to be a really good choice for you long term. Sometimes you can negotiate contracts. I have had situations where I've had a non-compete come up, and I have negotiated it out of the contract completely. There are also some times that I had to say no because they wouldn't take it out, and it was a really hard decision. But, it's just something to think about and to really mull over and see what's worth it, what's not. Another factor that's important is, sometimes they won't have a contract. It could be a smaller organization, and they don't have a contract. You want to contract with them. You want to have a contract when it comes to any licensing. This is guaranteeing that you're protected and that you will be paid. If you don't know where to start, I am by no means legal guidance whatsoever, but I have attached a draft in the project tabs of a licensing contract that you can totally use. It is something that I was provided by an attorney. So, here's to hoping, but I can't guarantee it because I'm not an attorney. But, there are blank spots that you can fill in your information, and then that should get you started there.
9. Wholesale: This can get into wholesale if you want to get into a boutique or stationery store or what have you. This is something where you want to price wholesale so that then your reseller can also make a profit and you both win. It also gets your name out there and then people are able to shop to you directly and things like that. So, it is good for exposure and whatnot. To price wholesale, do you remember that graph that we used that is based off of your expenses? This is a good way to do it because if you double that, oftentimes, it will be less than what you want your profit margin to be. So, that would be a good wholesale price that would then move into retail. Also, typically, wholesale is offered anywhere between 30 percent to 60 percent off depending on what you want to deal. That could also depend on your expenses and things like that. So, factor that and make sure that you are still making some profit and get yourself into some stockists.
10. Next Steps: All right, you guys, that's what I have for you for pricing work. I hope that this class was helpful. Just remember, the formulas work. So, when in doubt, use the formulas. Do some exploration. Do some price comparisons, and you will be well on your way, and remember the biggest thing that you will always come back to is your confidence. It's really important to own your confidence and know that you are an artist, a designer, a maker for a reason, and people are coming to you for a reason, and there's room for you. If they're not coming to you yet, they will be, and if they don't know your work yet, it's because you need to give them the opportunity to discover you. So, own your work. Don't overthink it. The formulas work. Know the market, price competitively, and there is not a solid project for this class, but assuming that you took some notes, I would love to see some discussions on the top three things that you had as a takeaway, and how you might choose to alter or change your current pricing structure. Mostly, I just want a prompt conversation around this very important matter. So, thanks again, you guys. It's always a pleasure and I can't wait to hear all of your thoughts. So, till next time.
Peggy Dean, Top Teacher | The Pigeon Letters
