I recently spoke with a Design Business Association member about his business. When he started off in 2006 he charged £30 per hour. He struggled for a long time. Now he charges £110 per hour. He works with large international businesses. What did he do to get here and what can other design businesses take from his experience?
He highlighted a number of insights about the market for design that have guided his thinking which I share here, along with some possible implications and actions for design businesses to consider:
• The market rate for what design can be sold for is decided by design businesses not clients. The first time a client buys design at a particular rate sets their expectations for future transactions.
Implications: Agencies and businesses can become locked in ‘expectation fix’.
Action: Be aware of the nature of your selling and buying market.
• The market for design is divided into jobbing designers and design experts. Jobbing designers work for £30 per hour and turn out design. Design experts have a unique perspective of how businesses can create meaning.
Implications: There may be a mismatch between the idea in a client’s mind about design and the capabilities of a design business that lurks beneath the surface.
Action: Check that who you are matches correctly the expectations of the clients your working with. Include in your presentation or meeting a way to explain which group you are in.
• The market rate for design has a long tail. There are a large number of designers scratching around at £30 an hour. They are busy. The perception they give out is that they are doing well. ‘We’re working late tonight, pulling an all-nighter.’
Implications: Does this sound like a design expert or a jobbing designer? Would you trust your solicitor if they were doing this, or your surgeon?
Action: Listen for signs that you’re in a conversation with a client who has been conditioned at the tail of the market. This does not mean they’re a dud. It just means you might have to work on the set up of the conversation.
• The £30-an-hour mob don’t understand utilisation. Utilisation is not how many hours you can work. It’s how many hours you can bill. You don’t need to bill every single hour that you work – in fact you can’t, its impossible.
Implications: A low hourly rate means you have to work your tail off beyond a point where quality can be achieved. By pushing your rate up you can set your utilisation rate at a realistic and achievable level. Imagine the effect on your productivity and the quality of your ideas.
Action: Raise your rates so you don’t have to kill yourself, so you don’t have to stay busy, grinding away.
• There is more to price than how much you’re going to earn. Wrong price=wrong client=wrong results=no results.
Implications: By starting the relationship with a low price you create a downward spiral that ultimately benefits no-one. A client who agrees to invest more is brought into the process.
Action: Benchmark your rates against the market in the area where you work. Decide on what this means for your business going forward. Quote your source of benchmarking when explaining your pricing.
• Designers don’t understand the maths. Many designers are not educated from the get-go to do business.
Implications: Designers need to decide to grapple with this. You don’t have to be brilliant at it. You just have to be better.
Action: There are sources of information. Rather than ask your mum to phone up other agencies to find out what they charge (true story), use industry information like the DBA’s Charge Out Rate Survey.
• Intermediaries are getting involved in between designers and clients. Whether it’s procurement departments, matchmaking agents or others.
Implications: What does this say about the market for design? Design consultancies are grappling with the challenge of improving how they communicate what they do. Clients are wary and lack understanding of what design can do. The availability of cheaper alternatives and the market scarcity of pitches add to this.
Action: Get ready to step up and become your own intermediary. Imagine you had to sit in between and broker a working relationship. What would you do? You could start by downloading the DBA’s Guides to Buying Design and positioning them on your website. Step back and see things from your client’s point of view. You do this when you’re engaged. Time to start earlier.