Pricing Your Work

04cffb2b35b3a1c53f6495554a5697cf?s=47 Brad Weaver
September 22, 2016

Pricing Your Work

Given at Generate London in September, 2016.

04cffb2b35b3a1c53f6495554a5697cf?s=128

Brad Weaver

September 22, 2016
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  1. Pricing & Profitability

  2. pricing & profit @sbradweaver Hello. pricing & profit @sbradweaver

  3. pricing & profit @sbradweaver Brad Weaver CXO @sbradweaver pricing &

    profit @sbradweaver
  4. #CREATIVETRUTH Tweet, Instagram, Facebook, MySpace, Google Wave, etc. pricing &

    profit @sbradweaver
  5. pricing & profit @sbradweaver My Story Why I’m here. pricing

    & profit @sbradweaver
  6. the workshop thecreativetruth.com #CREATIVETRUTH This shit is hard.

  7. pricing & profit @sbradweaver Follow your passion, fall off a

    cliff “Follow your passion” is a terrible business strategy. Not every passion can earn you a paycheck. pricing & profit @sbradweaver
  8. pricing & profit @sbradweaver Failure isn’t because of a lack

    of passion… reconciling something we’ve always done for fun to our financial livelihood isn’t easy.
  9. pricing & profit @sbradweaver …it’s because of a lack of

    income many who set out to make money pursuing their passion end up disillusioned, disappointed, and underemployed.
  10. pricing & profit @sbradweaver Don’t follow your passion, follow your

    effort. You have to sell your ideas, your solutions, and yourself.
  11. #CREATIVETRUTH Blindly following your passion is a recipe for failure.

    pricing & profit @sbradweaver
  12. The hardest lesson learned… pricing & profit @sbradweaver

  13. pricing & profit @sbradweaver Profitability = Sustainability if you’re not

    making a profit, it’s not really worth it. pricing & profit @sbradweaver
  14. Obligatory Greetings. $ PROFIT = DEVIL pricing & profit @sbradweaver

  15. Money is Uncomfortable pricing & profit @sbradweaver

  16. Avoid Emotional Pricing Your gut is not a calculator. pricing

    & profit @sbradweaver
  17. Professional (n). a person engaged in a specified activity as

    one’s main paid occupation rather than a pastime. pricing & profit @sbradweaver
  18. Clients want to talk about money … they just don’t

    know how. pricing & profit @sbradweaver
  19. How much is a website? or App, Logo, Photoshoot, Brochure,

    etc.
  20. We can educate clients to understand how we work.

  21. Profit & Stability Get Control with Solutions-Oriented Thinking pricing &

    profit @sbradweaver
  22. Step 1 pricing & profit @sbradweaver

  23. pricing & profit @sbradweaver Know What You Need Stop flying

    blind.
  24. pricing & profit @sbradweaver Your Shop Rate the lynchpin of

    a reliable pricing strategy. pricing & profit @sbradweaver
  25. There is a formula Yay! pricing & profit @sbradweaver

  26. pricing & profit @sbradweaver (expenses + profit) ÷ hours =

    rate
  27. (expenses + profit) ÷ hours = rate pricing & profit

    @sbradweaver
  28. Recurring Expenses + 1/12 of Annual Expenses + 25-30% for

    Taxes pricing & profit @sbradweaver
  29. pricing & profit @sbradweaver Expenses monthly & annual. Item Cost

    Start-Up & Annual Costs Office Furniture (Desks, Chairs, Tables) $0.00 Computer hardware and so ware $0.00 Association or Membership Fees $0.00 Printing - Business Cards, Marketing Materials $0.00 Office Decoration $0.00 So ware - One time purchase $0.00 Lease Deposits $0.00 Legal or Accounting Retainers $0.00 Business licenses and permits $0.00 Sponsorships or Marketing $0.00 Travel, Conferences $0.00 Other $0.00 Total $0.00 Split over 12 months (Divide total among 12 months equally) = COST PER MONTH $0.00 Ongoing Monthly Expenses Salary of owner-manager (amount you need to pay yourself) $0.00 All other salaries, wages, & commissions $0.00 Payroll taxes or self-employment tax $0.00 Rent $0.00 Equipment lease payments $0.00 Advertising (print, PPC, Twitter, Facebook) $0.00 Postage & shipping costs $0.00 Supplies (inks, toners, labels, paper goods, etc.) $0.00 Cell Phone $0.00 IVN or Phone Services $0.00 Virtual Assistants $0.00 Utilities $0.00 Internet $0.00 Hosting & Servers (AWS $0.00 SaaS (Dropbox, Creative Cloud, Slack, Basecamp, etc.) $0.00 General business insurance $0.00 Other Insurance (business vehicles, etc.) $0.00 Health insurance $0.00 Interest & principal on loans & credit cards $0.00 Misc. Debt $0.00 Recurring Legal and other professional fees $0.00 Miscellaneous $0.00 Total $0.00 TOTALS $0.00
  30. (expenses + profit) ÷ hours = rate pricing & profit

    @sbradweaver
  31. Additional 20% of Total Expenses pricing & profit @sbradweaver

  32. pricing & profit @sbradweaver Profit gotta have it to make

    it. Item Cost Expenses $94,000 Profit (20%) $18,800 Total Operating Cost $112,800 Billable Hours per week Owner 10 Creative Director 18 Designer 22 Developer 25 Project Manager 0 Designer 28 Developer 28 Account Executive 0 Writer 25 Project Manager 0 Designer 30 Apprentice 20 Intern 5 TOTAL BILLABLE HOURS PER WEEK 211 TOTAL MONTHLY HOURS (Weekly total multiplied by 4) 844 Rate (Total Operating Cost divided by Total Monthly Hours) $134
  33. Profit isn’t an option It’s as important as paying your

    utilities or rent. pricing & profit @sbradweaver
  34. (expenses + profit) ÷ hours = rate pricing & profit

    @sbradweaver
  35. Number of Billable Hours for Deliverables per Month pricing &

    profit @sbradweaver
  36. pricing & profit @sbradweaver Hours you’ve only got so much

    to sell. Item Cost Expenses $94,000 Profit (20%) $18,800 Total Operating Cost $112,800 Billable Hours per week Owner 10 Creative Director 18 Designer 22 Developer 25 Project Manager 0 Designer 28 Developer 28 Account Executive 0 Writer 25 Project Manager 0 Designer 30 Apprentice 20 Intern 5 TOTAL BILLABLE HOURS PER WEEK 211 TOTAL MONTHLY HOURS (Weekly total multiplied by 4) 844 Rate (Total Operating Cost divided by Total Monthly Hours) $134
  37. (expenses + profit) ÷ hours = rate pricing & profit

    @sbradweaver
  38. (expenses + profit) ÷ hours = rate pricing & profit

    @sbradweaver
  39. ($10,000 + $2,000) ÷ 80 hours = $150 per hour

    pricing & profit @sbradweaver
  40. pricing & profit @sbradweaver (expenses + profit) ÷ hours =

    rate
  41. pricing & profit @sbradweaver Your shop rate this is the

    line in the sand.
  42. pricing & profit @sbradweaver Whoah, my shop rate is astronomical

    this is the line in the sand.
  43. But, Why? Who, What, Where, When, How pricing & profit

    @sbradweaver
  44. It’s not that simple. If it were, we wouldn’t be

    here. pricing & profit @sbradweaver
  45. This is not your billing rate! pricing & profit @sbradweaver

  46. But, Why? pricing & profit @sbradweaver

  47. Value Who, What, Where, When, How pricing & profit @sbradweaver

  48. pricing & profit @sbradweaver Shop Rate vs. Billing Rate •

    Based on hard math • Can’t be reduced or backed off • Used in project estimates • Changed only by adjusting expenses or headcount • The same for every client & project • Not publicly disclosed • Based on vertical & horizontal market value • Can be reduced, just not less than shop rate • Only used when billing by time • Can be changed to increase profit • Varies by client & project • Publicly disclosed
  49. #CREATIVETRUTH if you back off of your shop rate, you

    will fail. pricing & profit @sbradweaver
  50. What do I do with this thing? pricing & profit

    @sbradweaver
  51. 7 PRICING MODELS pricing & profit @sbradweaver

  52. pricing & profit @sbradweaver There is no one way to

    price a solid pricing strategy is a mix of a few models used in different situations.
  53. Hourly Billing hours out, dollars in. pricing & profit @sbradweaver

  54. pricing & profit @sbradweaver Benefits Risks • Clients love it

    • You’re paid for your time • Easy to sell • Easy to calculate • You’re in control of change requests • Unpredictable • Commoditizes your work • Limited opportunity for profit • Requires higher rates or markup to make significant margins
  55. Flat Project Pricing Fixed Fees for fixed deliverables. pricing &

    profit @sbradweaver
  56. pricing & profit @sbradweaver Benefits Risks • Clients love it

    • Very predictable • Common and expected by clients • Opportunity for profit is high • Tendency to undercharge • Risk of going over budget and losing money • Tough to cover unexpected challenges • Commonality can lead to limited understanding of value
  57. pricing & profit @sbradweaver I suck at estimating so this

    is risky if you’re not doing the same thing over and over again.
  58. pricing & profit @sbradweaver Applying your shop rate Focus on

    outcomes, define “done”, break it down into smaller chunks, and be specific.
  59. pricing & profit @sbradweaver When to use Hourly vs. Project

    •Working with the same client on similar work regularly? Hourly •A project’s deliverables are unclear? Hourly •The client asks about money a lot up front? Project •The scope of the project changed several times when meeting with the client? Hourly •It’s clear you can get it done faster than the client’s estimate? Project •You’re doing very complex technology work? Hourly
  60. Package Pricing Publicly defined costs for tangible services. pricing &

    profit @sbradweaver
  61. pricing & profit @sbradweaver Boxed solutions don’t mean boxed answers.

    you can have a lot of flexibility and freedom within package pricing models.
  62. pricing & profit @sbradweaver Benefits Risks • Makes it difficult

    for clients to “bargain you down” • Good for repeat clients and agencies • Good for clients with multiple businesses or business units • Good for template-oriented designers • Client feels in control • If you like avoiding confrontation • Minimal opportunity for profit without high volume • High volume means tight timelines • Difficult to do high-quality work • Little room for error
  63. Value-Based Pricing Getting paid for your brain, not your hands.

    pricing & profit @sbradweaver
  64. “Price is what you pay, value is what you get.”

    -Warren Buffet pricing & profit @sbradweaver
  65. Cost Price Value

  66. Price Value Cost

  67. Price Value Cost

  68. ? Price Value Cost

  69. What is Value-based Pricing? pricing & profit @sbradweaver

  70. Customer Demand + Willingness to Pay Some things are worth

    more to others pricing & profit @sbradweaver
  71. I take less time to get to the right solution.

    Getting it done right without watching the clock. pricing & profit @sbradweaver
  72. 3 concepts & a lot of guts pricing & profit

    @sbradweaver
  73. What your market will bear 1. pricing & profit @sbradweaver

  74. Your track record and past experience 2. pricing & profit

    @sbradweaver
  75. The client’s perceived value 3. pricing & profit @sbradweaver

  76. Value is in the eye of the beholder pricing &

    profit @sbradweaver
  77. Better.
 Faster.
 Stronger. Back up your perceived value pricing &

    profit @sbradweaver
  78. Better. Best for them, not for everyone else. pricing &

    profit @sbradweaver
  79. Faster. Good & Fast, but not cheap. pricing & profit

    @sbradweaver
  80. Stronger. Moving the needle, hard. pricing & profit @sbradweaver

  81. By working with your client to define their vision for

    success, and exceeding those expectations and metrics, you’re providing tremendous value. pricing & profit @sbradweaver
  82. Cost Price Value

  83. Performance-based Pricing Risk for future reward. pricing & profit @sbradweaver

  84. pricing & profit @sbradweaver Base your fee on the performance

    of your work You must affect a measurable outcome for your client.
  85. pricing & profit @sbradweaver Value vs. Performance

  86. Time-based Retainers Hours out, dollars in… but guaranteed. pricing &

    profit @sbradweaver
  87. pricing & profit @sbradweaver Benefits Risks •Steady, predictable income •One

    less client you have to replace each month •Fosters stronger client relationships, meaning less time spent re-learning new businesses over and over •Help with vertical marketing, become a SME. • Clients can think that you work for them as an employee • It can make you lazy if you slack off on pursuing additional work • Clients expect rollovers • The temptation to pad hours when you’re close to using up the retainer. It’s stealing.
  88. Value-based Retainers Now we’re cooking. pricing & profit @sbradweaver

  89. pricing & profit @sbradweaver Scale your skills instead of your

    time you will hit an inventory ceiling, this deals with that problem.
  90. pricing & profit @sbradweaver *Retainer Agreements a critical caveat.

  91. pricing & profit @sbradweaver Retainer agreements • The amount you’re

    to receive each month • The date you’re to be paid by • Any invoicing procedures you’re expected to follow • Exactly how much work and what type of work you expect to do • When your client needs to let you know about the month’s work by • What notification you need before the retainer relationship can be ended
  92. Equity or Ownership Risk for future reward. pricing & profit

    @sbradweaver
  93. pricing & profit @sbradweaver Taking a stake in the business

    instead of cash big risk, big reward; but only if you can live without the cash.
  94. pricing & profit @sbradweaver Success depends on where the company

    is at the time you get involved are they funded yet? if so, how far along?
  95. Which is best and when? There’s no such thing as

    one size fits all. pricing & profit @sbradweaver
  96. pricing & profit @sbradweaver Pricing Model Comparison Pricing Model Profitability

    Risk Documentation Difficulty to Sell Best Use Cases Hourly Billing Project-based Pricing Retainer Pricing Value-based Pricing Package Pricing Performance-based Pricing Equity Pricing Low Moderate Moderate High Low High Very High Moderate Moderate Low High Low Very High Very High High Low Moderate Low Moderate Very High Very High Very Low Low Moderate Very High Very Low High Moderate Freelance, Technology Design, UI, FED Content, UX, Dev Consulting, UX, Obj. Prog. Branding, Design, Web Tech, Apps, Software, UX UX, UI, Apps, Software, Tech
  97. #CREATIVETRUTH profit is the key to a sustainable services business.

    pricing & profit @sbradweaver
  98. Avoid Emotional Pricing Your gut is not a calculator. pricing

    & profit @sbradweaver
  99. ninelabs.com/docs pricing & profit @sbradweaver

  100. thecreativetruth.com buy it on Amazon or your favourite small-business killing

    website pricing & profit @sbradweaver
  101. I make $3, I just think it’s the best book

  102. pricing & profit @sbradweaver Brad Weaver CXO @sbradweaver pricing &

    profit @sbradweaver
  103. #CREATIVETRUTH Tweet, Instagram, Facebook, MySpace, Google Wave, etc. pricing &

    profit @sbradweaver
  104. Thanks! pricing & profit @sbradweaver

  105. Pricing & Profitability