When I Bill Hourly (And Why I Don't Think Hourly Rates Should Be Demonized)
Whew! Hourly rates. This is a hot topic in the industry right now, and today I’m gonna give you the 411 from my perspective. So, here’s the honest truth – I have no problem utilizing an hourly rate from time to time, and don’t think you should be super worried about it either.
If you’re a designer taking in any amount of content from educators these days, you’ve likely seen or heard “never bill hourly” or “you shouldn’t even HAVE an hourly rate.” This type of black and white, cut and dry, no-exceptions-allowed kind of narrative might work for some people, but it doesn’t work for me. To be frank, I think it’s a little unfair, and sets a tone of superiority and shaming towards business owners who may be choosing to utilize an hourly rate for their business.
Here’s my take – and to be clear, it’s just that – my take. This is what I do in my own business. It works for me, and it might work for you. Or at the very least, it might help you to let go of the death grip you have on your pricing.
I believe that a fair hourly rate is a completely reasonable way to bill in your design business. This number is personal, and I can’t tell you what to charge. When I first started out mine was $35-50 and now it’s around $200/hour. This is not a number that I publish, but that I will selectively share with specific clients in specific situations (outlined below). Whatever the number is, you need to feel good about it. One of the biggest hangups that people have with hourly rates is that you are trading time for money. I will dive into why I think this is a problematic message to be latching onto a bit later, but the truth is that if you are charging a high enough hourly rate, you will have no problem trading time for money. It will feel like a great deal for both parties – you and your clients.
The bottom line is that YOU get to decide when you offer an hourly rate. If a client asks for hourly pricing for visual branding, and that doesn’t work for you, just say no. Period. You are in control. My hope in writing this post is just to show you that like many things in life, there can be nuance and flexibility in your business. You can use flat rate pricing most of the time, and hourly occasionally. It doesn’t have to be all or nothing. You don’t have to name it or label it anything – it can just be whatever works best for you. I think there is a lot of pressure on business owners these days to utilize a “system,” but what ends up happening is that when they inevitably need to go with the flow or do something different, they feel like a failure.
Also, a quick note: Yes, expertise creates efficiency, and we do not want to get penalized for working quickly. That is true. Which is why it’s incredibly important, no matter what billing method you are using, to track your time. I notice time and time again that designers consistently underestimate how much time they spend on projects because they don’t believe there’s much of a reason to track time if you’re using flat rate pricing. If you have taken Creative on Command you know that I am PASSIONATE about tracking your time for all projects so that you can gather data and price accordingly. When you bill hourly, you start to see that there is a lot of ancillary time that goes into producing work. You get out your laptop, you sit down, you research, you open your design program, you design the project, you research some more, you take a call from the client, you respond to an email from the client, you finish the project, you package it, name it, deliver it, record a video walkthrough – it all adds up, and you start to see just how much time goes into everything you do.
So let’s get into WHEN I offer hourly pricing, and why it works for me:
––––––
Quick changes (minimum billing increment of one hour)
I will often bill hourly when clients come to me for updates to completed projects, or small, quick jobs (ex: a client recently came to me after a packaging project and needed one of the labels adjusted to be a different size). This allows me to have a minimum billing increment (mine is one hour) and communicate that clearly to clients right out of the gate. It just makes pricing work like this really easy. A few years ago in my business I got it in my head that tiny jobs weren’t worth my time, but WOW was I wrong. Making a bunch of $200 edits here and there throughout the year adds up FAST.
Parallel project consulting or creative consulting
Sometimes clients will ask me to help with what I will call “parallel projects” – so let’s say I have a client designing vegan leather handbags and they want me to take a look at swatches to help select their palette. Not a service I offer. But I will just bill them hourly to hop on a couple of calls and walk through it with them. Or, when referring my clients to web designers that I love, oftentimes they will hire me to take a look at the mockups and make suggestions. I don’t offer web design, but it’s an easy way to say “I’m here when you need me” and there’s not a huge financial commitment on their end.
Retainer Clients
It is no secret that I think retainers are one of the best possible ways to generate consistent, predictable, and low-stress revenue in your business. I bill my retainer clients hourly, for an agreed upon number of hours per month. If you want to learn more about retainers, you can watch the first lesson of my course, Design Retainer Bootcamp for FREE by clicking here. There has really never been a better time to offer a retainer to your clients – businesses are trying to do more with less and are scrambling to find talent.
Retainers are what allowed me to quit my full time job and replace my full-time salary in my first year of business back in 2015. It was the smoothest transition to running my studio. One great thing about retainers is that YOU get to choose how many hours you are available to your clients each month. So right now the maximum retainer I would offer is one 10 hour retainer per month. When I first started, I had two 40 hour retainers each month. That’s a big difference! But I felt great about my compensation both in 2015 and today. Remember – you set the hourly rate, and if you feel great about it, then it’s a win-win for all parties.
––––––
WHy I’m not into demonizing hourly rates:
I really just inherently do not believe that there is anything wrong with trading time for money. Lots of educators/teachers right now will tell you otherwise, but I think it’s concerning, unfair, and frankly hurtful to suggest that our industry is somehow above this compensation structure, when much of the working world is paid that way. Designers are not “better than” nurses or plumbers or tilers or dental hygienists, or anyone else who is paid an hourly wage. So while I think it’s TOTALLY fine to make the choice to not use hourly rates in your business, it gives me a really bad, bad feeling when educators are insistent that charging hourly is the worst thing that you could possibly do in your creative business. It is absolutely not. Consider this your permission slip to go with the flow, price the best you can, and recognize that running a business comes with a deep appreciate for life’s many nuances.