Structuring a Design Proposal “Contract”

Here is some advice that I like to give my students regarding Best Design Business Practices. Be sure to read the article about Pricing Design Projects if you are wondering what to charge for a project.

While business contracts are always a good thing to have in place when beginning work, especially with a new client, I have rarely used contracts myself, unless they involve large, significant projects.  To me, large projects would be over $10,000.00.  Less than that amount, and fussing over the details of a legal contract is wasted energy.  Instead the best thing to do is to structure your payment schedule wisely, so as to cover your butt!

The first thing when writing up a proposal, is to be sure that you receive payment in advance of actually doing the work.  How do you do this?  Ask for a retainer.  A retainer is a sum of money paid to you, by the client, in advance of beginning work on a project. The amount of the retainer will vary, but it is generally anywhere between 1/4 to 1/2 the cost of the total project.

But why would any new client pay you money upfront?  A client will do that because you have convinced them in advance that you are worth the investment.  There are a few ways in which your client will be convinced that you are worthy of a retainer, and give you the trust that is involved in giving money to a new designer.

First, the client should have found you via a recommendation from another client, friend, or family member.  Remember, when someone recommends you, they are putting their own reputation on the line.  It is always imperative that you behave in a professional and honorable manner.  To not do so not only affects your own reputation, but also the reputation of the person who had recommended you.

Your portfolio is a second way in which a new client will determine whether you are worthy of receiving a retainer. This is just another reason that your portfolio must be top notch!  You portfolio should include not only work which was successfully executed for a client, but it should also show really interesting, creative, and professionally appropriate designs, even if it was for an imaginary project. When it comes to design and creativity, clients will care more that you show them that your skills suit their needs. For designers who are just starting out, this is a great way to fill out your “book” (these days, your online book—portfolio website) when you haven’t yet gotten many client projects behind your belt. Show them that you love to design, even in your spare time.

The third way to land a project is through your initial discussion.  Talk to them as a professional, and describe what your process is, or the process you expect. Talk about good design, latest technologies, your experience and knowledge. You obviously would not charge a client for the initial meeting to discuss the project.

The fourth way, is in the professional quality of your proposal. You also should be taking some time to think through the project carefully. Map out the steps involved in the design process. Design the layout of your proposal! Do it in InDesign and send a pdf rather than a Word doc, or design a web page proposal which is password protected. This shows them that everything about you and your services is about presentation and skill.

Take written notes during your conversation, and be sure to include their instructions and requirements in the proposal. Even use their own words! Clients love to know that you were listening and paying attention to the details.

Setting Up the Payment Schedule

This part is crucial to you getting paid for your hard work.

So the first payment is the retainer.  Do not start a project without one. You have already taken the time to meet with the potential client, and to write a clear, organized proposal for the work. This will happen regardless of whether the client chooses you or not. Now it’s time for the client to show their own commitment to you and the project… by paying a retainer.

In the proposal, there should be goals… milestones… clearly described and attained during the project. For instance, with a web project, there is 1. the design phase. There is 2. the technology production phase (site build and debugging). And then there is 3. the final launch.  The retainer pays for the design phase. You will go through your design process with the client. They will review, ask for changes. There will be a series of back-and-forths, and then they will settle on a final design. They will give the “final approval” of the designs, and that final approval initiates a payment, and the beginning of work for the next phase. Do not begin work on the next phase, until you receive the payment. The payment signifies that they have approved the designs. Of course there will be some minor design adjustments during the technology development (i.e., production phase), but they cannot say at that point they want a significant design overhaul without paying additional fees.

The following phases work the same way. This way, you are always paid in advance of doing the work, and so if the client wants to drop the project, you have already been paid, even if that phase is still mid-stream.

I like to structure payments so that the final payments happen after launch rather than before. That shows good faith on your part and a level of trust. If you want to be cautious, you can structure the payment schedule so that the final payment is paid in advance of delivery. You should go with your gut on how to structure the final payment, based on the individual client. Projects that really inspire you, structure one way, projects that you are doing because you have the skills, but they are a little boring, do another.

Language in the Proposal

One thing that I like to do is be somewhat general about how the design process will go. What I’m  referring to is how many design options you will offer them, and how many rounds of changes are included in the proposal. Every client, and every project is unique. So you don’t know how it going to go in advance, especially with a new client.  I like to put “Up to 3 design options” and “Up to 3 rounds of changes” rather than “3 design options” and “3 rounds of design changes”. Sometimes the project is so specific, you don’t need 3 design options, or 3 rounds of changes. Sometimes its not exactly clear what constitutes “an option” or “a round of changes”. By stating “up-to” means that if there are fewer, they don’t get to ask for a discount, and they can’t back track once they have approved a phase and paid you. You should always aim to make the client happy, but when they have obviously used up their 3 rounds, you will both know it, and you can ask for additional fees.

Value Added Service

Its always good to add in a few extras for free that you know you can do well, and easily. I like to freshen-up the branding and logo whenever possible, and when the client is willing. They may not ask for it. But I enjoy designing logos and adjusting brand colors, so it’s not strenuous work for me. Additionally, with websites, I tell them that Google Analytics implementation and Search Engine Optimization are included in my services. Many clients have no clue what that means. It’s easy to do (if you’ve taken ADV3561 Web Analytics, SEO & SEM and ADV3551 Web II) so throw it in.  They will be grateful that you introduced them to such important features. Because they are “value added” that means that they are free, and if things don’t work out, you can stop work on them, and they won’t be paying for them.  But because they are value-added, it’s best not to include them in your written proposal.  Tell them verbally that you will also work towards these goals. If you put them in your written proposal, they become required services included in the payments.

Kill Fee

Kill fees are payments to end a project before their completion. You may or may not want to include a kill fee in your proposal.  The way I’m recommending that you structure your proposal, a kill fee is not necessary.  Kill fees are typically more appropriate for corporate clients because often times there are many meetings and rounds of changes (there are many people involved), and then suddenly the project is ended by someone at a higher level for some reason outside the control of the person you are working with. You do not need it if you structure your proposal they way I recommend. But its good to know what they are, and how they work.

Contract Wrap Up

So there you have it. Break your proposal up into 3-4 payments, based on approved milestones. Don’t move forward to the next stage without approval which comes in the form of a check.

Legal contracts are only useful if you are willing to go to court. People rarely go to court unless they feel that they have been duped. Always be open, honest, and communicate. Small projects are never worth the effort in time and emotional stress to take legal action. Always act professionally and honorably. Try and see things from the clients perspective. Be willing to return some money if you feel that it makes it easier to end things quickly in difficult situations. And never do business with people you don’t like, or projects you are not interested in doing.

Pricing Graphic Design and Web Design Jobs

I’ve been getting many questions from students asking how to price a job. So I’ve decided that I will add some best-practices tips for new freelancers on my site.

There are 2 important things to consider when pricing a job.

The first is, what the job is worth to the client? Ask them what their budget is. Most times they won’t tell you.  But honestly, if someone was shopping for a car or a house, they would have a budget they had in mind.

The second thing to consider is, what the job is worth to you? Is this a project that will fill out your portfolio, or has some prestige? Then you price it to get the job.

If you can get a sense of either of them, it’s a good starting point.

What I generally do is figure out how many hours it will take me to do the work. Included are meeting times, and rounds of changes. Also consider how many versions you will present. I specify in my proposals: initial designs, up to 3 versions, and 2 additional rounds of changes.  You should be able to get an idea from the first presentation what they are looking for, if they haven’t told you up front.  Additional rounds of changes cost more, especially for clients who are undecided or don’t really know what they want.

Determine your rate of pay: $25/40/60/hour?

Try and come up with a final number in multiple ways, and see how closely they match. What is your gut price? When you break it down by hours and $rate do you come up with the same number? Work through each step of the process: research, sketches, layouts, rounds of changes, build, debugging. What’s your number now?

For example,  3 days is 8 hours x 3 (24 hours).  At $25/hour, it would be $600 for 3 days of work. A week is 40 hours. At $25/hour, a week is $1000.

Remember that you may not be overly productive every day, or you may be focusing on multiple projects, so while you may bill for 24 hours, put in additional time into your timeline. So give yourself a week to do 3 days of work.

As you get more work, you gradually raise your rates. I recommend increasing your rate on new customers as they come in, rather than raising rates on existing customers.

Corporate clients should be charged top rates. They have bigger budgets, but more importantly, there are more meetings, delays and more levels of people who have to buy-in to the designs. Price accordingly. You generally don’t have to worry about getting paid by a corporate client, however, it often takes 45-90 days from the time you invoice them to getting paid. Don’t fret too much. Just don’t plan on getting the money right away. This waiting time is worth charging top rate.

Small businesses, and individuals get lower rates. Make sure you let them know they are getting lower rates by adding up the full amount and then subtracting the discount at the end. Or let them know your corporate rate is $50/hour, but you are only charging them $30/hour. They should know that they’re getting a discount.

People who ask for a discount are the worst clients. They quickly forget that you gave them a discount. And when they are fussy enough to ask for one, they are just as fussy when you do the work. They generally feel that their money is worth more than your time and work. So steer clear of them.

Designs for a website, with html/css deliverables, with up to 3 design options, plus additional 2 rounds of design changes (i.e., 3 rounds total) should be between $1000-3000 for a corporate client. Of course this depends on the complexity of the site, and how demanding the client is. Small business, friends, not-for-profit, $500-1500 for the same work.  As you have more experience,  the price for designing an interface would top out around $5000 for a corporate client, $3000 for small business/friend. The back end technology development is extra, unless we’re talking html/css.