How Much to Charge Hourly for Graphic Design
How much should you charge if you're starting out as a freelancer? How do you know if you're charging too low or too high? When should you increase your prices? In this article, we'll dive into these questions and more on graphic design hourly rates.
Why charge an hourly rate?
If you are just getting started as a graphic designer, the easiest way to get paid is to bill at an hourly rate. At this stage, you are still learning how long it takes you to complete a design project. This way you are getting paid for your time, no matter how many rounds of feedback the client provides.
Hourly rates are also the most commonly accepted. Most clients will want to know upfront, "What is your hourly rate?" They want to gauge how much they need to set aside to pay you for designing, they will most likely ask you for an estimate of how long you think the project will take.
Depending on the type of graphic design work you are hired for, it makes sense to be paid an hourly rate. For example, if you're doing consistent, ongoing design work for a company then it works in both party's interest to agree on a rate per hour for a certain amount of hours for design work. However, if you're working on higher-value design projects like designing a logo and identity for a new company, creating a new line of packaging for their product, or a complete website redesign, then you may want to consider a different pay structure.
How to come up with your base hourly rate
The first step is to research what graphic designers are paid in your area. This will help give you a baseline for what to charge. A big factor in coming up with the minimum amount you should charge has to do with your location and cost of living. An expected hourly rate in Austin, Texas will vary greatly from San Francisco, California. You can even use results for full-time graphic design roles to help you come up with a rate. You'll just have to do a little math to break down the yearly salary into an hourly rate.
Collect data from various salary websites
To start searching for what graphic designers make in your area, try sites like Glassdoor, Payscale, Indeed, and LinkedIn. It may be helpful to start a Google spreadsheet to keep track of the data you collect. Be sure to keep in mind the level of experience. If you're a junior-level graphic designer, you don't want to record pay rates for a senior designer. Most of these websites, allow you to filter by years of experience.
Unfortunately, most of these sites are best for uncovering the salaries for these locations, rather than an hourly rate. So let's calculate a base rate from this example. Here is a search result for graphic designer salaries on LinkedIn for the San Francisco Bay Area.
Now, this is just one example. Adjust your salary searches and calculations based on the averages you find for your area and your level of experience.
Calculate an hourly rate based on yearly salaries
There are 52 weeks in a year, so divide $65,000 by 52 weeks. This comes to $1250 per week. Since there are 40 work hours in a week, now let's divide $1250 by 40 hours for a total of $31.25 per hour. This means you should charge no less than about $32 per hour as a freelance graphic designer in the San Francisco Bay Area. But this isn't a hard and fast rule.
As you can see from the graph, some graphic designers make more, some make less. What sways the date in one direction or another? It depends on the company size, industry, and also on your level of experience. There are so many factors but this helps give you a general idea of where to start.
Ask for more than what you're comfortable with
As a designer who has been in the industry for many years now, I wish I could give my past self this piece of advice. Ask for more than what you want. You should feel a little uncomfortable with the rate you set, that's how you know it's in the right ballpark. If you ask for exactly what you want and the client agrees, you'll likely be disappointed in yourself and wonder, what if I asked for more? In fact, the longer it takes for the client to agree on payment terms, the better. If they agree immediately, most likely they were willing to pay you more.
Avoid these mistakes when choosing your hourly rate
Don't forget you're a business owner
As a freelancer, you are a business owner which means you have to operate as a business. You don't have an employer to pay for expenses like software subscriptions, payroll taxes, or contributions to your retirement account. In order to be a profitable business, you'll need to calculate these expenses into your pricing and make sure you have enough overhead.
When it comes to taxes, you need to be sure to set money aside. When you work for an employer, they take care of the payroll for you, including withholding taxes. When you work for yourself, you have to pay your own taxes at the end of the year. If you don't save enough, you may find out at the end of the year that you owe money.
Remember the example hourly rate we came up with earlier for the San Francisco Bay Area? You will want to take that rate of $32 per hour and add in a buffer for taxes, expenses, retirement, etc.
Don't forget to bill for all of your time
Billable hours are not just the time you spend composing a design in Adobe Illustrator on the computer. It's also the time you spend researching the competition and target audience, sketching out possible ideas, the time it takes to create a presentation to share your work with the client, and the time spent in meetings with clients to discuss work and feedback. Just be sure to specify at the beginning of your relationship, what you will be billing for so it doesn't come as a surprise later to the client. They need to know that your time is valuable, every 15-minute call or meeting is counted.
Don't forget to raise your rates
Sometimes, when you work for the same client for a few years it's hard to increase prices, especially for ongoing work. But if you were an employee of their company, you might receive an annual salary increase of 2–3% minimum to account for inflation and maybe even as high as 5% if you're a top-performer. You can do the same for yourself as a freelancer.
Every year, notify your recurring clients in writing that your rates will be going up along with a date it will take in effect. Be sure to give them plenty of notice, for example, maybe you notify them in November that your new rate will be enforced in January of the following year. The client may push back, at that point it's up to you to negotiate new terms or walk away from them completely.
As for new clients, continue to increase your prices incrementally. You are gaining valuable new experience with each client project and taking that expertise into the next project, so price yourself accordingly. Unless a past client happens to refer and share their rate, new clients will have no idea that your rates have increased.
How to price yourself going forward
The problem with charging hourly rates
You're only getting paid for the time you spend working. This doesn't take into account all the years of expertise you've built up. Maybe you've spent years learning design and developing your skills but by charging hourly you're actually missing out on getting paid what you're worth.
Charging hourly punishes efficiency. If a junior designer takes 3 hours to work on something that a more senior design can do in 30 minutes, why should they be paid less? Yes, you could just increase your hourly rate and the problem solved temporarily. But it doesn't always work this well. The higher your hourly rate, the harder it can be for a client to swallow the idea of hiring you even though you have the experience to back up the price.
But the biggest problem with hourly rates is they don't account for the value of the project you're working on. Let's say, for example, you're designing a website for a client. What value will that website give their company? If it brings in thousands of customers over the coming year, you're contributing to their bottom line, your rates should reflect the value you're giving.
Check out this video where Ran walks through why he thinks hourly pricing is not the best way for designers to charge for their work.
Try project-based pricing
Let's say you've been designing for a few years and you're tired of the ceiling you've hit with hourly pricing. After all, there are only so many hours in a day and you should be paid more for your growing expertise. At this point, you can try experimenting with project-based pricing.
What are the pros of charging per project? For one, the client knows exactly what to expect when it comes to pricing. No client likes to be surprised. By charging hourly, the client has no idea what they will be paying until the project is complete and you send an invoice. This can result in clients arguing about the cost and there's always the risk they might not pay at all. But with project-based pricing, a client asks for a specific deliverable like a new logo and you're giving them a specific price to complete the project. There are some caveats with this type of pricing.
At this point, you should have an idea of how long it takes you to design a logo. This way you don't end up spending more time and in the end, being paid less because you didn't correctly estimate how much time it would take you to complete. You need to provide a thorough and complete contract that spells out every possible outcome.
Be specific with the terms in your contract
What is the timeline for this project? Is the client requesting a rush delivery? How many revision cycles does the client have? What happens if they're not satisfied with the design after those revisions are up? What happens if they're late with providing feedback? When do they pay you and for how much? These are just some of the terms you get to get to choose and write into your contract. If the client doesn't follow these terms, you can charge a late fee if you noted so in the contract.
How to increase your prices as a freelance designer
Now that you have a better idea of how to come up with a good hourly rate, when to increase your rates, and maybe even when pivot to a project-based rate, you may want to read our post on How to land freelance design jobs next.
Also, check out part 1 of our series on Intro to Freelancing on the Flux YouTube channel where you'll learn how to find your first clients, how to build all the processes you need to serve your clients successfully, and how to build confidence and motivation.
If you're ready to dive even deeper into freelancing, check out our course The 6 Figure Freelance Design business, where we share the step-by-step business-building roadmap. Through weekly mentorship calls and done for you business templates and resources, you'll have everything you need to build a profitable freelance design business.
How Much to Charge Hourly for Graphic Design
Source: https://www.flux-academy.com/blog/graphic-design-hourly-rates-tips-for-pricing-your-work
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