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HOW MUCH!?

THE COST OF PROFESSIONAL DESIGN

Everything you ever wanted to know about graphic designers but were afraid to ask – The cost of professional design

Last month the header tank in my loft gave up the ghost.

My wife called in a local, experienced plumber (recommended by a good friend) and he gave her an estimate:

He said it was a simple job and should be wrapped up in a day.

Now I’m not a tradesman, and I don’t know the ins and outs of plumbing, but I couldn’t work out how he’d arrived at £600 for labour. It ‘seemed’ like a lot to me.

So, as most people would do, I mulled it over…

Whatever the reasons, it prompted us to get a second estimate – this time, from a young, less experienced plumber, recommended by my son.

He, too, said it was a simple job and gave us the following estimate:

What a difference! After thinking it through, we went with the second estimate and ‘saved’ ourselves £420.

The job was completed to a very professional standard and we were happy with the outcome.



SO WHAT’S A HEADER TANK GOT TO DO WITH DESIGN?

Well, the above anecdote illustrates nicely the fears that we all have when stepping outside our comfort zones – particularly when it involves money, whether it’s ours or our companies’.

So how do we establish what’s the right price for a job?

Well, in general, we all go through similar thought processes and actions:

The final bullet point is probably the most crucial.

If we’d made our decision based purely on cost, the young plumber’s inexperience may have come back to haunt us. But as both plumbers had said that it was a simple job, we came to the conclusion that the extra £420 didn’t represent any discernible value.

In truth, even though it was a simple job, we’d have probably paid a little more for the peace of mind that the experienced plumber would have offered, but what that premium is, is difficult to define. I guess it depends on the individuals concerned, their market knowledge, their budgets and their risk aversion.

The parallels with design are very similar. Clients:



EVERYONE’S A DESIGNER!

‘Clients should always ask, “Is this a good use of our time?”

Before I outline typical (and benchmarked) Design Industry charge out rates, I think it would be helpful to offer a quick insight into the design market place in the UK. According to the most recent Design Council survey.

And these are the professionally-qualified ones.

We then have the have-a-go heroes; those individuals that buy a Mac, take a few night classes (maybe) and disingenuously call themselves ‘designers’.

If that wasn’t complicated enough, many printers, in order to supplement the declining print trade, offer design as a complementary service. I would venture, however, that their ‘design’ offers are primarily production based (such as typesetting, simple amends to existing files and very basic layouts).

Some clients, of course, also have a go. Keen to reduce the cost and time of turnaround for simple amends, they embed desktop publishing software, such as InDesign or QuarkXPress, at their offices.

Now this is absolutely fine for simple amends, but please tread very carefully as, sometimes, what appear to be simple amends can often impact carefully considered design decisions – and the results can be ‘variable’, to put it politely. And that’s before even considering the technical or production issues.

Over the years we’ve seen some real horror stories: 19-colour leaflets, typography that wouldn’t be out of place in a Primary School, 5-page flyers and clients spending days creating something that would take a competent designer a couple of hours. Clients should always ask themselves, “Is this a good use of our time?” and “Will an in-house effort adversely impact our brand?”

So the market place is complex and, unless you understand what you’re buying and the skills of the ‘designers’ you’re working with, it can be very difficult to evaluate.



WHAT ARE THE DIFFERENT ‘STAGES’ OF DESIGN?

When you receive a quote, it’ll generally be broken down into ‘stages’, albeit that some agencies may describe these stages slightly differently, particularly across the varied disciplines.

In this article, we are primarily looking at the disciplines of branding, literature and digital design and are assuming that any strategy has already been established and a thorough brief supplied to the agency.

The following typifies the main internal design stages that most agencies (and some freelancers) would follow. There will be subtle nuances within every agency – and within disciplines – but it should give you a good idea of the general process:

1
Brief – analyse and challenge

Before any thought is given to execution, it’s incumbent on any agency to first check that the brief makes sense. If it doesn’t, a good agency will seek to clarify – or even challenge – its contents.

You will probably find that both designers and account managers will be involved at this stage, as it will impact the work moving forwards. The seniority of those involved and the time it takes to complete this stage will depend on the complexity of the brief and the clarity of your answers.

2
Conceptual design

This is at the very heart of what most design agencies offer and the ability to deliver this well separates the good designers from the average. It is the stage that cannot be replicated in a software program or lifted from a template. Good designers use their imagination, life experiences and professional training to create unique and imaginative solutions. You should expect to pay a premium for this stage.

3
Design development

Once the conceptual stage has been presented and reflected upon, a client may ask to see variations, such as alternative colour ways, different fonts or revised layouts. This is still the domain of the creative designer, as decisions here are critical to the quality of the final outcome.

4
Production/artwork

Often referred to as typesetting and artwork (a term which harks back to traditional pre-press processes), the production stage is where the ideas are committed to a deliverable, whether printed or digital.

If the design is complex or needs a sympathetic interpretation, a creative artworker would be used; someone who, although expert in efficient production, still has a subtle design appreciation – although a senior designer would probably oversee the final output.

However, if it’s a simple, mechanical interpretation, where there are not that many design decisions to make (or a style guide is to be rigidly followed) then a straightforward artworker would be used.

Even though this may appear to be a simple process, don’t underestimate its importance. The artworker still needs to be accurate, highly competent with the software and capable of ensuring that all the production protocols are followed – across all media, if necessary. Sloppiness at this stage can lead to substantial problems later, particularly with printed items.

5
Quality control

If your agency has inbuilt Quality Management processes, such as our ISO 9001:2008, then all its projects will follow a tried and tested methodology. Any errors and inconsistencies will get ironed out en route.

Nonetheless, we always recommend that a client allocate a sensible amount of time (and budget) for this stage. Quality should never be compromised.

It is the final opportunity to pause, draw breath and carefully run through a project that has probably involved a team of people and incurred several sets of amends.

Final files should be checked for – at the very least – structure, consistency, cross-referencing, spelling and grammar. This should be a default for any client (and agency). No exceptions.

I cannot recall how many times clients have supposedly ‘checked’ and then signed off final artwork files, only for us to find (and correct) potentially damaging or embarrassing mistakes on our final run through. If your agency is not commissioned to do a final proof read and check (some clients see it as an unnecessary expense), please ensure that your own people are trained to do it and fully appreciate the importance of this stage.

6
Account management

Whilst not strictly classed as a ‘stage’ (such as No.s 1-5 above), account management is an over-arching process that involves all of them.

Apart from very small projects, an account manager will probably be allocated to every project.

Their role is to project manage and act as the link between client and designer(s), ensuring a smooth passage through the studio. They will also log variations to the brief, implement client amends and record all studio time – to ensure that all key milestones are met and budgets are adhered to.

Account managers are crucial to the smooth running of any design project.



WHO DOES WHAT?

Before we explore the hourly rates, it’s worth pointing out a few things that may not always be apparent to a client:

As their overheads will be higher, larger agencies will need to recover as much chargeable time as possible, so may seek to salami slice their services – and charge accordingly.



WHAT’S THE GOING RATE?

“You’re too expensive”. “I can get it done cheaper around the corner”. “The other company only charged me X per hour”.

“I CAN GET IT DONE CHEAPER AROUND THE CORNER”.’

At Bentley Holland, we’ve been around long enough to have heard them all before. But of course such comments are meaningless, as price is so subjective. What feels expensive to one client is perfectly reasonable – or even cheap – to another.

So let’s take the emotion out of it and look at costs objectively. The best way to establish what the actual ‘going rate’ is for a particular design service is to defer to a credible third party, such as the Design Business Association (DBA). DBA is the trade association for the Design Industry and their members constitute 80% of the industry, by turnover.

Every year it collates its members’ charge out rates and publishes them in a very comprehensive survey. It covers all the main design disciplines – as DBA see them – from Corporate ID/Branding to Advertising. It also lists the Lowest, Average and Highest charge out rates for each type of employee, from Agency Principal to Junior Designer.

However, to keep this article informative, we have avoided the Lowest and Highest rates, simply because the variation is so wide (distorted by quantitative anomalies) that it renders a helpful conclusion impossible. Instead, we have chosen to highlight the Average charge out rates.

Figure 2 shows you the rate per employee, within the Corporate ID/Branding discipline.

You’ll see that a Senior Designer is charged out at £99 per hour and an Artworker at £84. If you value the experience and expertise of the Agency Principal or the Creative Director, be prepared to pay a premium for this – on average £148 and £139 per hour respectively.

So if a design agency is basing its quotes on these hourly rates (give or take £10 per hour for minor variance), then you should regard them as industry standard and you can be confident that you are being quoted a perfectly reasonable price.

Note: In a typical smaller agency (classed as less than 20 people in the DBA survey) some staff will inevitably wear multiple hats. For instance, the Principal may also be the Creative Director. The Senior Designer may occasionally help out with artworking and the Account Director may also be responsible for both planning and proof reading.

As long as they charge the correct time for the work they do for you, in their respective capacities (rather than by job title), then you will greatly benefit from the experience and flexibility that many smaller agencies offer.

To give you an idea of how other disciplines compare, Figures 3 and 4 show the Average hourly rates for Digital and Literature/Print respectively.






ARE REGIONAL AGENCIES CHEAPER?

The short answer is yes. In terms of the roles mentioned previously, Figure 5 shows the difference in hourly rates, based on Average agency costs:


Averaged out across all roles, you should expect to pay 17% less to work with a regional agency. This decrease is to be expected, as regional agencies will generally carry much lower overheads and staff costs and can therefore pass on the savings to their clients in the form of lower rates.

Note: As you would expect, there are always exceptions and there will be a small ‘crossover’ of charge out rates (with similar sized companies), where a high-profile, specialist regional agency will charge more than a perfunctory, generalist London agency but, in the main, the differential outlined above will apply.



HOW ARE HOURLY RATES CALCULATED?

All successful agencies know exactly what it costs to run their businesses, what to charge and how to make a reasonable profit.

But before I outline the different ways an agency charges for its particular services, it will be useful to first explain how an agency actually calculates its costs – and, by extrapolation, its hourly rates.

In very basic accountancy terms, a company’s gross income should nominally comprise the percentages shown in Figure 6.

In reality, however, salaries always absorb a much bigger proportion of gross income, particularly in a people-centric business such as Design. In fact, salaries can creep up to as much as 55%, if not monitored. Fixed costs (rent, rates, phones etc) are also likely to be higher than the allotted 33%, so a real-world scenario may look something like Figure 7.

So now we know the approximate split, how do we calculate the hourly charge out rate?

Well, first of all, we look at how many people in an agency are deemed billable (i.e. they should be charging for their time or services).

Some of them, such as designers and artworkers should be busy pretty much all the time and charging for all of it. Others, such as Principals or Partners, will not be involved with client-facing work quite as much, so will charge for a smaller proportion of their time. Some staff, such as Admin, HR and IT will not charge for any of their time, as they are seen as an internal resource.

So you add up all the hours that can be theoretically charged – from those members of staff that are deemed billable – and then multiply the final amount by 80%. The figure you arrive at should be sufficient to pay for everything shown in Figure 7.

So why 80%?

A typical UK design agency will, in reality, only be able to charge about 80% of its billable time – which is an accepted UK benchmark.

In other words, in an average 40-hour week, 32 hours (80%) will be billable – i.e. charged out to clients for project-related work.

The other 8 hours will be non-chargeable, and allows for things such as sickness, IT issues, down time, internal training, comfort breaks etc.

If we take another member of staff as an example, a Principal may only allocate 20 hours per week for client-facing work. When we apply the 80% formula (known as the utilisation rate), only 16 hours will be deemed billable.

And so it goes on, across the agency, until all billable members of staff have been accounted for.

The total billable hours have to provide enough money to run the agency and return a reasonable profit, with which a company re-invests in its staff, training, equipment and expertise – for the benefit of its clients. A virtuous circle.

As for how one establishes exactly how much each member of staff charges, it’s a composite process. It’s established by their salary, the variable costs of running an agency (see Figure 7) and benchmarking against competitors. As highlighted above, DBA (and others) provide annual validated industry statistics for both charge out rates and salaries.

It’s important to explain how these rates are arrived at, as some clients (and I say this from personal experience) are somewhat sceptical as to their legitimacy and openly question whether agency charge out rates are based on anything tangible. Now you know they are.



HOW DOES AN AGENCY CHARGE FOR ITS SERVICES?

Per project

When an agency receives a project brief, it will calculate what’s involved, how it falls into the design stages (previously outlined above) and which members of staff are best suited to the project.

It will then estimate how much time (in hours) is needed for each design stage and multiply that by the hourly rate ascribed to that person or discipline.

Please note that an agency can only interpret the project as it sees it. If a client brief is particularly verbose and makes the project sound complex, an agency will assume it is, and quote accordingly. So if it’s a simple approach you want, it’s best to just spell it out. Even better, try to ensure that the agency can talk to you directly to clarify all details before they submit estimated costs.

By the hour

Although some agencies bill by the hour, most clients are very nervous of this open-ended commitment and would, understandably, seek to cap their financial exposure.

However, it may be appropriate to charge this way for the tail end of a large project – maybe to capture small, rolling amendments from multiple sources.

Rate card

This form of charging is often used for repetitive tasks, such as producing display advertising or digital banner ads. In effect, the client agrees a fixed price with an agency to complete a set task, within agreed parameters.

The idea is that, while there may be small variations from ad to ad, the agreed cost covers most eventualities and seems to work well for both parties. Rate cards are often reviewed to ensure that they are still effective and delivering value.

Another advantage of the rate card is that purchase orders and invoices are easy to administer and process.

Retainer

A retainer is a mechanism whereby a client ‘retains’ the services of a design agency, often committing to a set amount of hours (or days) per month. This is ideal for ad hoc work.

The client benefits from priority treatment, access at short notice and, possibly, a discounted rate.

The agency benefits from a reliable workflow and a regular income, with fees often paid in advance, via standing order.

Both parties monitor the actual hours worked over the agreed period. If they overrun, then an additional invoice is raised. If they under-run, the hours are rolled over to the next period (or lost, depending on the contract type).

The retainer is an efficient way for a client to quickly access design services and to avoid multiple invoices for small amends or sporadic projects.

Miscellaneous fees
Rush or overtime charges

These are charges that may be applied, should you require your design agency to immediately respond to an urgent request or to work outside of standard office hours (unless, of course, the agency offers, as standard, a 24-hour service).

Should you require this, you should expect to pay an additional 50% for evenings and an additional 50%-100% for weekends.

In reality, many smaller agencies aren’t zealous clock-watchers and will happily work into the early evening to complete a project – without charging overtime rates. However, once they get beyond about 8pm, it would be realistic – and only fair – to expect to pay a little more for that service.

Client amendments

Unless they are very straightforward and efficiently managed, client amends can become a very contentious issue and can often spoil a good relationship. For some clients it can be a make-or-break deal.

What is deemed fair, all depends on how an agency records (and charges for) its time.

For instance, if an agency operates a minimum charge system (i.e. blocks of 15 minutes, 30 minutes or even 1 hour), then a series of simple amends, requested at different times, can contribute towards an unexpectedly large invoice.

However, if an agency, as we do, makes note of the actual time taken (i.e. 5 minutes, 17 minutes, 33 minutes) for each set of amends, and combines them for invoicing, then a client pays for the actual work undertaken and is not held hostage to an inflexible and expensive charging system.

“WATCH OUT FOR THE ‘HIDDEN’ AMENDS.”

Please note that it is always best practice for a client to collate and then brief amends in tranches, as it is a better use of their time and budget and a designer can then focus on that specific project, with all its nuances, rather than picking it up and putting it down, risking repeated loss of concentration (a fertile ground for mistakes).

Another thing to watch out for are the ‘hidden’ amends. This happens when an unscrupulous agency submits an estimate where the allowance for client amends is set deliberately and unrealistically low in order to win a bid or tender (the cost for ‘further’ amends is buried in the small print). This only becomes apparent when the client receives the final invoice and finds that the amends part of the bill constitutes a much larger proportion of the costs than they had expected.

Buying third party services

On many projects, your agency may need to procure the skills of another supplier, such as a photographer, copywriter, developer or printer.

Please be aware that it is standard practice to mark up third party costs, often from 10%-35% depending on how high the costs are (the higher the costs the lower the mark up).

This mark up (or commission) is to pay for the time spent liaising with and managing the supplier and also helps to finance the payment gap – as these third party suppliers will often be paid before the agency is. In many respects it’s a de facto project management fee.

In a close working relationship, it’s not unusual for an agency to occasionally waive this mark up altogether if, for example, the project budget is limited. Both parties understand that there is a bigger picture in play and that flexibility of process is key to their ongoing mutual success.

Heads up…

Sometimes, hourly rates can be a touch misleading and can only be truly compared when the service being delivered is almost identical.

For instance, some artworkers are blisteringly fast, which means that they can produce much more than their contemporaries in an hour. If they charge £80 per hour and are twice as fast as an alternative artworker charging £60 per hour, you’d be very unwise to choose the latter. But how would you know? It’s not easy.

And what about attention to detail? What if a designer or programmer offering an attractively low fee turns out to be inaccurate? Mistakes everywhere. You’d lose whatever cost benefits you thought you’d gained by wasting (your) time and money chasing through continuous amends. And you’d feel uneasy throughout the project.

The point I’m trying to make here is to not be seduced by what appears to be a cheaper option. Don’t blindly follow an hourly rate; it’s just a financial calculation that correlates with the cost of running an agency.

To maximise value, do your homework and apply some common sense. Look at an agency’s work and talk to them about their standards, speed and efficiency. You need to be making a measured judgement as to who does what in the agency, how good they are and how well you think they’ll work with you.



SHOULD I USE AN AGENCY OR A FREELANCER?

This is a hoary old chestnut. If I was a client and I had the experience to engage productively with designers, I’d probably use both. But you need to really understand what each can and – most importantly – cannot provide.

Why use an Agency?

When you commission a design agency, depending on their size and structure, you’ll almost certainly benefit from the following:

As was mentioned before, all this experience, training, infrastructure and systems flow into a commercial charge out rate, which a client should expect to pay.

Why use a freelancer?

Freelancers offer a client different options.

The primary benefits of a freelancer are:

So you need to know where the value lies – what works best for you, which may change project by project. You cannot – and should not – invite agencies and freelancers to submit quotes for the same jobs, particularly where price is the primary driver. It’s a pointless exercise.

Use an agency when you need breadth of experience, peace of mind and expert support. Use a freelancer when you know that their specific skillset is a perfect match, when you have a limited budget and when you have the time to project manage them carefully.

What about crowd sourcing?

Most people have now heard of the term ‘crowd sourcing’. In simple terms it means that you can electronically access a global pool of people, in myriad professions, who are happy to supply a product or service for a fixed price (often a very low one).

Design is no exception and there are companies out there who will, for instance, design a ‘logo’ for you for $5. Seriously. Fiverr is such a company. (I was going to feature a company called $5logo.com, but they seem to have disappeared since I last looked. Maybe that says something about their business model?)

Warning: enter this territory at your own risk! It is awash with obfuscation, intellectual property infringements, templated files that you’ll see elsewhere and worryingly variable production knowledge (i.e. submitted designs that simply won’t work when applied to different substrates and collateral). This is not the case for every designer, but it happens often enough for it to be problematic.

And don’t expect to pay $5 for your logo either, as everything is extra; file types, copyright, responses within a certain timeframe etc. Maybe $50-100 would be closer to the mark, which is relatively good value (notwithstanding the IP issues!) if you’re a micro-business or sole trader, such as a corner shop, a window-cleaner or a mechanic.

If, however, you value your brand and corporate reputation, you’ll see it for what it is and stick with qualified design professionals that can add value to your organisation and validate their work via portfolios and (real) client testimonials.



SUMMARY

Calculating what you should be paying for professional design services is not a straightforward exercise. The variables are sometimes difficult to quantify, which can make decision making little more than a guessing game.

Whilst organisations such as DBA offer accurate guidance as to industry standard rates, it takes knowledge and experience to truly understand the nuances – and then procure these services effectively

If in any doubt, refer to your (experienced) colleagues, talk to designers that you trust and liaise with your procurement departments. Between them all, you should be able to build a clearer picture of what you should be paying for any given design service.



TAKE AWAY TIPS

1. There is an established ‘going rate’ for professional design services – see the 2013 DBA Charge Out Rates and Salary Levels Report.

2. Expect to pay freelancers approximately a third of what you pay an agency (but expect a completely different service).

3. Not all designers are as creative as each other. Not all artworkers are as fast – or accurate – as each other. Bear this in mind when comparing costs.

4. Only pay for experience when you need it. You don’t want an Agency Principal working on your artwork amends.

5. Expect to pay less (approximately 17%) when working with a regional agency.

6. It takes experience to work out where the real value lies in a quote.

7. Watch out for the ‘hidden’ cost of client amends. They’ll artificially inflate your final invoice.

8. Agencies can offer multiple ways of charging. Choose which ones suit you.

9. All ‘bought-in’ third party services are normally marked up (as a de facto management fee).

10. Enter into crowd sourcing design procurement at your peril. It only offers any sort of value to those shopping at the lower end of the market.

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