Many times people ask me how much should I charge for Industrial Design Contract Work? Like many questions in life there is no definitive answer. In this article I hope to give you an idea of how much you could charge based on a number of factors. Details aside in this article, if there was something you should take away from this article it is that Industrial Design is a very important profession undertaken by clever, imaginitve and hard working individuals that deserve to be duely compensated for the work they perform. Unfortunately however it is often only designers themselves that understand the value of good design. We understand that some consumers don’t just shop by price and features, but sometimes they will buy a certain brand because of something trivial like it makes them feel happy or gives them a sense of belonging. Businesses often don’t appreciate the return on investment an industrial designer can bring to a project. In this article some assumptions and generalisations will be made, and according to some circumstances like where you may live for example these might not all hold true. In the comments please let me know how much you charge and why? What factors do you consider when charging your client for your services?

Article by Martin Gibson – Twitter – 29.01.2010

The Poll

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Factors to Consider Before Naming Your Price

There are a number of factors you should consider before quoting your price. You have to be clever in how you position yourself in the market and the long term implications this may cause. Some factors include:

• Clients are willing to pay money for a good designer as the output quality will be higher. As we know the difference between employing one designer over another can have extremely different consequences on the end result of the product. So what does your record look like? How many awards have you won? What university or college did you study at? What resources do you have? What experiences do you have? These all attribute to your final quote price some way or another.

• More experienced designers are more likely to complete the works faster than fresh out of university students, which means for a client a smaller amount of hours to pay for. Strategically this means that a student might have to charge less per hour and a seasoned designer can charge more.

• It depends on the quality of your skills and related work experience you have had in the industry. For example if you know all about printer design you will have higher credentials applying for a printer job and therefore might be able to charge more. Whereas a newbie to the industry might have to charge less to enter into the market.

• The price you charge should depend on the current market conditions of the design industry. For example, are there many industrial designers in your local area that can service the needs of your client? Are there many other jobs that you could do in the market? Is there any international competition? Obviously the more market competition the less you might be able to charge, whereas if design resources are scarce you might be able to charge higher (although this scenario is very uncommon).

• Is there anyone else who is tendering for the specific job? Often when a client requires design work he/she will approach a number of designers to scope out the best deal possible. If there is high competition on a tender you may need to deliver a highly competitive quote.

• Back on market conditions, a huge impact on your asking price will depend on which country your operating from and the location of the client. Generally speaking designers from western countries like developed Europe, North America and Australia get better pay than equivalents in Asia, South America and the Middle East. Therefore quoting for a client in developing nations might require you to lower the price, or increase your price if your working for one of the more developed nations.

• Consider the profile of the project. Having a prestigious client in your portfolio might speak wonders for your ability in the future to pick up other large profile clients. So consider being particularly friendly when quoting for these types of portfolio projects.

• Finally it also very much depends on the specific nature of the industrial design work. For example are you getting paid to just generate concepts? Or are you getting paid to do CAD work, rendering, market research, model and prototype building, graphics and web design or manufacturing liaison activities? For example you might be able to charge more for CAD work because it requires software and specialist training to operate. Whereas the skills required for pure concept development only require an imagination, a pencil and paper.

Negotiation Strategies

Consider the negotiation between yourself and a potential client like a downwards auction, also referred to as a tender. The client always has the power in the relationship as he/she may pick and choose who should perform the work. The client seeks the best value for money to complete the tasks. So therefore your competing with other designers on 3 main factors including total price, time to complete and quality. Of course both parties are seeking as much money as possible. So therefore you must strike a balance between being paid fair and justly for the tasks you perform and asking too much and appearing disingenuous or greedy infront of your potential client. Use your overheads as a starting block as to where your negotiations begin and then add a profit margin on top of this cost. There are many overheads you must allocate for when tendering for a product, for example, the cost of labor, fixed costs like rent, electricity, internet, telephone, couriers, conveyance, hardware depreciation, software upgrades etc.

Like any product or service in this world the value of it only depends on what someone is willing to pay for it. So consider the disposable income and the affluence of the client business. Generally larger companies have more disposable income and are likely to invest more for design services than lets say sole traders. Consider also what this client means for your future. Is there likely to be any repeat work from this client? If there is you may want to charge less than usual to draw the client in.

If a client questions the price you offer and you genuinely feel your getting paid the price of someone who works at McDonald’s don’t be scared to subtly educate the client on the return on investment good design could offer to the development process of a product. Use examples of how good quality product design has been a game changer for many businesses who seeked competitive advantage. One that springs to mind is Dyson in the Vacuum Industry. Have you ever seen such a desired and successful vacuum cleaner in your life before? If you have previous ‘Dyson’ experiences of your own, use these to impress and woo your client.

Where to Start?

Should I charge per a project? Per a project phase? Or by an hourly rate? Whatever the case you must ensure that whatever option you choose to charge to make sure that you can sustain yourself economically throughout the project. Don’t let yourself get paid only at the end of an 8 month project when you have an array of personal expenses throughout the project. Generally speaking you should only get paid at the end of the project if the project has a short duration. For longer projects that may span over months request that you get paid at the completion of certain project milestones. Often clients will have a varying fee structure for projects to encourage you to finish the work on time. For example if a project were to have 3 milestones, they might give you 20% at the first milestone, 30% at the second and 50% at the final milestone. For more contract based work that may be completed more in hours or a couple of days you might want to charge per an hour.

If the payment structure seems unreasonable or the project is very blue-sky and ad-hoc there is a risk that the business might not pay you due to their economic cirumstances or take months and months to pay you after the project deadline. Be extremely careful of this, this happens way more than you think! Projects and businesses fail, and if they do and your expected to get paid at the end of a 3 month project don’t expect a cheque to be waiting for you in the mail.

Sometimes you may pick up work that only requires 3-5 hours of design time, and if you charge per an hour it may seem like not even worth performing such minor projects. In these cases you should have a minimum charge of maybe $300-$500 or you may want to change an administration fee. As the difference between a project that goes for 3 hours or 3 weeks the administration work of these projects is likely to be the same. Don’t be scared to charge the client for any expenses you incurred or from meetings/briefings you had to attend with the client as either hours of work or as additional expenses.

From my experience and using data from the Design Institute of Australia the average hourly rate for industrial design services lies between $40-$60AU an hour or $50-$70US. But once again the factors listed in this article may very dramatically change this rate. A student may have to accept less pay and a seasoned professional might want to charge up to $125 an hour.

You may have the Job but be Protected!

It is imperative that you use a log sheet to document the work you have performed. Some headings of your log sheet could include: date, estimated time, actual time, activity, expenses etc. This sheet will give evidence to your client that every hour of your time can be justified and can’t be argued against. Make sure you are in agreement with your client on the fee structure before you start work and require the client to recognise a contract signed by both parties. Remember to talk about the confidentiality of the project with your client. For example are you able to use the output of the project for your personal portfolio purposes? Or is it under a non disclosure agreement? For example you don’t want to be showing off the work you did for a client that is under a patent pending, it is highly unlikely they will continue to work with you in the future. However in saying all this it is really the clients responsibility that intellectual property rights have been understood. It just might be a pain signing a non-disclosure agreement with every client you do work for and at the end of the day have a portfolio which is completely blank. In the future when prospective clients enquire about your portfolio of work they will have no grasp on the level of quality you did for months and months of work.