78. How do you price a project?
Have you perfected your pricing? 💰 In this one-on-one episode, hosts Phil and Lauren discuss Phil Pallen Collective's pricing decisions (and trials) over the past decade. From sending out their first website proposal to charging flat rates to managing retainers, this episode explores all the ways to charge for your services. A must-listen for anyone who invoices for their work.
Episode transcription
Phil:
Hello, and welcome to Brand Therapy. I'm Phil.
Lauren:
And I'm Lauren.
Phil:
And this is the podcast where we help you position, build and promote your brands. Welcome. Glad you're here. We're gonna have a productive little conversation today with just the two of us. So get ready for that.
Lauren:
Nice and cozy.
Phil:
That's what this is. And to top it off, we're talking about one of our very favorite topics: money.
Lauren:
The best.
Phil:
Money, money, money, money. They're not saying not so we don't have a license to track. Not that my singing is good enough that you think it was the track, but you know.
Lauren:
Have you ever watched Parks and Rec?
Phil:
Yes.
Lauren:
Have you seen the parts of the seasons where a character named Mona Lisa, played by Jenny Slate is on the show?
Phil:
No, I haven't watched it that close in detail.
Lauren:
Not that closely. Okay, well, for Parks and Rec’s fans listening to this episode, they'll laugh thinking of Mona Lisa sticking out her little hands to her dad. She's like, she's not a child. She's a grown woman and she says money, please. So silly.
Phil:
That's you today. That's actually you when it comes to our clients. So here's, it's true. Money please.
Phil:
So here's how our business works. For those of you that are new that are joining us, we are Brand Strategists. We've been in business, I mean, I started it on my own, solo, back in 2014. But I started working as a sole proprietor in 2011, and oh my god, the number of money models or business models that we've cycled through, it's quite shocking, and it's certainly enough to reflect on for today's discussion. Decisions we've made where we've arrived now. Oh my god. I mean, can we talk about all of it in half an hour? I think we can. But we could talk even longer.
Lauren:
It might need to be a two parter. Well, later.
Phil:
Later, yeah, we'll get to the juicy stuff today. For those of you who have joined us today, we'll make it worth your while. Money. What a topic, particularly for creatives or businesses, where it's not as clear cut on how much to charge. Even if you're not a creative. You could be a consultant or a lawyer or a doctor, and you're still in a position where you're having to decide how much money should I charge to earn a living, to grow as a business, to pay for expenses, and you know, to make it worth your while to take on projects. So I'm looking forward to this discussion, because it's fun to go down memory lane, isn't it?
Lauren:
It is. I mean, we've tried it all.
Phil:
We've tried it all. I'll start with this. I have never paid super close attention to the analysis of money charged and all of that. I guess that's not a good thing as a business owner, but you tend to pay a little bit closer attention to it. I tend to operate a little bit more intuitively, which I don't recommend. But I'm like, does this feel good right now, my charging enough based on what I know, you know, the service I'm rendering based on feeling is probably not the best idea.
Lauren:
No, I disagree. I think that properly pricing your services, or a project comes down to a really fine balance between numbers and intuition, because you can have an airtight quote for a project. But if your intuition is that, whatever you're proposing isn't going to sit well with whoever you're pitching, then the numbers don't really matter. Right. As long as you have data to back up, why you're structuring something in a certain way, I feel intuition is a big part of it.
Phil:
Absolutely. I think people are also afraid to make mistakes. So they feel particularly just starting out, right? You've got to figure out oh my god, what's my rate? Once I set it, it can't change. There's all of these stressors, pain points of Oh my God, I have to decide. And that's it. Whereas I think actually, some of the most important things that you can learn, are, by doing and actually evolving with what you learn as you go. When you're starting out, you shouldn't charge that much unless there's a reason to charge a lot. I would rather people get down and dirty, and start to test what people respond to. Not just the people that say yes, to your proposal, but also ensuring that you're working with the right types of people. Right, that you're attracting the right type of audience that fulfills you in what you deliver as a service provider, or as a product. Right?
Lauren:
Definitely. Okay, I want to go really far back in memory lane. Can you walk us through and by us, I mean, like me and the listeners. Can you walk us through your various first website quote to Gordon's Gold Jewelers in London, Ontario?
Phil:
Shout out to them. They were my very first client specific shout out to Loretta Gordon Bach, who I always say honestly, when I think about how I started, she really gave me the encouragement to start down this path of design, organization, even branding from little projects in the jewelry store. Which is where I worked while I was studying my undergrad, which is where we met Western University, circa 2006. I started there in 2007. But she was so great because obviously my main responsibility was selling jewelry to hopeful heterosexual couples getting engaged and then old ladies that needed watch batteries.
But Loretta would say Phil, I have an event coming up, can you help design a brochure for that? We’re closed for Easter sign for the front door, can you design that? I mean, how cool right to be doing some of those projects in addition to what I was doing as a job selling jewelry? But I created their first website. And I remember being absolutely terrified about how much to charge for that.
Lauren:
I remember too. I can see your proposal in my head.
Phil:
Isn't that funny? I do forget names, but I never forget numbers. And I charged I think it was $1650.00 for the website, Canadian.
Lauren:
How did you arrive at that back in your young age?
Phil:
God, I'd love to be able to find that proposal on my hard drive somewhere or maybe in my inbox. I didn't take that up prior to this conversation. But I also remember it pretty vividly in my mind. Back in the day, I estimated what it would cost based on time. Around there, then, I would have been working I think I started to price my services at around $25 to $30 an hour when I was starting. And I remember part of the deal, part of the negotiation was a lower rate with the ability to do the work while I was there. So I was able to actually work right now. I was able to work on the website while I was working at the store, which was huge.
Lauren:
So you were double dipping?
Phil:
Yeah, exactly. So it was beneficial for me. That made a big difference because I was there, physically present to be able to just kind of pull off this website and figure out how to communicate everything that was great. Keep in mind back in the day, we didn't have Squarespace or Wix or Weebly or any of these self-service kind of website makers. It was WordPress or it was HTML. I didn't even know WordPress, then. I was literally, this is so not kosher nowadays, but I was making websites with text saved as image. Still look pretty, but back in the day, you know, I was making it in Dreamweaver and still learning as I was doing. And so it's interesting to think back to that, my first client and first website project and it was $1650.00 Canadian dollars. And I think that would have taken me 40-50 hours. Right? So let me get my calculator divided by, let's say 50 hours. Yeah, around $30 an hour was exactly where I priced back in the day. That's how it all started.
Lauren:
Wow. So I asked this story because I have a feeling that a lot of new grads listening to this episode are probably doing or going through a similar thought process that you did at the time. So how did you arrive at $25 to $30? An hour out of curiosity?
Phil:
Good question. I think I had a peek around online. In fact, one of the dirty ways of doing this is to find someone who's at your level of expertise, could be a competitor, and email them from an email address that's not yours.
Lauren:
Oh my god.
Phil:
I've done that before, where I've emailed someone and said, hey, I'm interested in hiring you. What's your price? I don't know why I'm saying that out loud, people shouldn't do that. But actually, I mean, do it if you want to know what your competitors are charging, but it's risky.
Lauren:
At least to start.
Phil:
Or if you've got friends, this is easier. If you've got friends who are offering a similar service, ask around, see how much they charge, right? Get some insight into their process, the deliverable, trying to understand with a little bit of research and people around you where you should price that but at the same time, it's not an exact science. Here's what I think. And I didn't necessarily go through this exact step by step process, but when I reflect on this, and if I think about students or recent grads, or people changing careers, starting something brand new and starting at the beginning, I actually think your first three clients should be free.
I know some people go against this advice, but I think that you should build a killer portfolio with three projects that represent your skills, now. Maybe it's an exchange for something that's not money. When I first moved to the US, and I was waiting on getting my work visa, I did work for a client and not in exchange for money, she bought me an iPad. So that was one way that made it worthwhile when I was just starting out and couldn't legally take money, she bought an iPad.
So I think when you're starting out, if you don't have a strong portfolio, you need to do those first few projects to show proof of concept. And maybe you get paid for those, maybe get paid a small amount or maybe get paid nothing. Grand scheme of things. Let that motivate you to do a really good job and get the job done sooner so that then you can start to charge. Tip number one, you got to have at least three examples of proof of concept in your portfolio, then price yourself accordingly, even if it means asking some people around you. Do you agree?
Lauren:
I do agree. Yeah, I definitely agree. Because I think when you're doing those free projects, it's really, really important to keep track of your time so that you actually have a concrete reference that can help you with future quotes. To me, that's the key here, because human beings are actually really bad at predicting the amount of time something's going to take. lf we say, oh, I'm just going to check email, it's going to be two minutes. It's not, it could be eight minutes. And that's four times longer than what you expected. And it's really, really easy for that to happen with clients, particularly chatty clients. So by keeping track of your time from start to finish with everything, I think that really will put you in a powerful position in the future.
Phil:
I completely agree. When is the point at which you start charging more? I have strong opinions on this, but I think this is the next segue right? So you've done your free projects to show proof of concept if needed. If you graduate out of school with a solid portfolio, you might not you can, you might be able to skip that process. But then once you find yourself comfortable, and it's time to increase your rate, what do you do?
Lauren:
So, what I would first recommend doing is look at job descriptions online of similar responsibilities or similar experience to what you have. Look at what that salary is. And then basically divide that salary by 1000. And that should be your hourly rate. So for example, let's say you're a social media community manager, and you want to you know, write some posts for people, manage their Twitter account. And then basically guard their social media channels, but not implement any really advanced strategies. I would look up social media community managers online, you'll see that the running, I would say the average salary is probably $50,000, maybe. So your rate should be $50 an hour. Now the key here is to price yourself properly for the experience you have, the potential recommendations that you could give and also your confidence and the ability to solve a problem for that client.
Anyone can say that their rate is $900 an hour but the cost client's expectations are going to increase exponentially with the amount that you're billing hourly.
Phil:
Great. That's a very tangible way to arrive, I think at an hourly rate. Now, here's my strong opinion to add to this. Now I'm adding to your thoughts. I for one, am a person that generally doesn't welcome confrontation, thank you Sue Pallen for making me this way. I wish I did. You're better with confrontation than I am.
Lauren:
I don't like it.
Phil:
No, but you're better at it. I would say it's uncomfortable for everyone involved for you to raise your hourly rate. I think it's really uncomfortable. Imagine going and getting a haircut today. As we sit and record this, it's the middle of pandemic, so actually, I would love to imagine that that's like a perfect day dream setting is actually paying my hair. Imagine getting your haircut so your barber your hairdresser charges $50 for a haircut then you go back for exactly the same service three weeks later, and all of a sudden they charge $75 for the same thing. That is uncomfortable for everyone, including you.
So I have never, in all the years of my rates going gradually over a decade from 30 an hour to 300 an hour, I have never raised my hourly rate with that on its own. For me, I've always considered the service I'm providing and I brand, that increase. So one more example. The first brand audit, which is our kind of our signature service that we start every client with, so someone says please rebrand me please make my website. We will not take on that client. No exceptions unless they've done a brand audit with us. In fact, even if someone's done a brand audit with us, if it's three or four years ago and they come back for more we have to redo that. That service nowadays is $1500. Lauren and I are both on the call. This is not an ad for by the way, but sure if you want to, you can listen to this. Send me an email. We do that service for $1500, which includes a 90 minute consultation, and we put together a very detailed deck, least 30 slides, and a lot of times, not promise, but we see potential and work with that client moving for which normally we do, we'll do a presentation as part of that. Back in the day when I started this service almost 10 years ago, oh my god, I'm dating myself.
My first quote unquote, brand audit is with a TV host at Starbucks. And I'll never forget, it was at Starbucks in Culver City. You know, the one that's kind of like skinny, it's like, between those two roads. I was sitting there at the table, and this girl handed me $100. And she said, you know, I'd love your advice for what it's worth, right? I'd love your advice on how I should grow my brand. And I think I spent two and a half hours with her. And I called my mom right after, and I was like, someone just paid me for my thoughts. Someone just paid me for advice. Oh my god. And it was like the coolest little light bulb moment. So $100. And that was how it started. So, our brand has gone from $100 to $1500 over the years. I remember for years it was $275, four years it was $375. For a long time it was $500, then it was $750. Then it was $1000. And now it's $1500. Isn’t that funny when you stop and think about it.
Lauren:
Yeah. But the offering and the value has become more valuable in terms of the amount that the client is paying. But it is becoming I think increasingly more valuable in what the client gets, which is the key.
Phil:
Exactly. It's fun for us to think and reflect on the monetary value. Oh, we're making more money. Nowadays we are. That's not the point. The point is the value in which your customer or client or user, what they're experiencing, right. I don't like when people increase their rates and make it just about that. It should always be about the value they're experiencing. I've never had an uncomfortable moment of like friction. Even though I've obviously increased my rates over the years. It's never been uncomfortable for me because I always make it about the service that I'm providing. Sometimes I rename the packages, we should talk about that next probably right, today is a flat, right, what we learned from that, right? Yeah, you can rename things, you can reject them, you can rebrand them. It's a good idea, I think to make it less uncomfortable for you, then people focusing on your hourly rate.
For years, it was about hourly. Right? And we were transparent about that, weren't we? We were like, you know, so it's gonna be this amount per hour. But we learned some things from that as well.
Lauren:
Yeah. So sometimes, I mean, it's so tough because this is our experience, but it's not necessarily the right experience. It's not necessarily applicable to everyone. There are Some really solid arguments for charging a flat rate, because number one, flat rates are more digestible to the client. It's really, really nice to hear that website is going to cost $5,000. And I'm going to get the job done. You don't have to worry about me talking to you on the phone for 20 minutes and charging for that. So flat rates are nice, but some clients really aren't as receptive to hourly rates as at least as what you would think, because they tend to guard minutes instead of appreciating the creative process. That's what I found.
Phil:
Absolutely. So we went from experiencing that, and then starting to focus a little more on the hourly rate, because then clients would be like, Well, why is it taking you so long? To be super transparent about that, it has its challenges. We then switch to more of a flat rate approach, which we learned as well. Flat Rate is nice because people aren't so focused on how long it's taking you to do things. To Lauren's very first point in this discussion, always be tracking your time, always every part of it, even if you're not charging for it, so you can be accountable for where your time is going. But also so that you can look to see if what you charged is accurate for the amount that you roughly reference your working hours at. Right? I say roughly, and there's actually nothing rough about it.
So when we were working with flat rate projects, we would say well in the past because we have this data to pull from having worked for a few years, right, this is why don't freak out if you underpriced yourself for one job, you will get more obviously not as much money as maybe you deserve, but you will get learning from that moment that will inform and grow your business moving forward. So be grateful for the moments that you undercharge because they will help you make a lot more money in the future. But I would say when you've got the data to be this is fun because we're going from like birth to like free to then low project, to then hourly, maybe try flat rate once you know and see what works. For us, when we did flat rate it was based on what we knew that we were worth.
So we would take, for example, if it took 20 hours for a project, we would multiply 20 hours by what we know our rate is and go to the client and say, listen, the project is going to cost this amount of money. Here's what's included within that scope. So if it's a logo, there's going to be three revisions included. And here's what that looks like. And if you need more revisions, right, you have to put a cap on it. That's the scary thing with flat rate is it could go on and on and on and on. And we learned that, didn't we?
Lauren:
We did. And that's the challenges because every client is different. And it's impossible to assume that every client is going to need the same amount of revisions. Some are really, really easy, and others require a bit more handholding. That's just the nature of creative work. And it's very, very uncomfortable to be like oh well, we're at version three, you don't have any more revisions left, either take this brand identity that you're unhappy with, or pay us more and we'll continue. That's very uncomfortable. Yes, I hate it. And so now we hear the merits of flat rate two, because it didn't necessarily work for us. But it might work for someone else, especially someone who's wanting to get going.
We were at a point where we wanted to have a high volume of clients, which flat rate helped us achieve, because it was really, really easy to understand exactly what you're going to get by investing $10,000 or whatever the amount was. So if you are looking to basically increase your client volume to get more experience and also have an income that you can rely on, for the next few months, flat rate might be a good option for someone. It might because I feel it increases the amount of yeses, which is a good thing, but it's also a bad thing sometimes.
Phil:
I know there's no, we're always so quick to be like, okay, what's the quick and easy solution here? And actually, there's a number of factors that you have to consider. And I guess we should have included this disclaimer at the beginning. But just because we do something doesn't mean it's absolutely the right thing to do for everyone. It's just we can reflect on what we've learned in a service business. I mean, we've also had products, so we're kind of a synthesis of all of this, but I think what we've learned is definitely going to be useful for people. Lauren, can you kind of now probably, it's a good idea to elaborate on our final pricing system because well, let me let me start with this. We were flat rate for a long time. And I recall saying to you, given that I pay my contractors hourly, and I'm collecting a flat rate, the variable is high in terms of how much I keep the variance after paying everyone and all of our expenses. When we were flat rate, I felt uncomfortable, not really based on any numbers probably should have been, but I remember looking at my bank account, at the end of a project going, huh? there's not as much left in the business as there should be. And so we adjusted accordingly. What was it that prompted our adjustment? Was it me saying that and us doing some research?
Lauren:
I think it was a combination of things. You were stressed because every flat rate project was a guaranteed amount of gross income, but there was a huge range of what your cost of goods sold could be with contractor expenses. Because if contractors are invoicing you based on time, but clients are being invoiced based on a flat rate, that leaves a huge variability in the margin. So you were stressed out by that. And I was getting very stressed out by with client boundaries. Clients, I found, were getting stressed out because they knew the amount of revisions were running out and it was making it uncomfortable to have to keep drawing boundaries with clients and say one revision left hope you like it. It was just very, very stressful.
So we ended up deciding that maybe it was time for us to do the standard agency model, where it's contractors and workers are billing hourly, they're keeping track of our time, and we in turn are billing clients hourly and alerting them if we were running through the budget quicker. Now, I don't think that this is something that everyone should or can do with pricing, because you do need the right tools to be able to keep that under check. It's when we've got like seven different contractors working on a project, it can be really, really hard to manage the budget and know that we're not going to be burning through all of it with a contractor working hourly. So it does require a lot of checks and balances throughout the way. However, I will say that I think we have the most clarity ever, ever, in terms of project budget usage and margins than ever before.
Phil:
I completely agree. I think we're in the most comfortable position financially now than ever before. And the thing that I would add to what you said is that I think you need to have a reputation. You have to have a reputation for excellence before you can start operating on a retainer, because it takes a lot of trust for someone to say yes. And I think what's helped us is staying in our lane. Personal Branding. Yes, we brand companies, but the fact that we are the people to call when it comes to building your personal brand, right. Like the fact that we've had many examples come before us gives us or gives our our new customer confidence that we can deliver something to them. To your credit, we now in this model can project our retainer for a custom deliverable for a client almost down with accuracy down to the 15 minute mark. I mean, thanks to tools that we use for tracking like Asana for project management, and then Everhour, which is an additional plugin that we pay for, that enables all of our team members to track to the minute how long they spend on stuff. Without these tools, we wouldn't be able to pull it off.
Lauren:
It's completely life changing, completely. Because I can also see from an account manager perspective, I can see where we're at with the budget. I can actually set the budget down to the sub projects. And I can get email alerts when we've utilized 25% 50% 75% of the budget. So once we hit one of those markers, I can email the client and say, hey, we're halfway through the project. we've only used 30% of the budget because you've been great. What extra service would you like us to provide?
Phil:
Absolutely.
Lauren:
Or, hey, we're halfway through the project, we used up 60% of the budget, so we're actually pacing faster with budget usage than expected. I think a good way for us to get this in check is to maybe reduce or eliminate the recurring status calls and instead use Slack.
Phil:
There's always ways to adjust accordingly. But that way, you also allow right at the beginning of an estimate, don't you have some kind of factoring of like variables that we can anticipate so that we don't fall short? That's why you do that task? Not me. Do you include a certain buffer, for example?
Lauren:
Yeah. So one thing I've learned is that everyone and this is me included. We all underestimate how long something will take if something goes wrong dramatically. So whenever, at least now we've done this enough that I can just care about a project and know how much time a contractor will need just because we've worked with the same team for so long. But before when I wasn't as sure or getting used to working with different people, I would be like, okay, here's a design project designer, how many hours do you think this will take you, including about two rounds of revisions, and whatever quote, I would get four hours from the contractor, I always add 20% for just the contractors estimate, in case something goes wrong. And then on top of it, I'll add another 20% for account management, which is you and I, going back and forth working with the designer on versions before we share with the client. It's you and I having to hop on an emergency phone call on Mother's Day in a case where the clients upset, it has happened.
But this way, by anticipating and adding those buffers in your project quote, at the very beginning, if something goes wrong, you don't have to eat the cost. And if something goes wrong, you don't have to tell the client, hey, I would love to fix this for you, but it's gonna cost you more money. Because both of those alternatives are negative. Whereas if you have that buffer in there, then the client just thinks that cost is part of doing the job. If it goes well, then you can reward them by offering additional things that they weren't expecting. Or ideally, even if something goes wrong, you still stay on budget and everyone's happy.
Phil:
Lessons learned in 10 years of business when it comes to pricing from two brand strategists. What a fun journey down memory lane and a reflection on what's working now. Certainly, what's working now, or what we're doing now is working. And I don't see us having to change that anytime soon. Some of the new learnings for us have, you know, they're related to course sales, for example, is a new thing for us to sell a product, right? So we're always learning and even if it takes a few years to arrive at a model that works best for you, great, celebrate that. Don't be too upset about things that go wrong, because the learning moments and what goes wrong, make you so much stronger in the future.
Lauren:
Yes, and one thing I will say before we end this episode is that no one likes a surprise. Don't like a surprise when a client's or when a contractor spends an extra five hours refining their design and making it incredible. It could be a freaking Michelangelo statue and I would be pissed if they went over budget because they thought I would want the creative end deliverable more than saying on budget. And the same thing with clients. Clients do not like to receive an email or a phone call saying, well, we've surpassed our budget, so everything moving forward is billable. That's not fair to anyone. So I think no matter what stage you are at in your business, give clients a heads up and don't be scared to be transparent with budget usage.
Tell them I would recommend letting clients know when you're halfway through the hours letting clients know when you're either 70% or 80% of the way through the hours and then let them know when you're at 95% of the way through the hours so that way your client can't feel never feels blindsided.
Phil:
Absolutely. Technical episode, but hopefully one that's useful for you. As we reflect on what we've experienced, I would love to know if there's one little nugget of this episode you found interesting or useful. What changes are you going to make in your own business? Or what things have you been thinking about? Do we share something that's particularly useful for you? These are the things we want to know. We'll continue the conversation online #brandtherapy. I'm @philpallen.
Lauren:
I'm @thelaurenmoore and don't forget to check out the blog, we've got a great kind of an actually an older blog post that we'll be updating called easy pricing formulas for services. I think it'll be really really helpful for people to take a look and see all the different ways that you can price yourself from an hourly to a flat rate basis.
Phil:
As you said, we're resurfacing that post we've had over the years, but we're updating it with some of the ideas we've shared in today's podcast. If you liked this episode, if you like listening to us, do you like it when it's just the two of us, you should let us know we always feel weird, but some people have said oh my god, I love it when you guys talk, so we're giving you what you want. Leave a review if you enjoyed this, five stars helps other people discover this podcast that we work very hard to make. And that's it for us today. As I said, technical, you stuck with just the two of us in a cozy little moment here on Brand Therapy. Hopefully, again, you found this useful and we'd love to hear from you. You know how this works. We will see you back on our next episode and we look forward to it. Thanks so much for hanging out with us here on Brand Therapy.
Lauren:
Bye bye.
