adrien 24 Aug 06

There’s another similar story:

A machine in a factory has malfunctioned, and the engineers on site can’t find the source of the problem.

So they call on a retired worker who had spent a long time working with the machine. He comes in, walks up to the machine, looks at it for a minute, pulls out a piece of chalk and draws a circle around the screw that needs to be tightened.

He then writes them a bill for $5’000.

“$5’000, that’s ridiculous, all you did was draw a circle around a screw!”

So he writes them a new bill:
- drawing a circle around a screw: $1.
- knowing where to draw it: $4999.

Michael Chui 24 Aug 06

Another common variant: a technician is called in, checks everything out, and then taps on the back of the machine. The manager demands an invoice, so he writes:

Tapping the computer: $1
Knowing where to tap: $4999

Experience has value. Too bad none of these stories are likely true.

Michael Chui 24 Aug 06

Another common variant: a technician is called in, checks everything out, and then taps on the back of the machine. The manager demands an invoice, so he writes:

Tapping the computer: $1
Knowing where to tap: $4999

Experience has value. Too bad most of these stories are likely untrue.

Anonymous Coward 24 Aug 06

Thanks for yet another great post.

Dave Astels 24 Aug 06

I’ve had this sort of thing happen semi-regularly. I’ll join a project in progress and get a general understanding of the lay of the land.

Then someone will have a problem and ask for my help. They’ll explain it. And I’ll suggest something. Five minutes laters it’s “That was it. How did you know to look there?”.

In general these days, experience seems to be grossly undervalued. This seems especially true in the software field.

It’s that sense of intuition that takes years, even decades to build up.

Another personal example, in design/achitecture discussions someone will make a sugestion that sounds good. But it doesn’t “feel right”. I’ve learned to trust that feeling. There have been times when I’ve challenged the decision, but been unable to give concrete reasons why. So it’s been used, and later has to be revisited because it turned out to be the wrong way to go.

“How did you know?” Honestly.. I have no idea.. I just did. That’s the value of experience… “Just knowing” often without conciously knowing why you know.

reid 24 Aug 06

I’m firmly in the price per hour camp. Your price per hour reflects what you want for your work and that you set a realistic customer expectation ahead of time. Without setting accurate expectations, you get suprised customers, like the factory manager and the woman who now has a cheap Picasso painting of her. People know that experience is worth paying for, they just want to know what it’s going to cost before they make the committment. The fixed price is attractive because it sets an accurate expectation.

Chris H 24 Aug 06

Another idea to expand on this that I’ve read lots about is charging not by how long it takes you to complete a project, but charging based on the VALUE of the completed project to your client.

Take a logo design, for instance. Say it takes you 2 hours to design a logo (rarely so) and you charge $100/hr. Don’t you think a logo that a company is going to use on everything it ever does is worth more than $200 to them?

So take the VALUE of the project, add in your years of experience and talent and then come up with a project fee.

Then make sure you write into the contract/proposal what that fee covers (be as exact as possible - e.g. “includes 3 concepts, 2 rounds of revisions each”). And then state that should the scope of the project exceed the above specifications, a Change Order detailing the fees for additional work will be issued to the client and must be approved before additional work will begin.

Once you begin to do those things consistently and stick to them, you’ll see your earnings grow exponentially and not only will your clients become trained to expect it - they’ll actually value your work more because they have to actually pay you what you’re worth.

At least that’s been my experience and deal almost exclusively with local small-business clients of the engineering variety, who are not typically generous with their marketing/advertising budgets.

MrBlank 24 Aug 06

Thanks for sharing the Paula Scher video!

Eric Mill 24 Aug 06

Well, I’m glad the 37signals campfire room idea worked out so well. I can’t believe anyone intelligent enough to read this blog would flood a room with garbage. I still say you should give it another shot sometime soon though, I won’t let that man extinguish my hope for the future.

Sam Leibowitz 24 Aug 06

The Picasso story reminds folks of the engineer story. In turn, they remind me of the extremely old-school “AI Koans,” from back in the day. A sample:

Knight and the Lisp machine

A novice was trying to fix a broken Lisp machine by turning the power off and on.

Knight, seeing what the student was doing, spoke sternly: “You cannot fix a machine by just power-cycling it with no understanding of what is going wrong.”

Knight turned the machine off and on.

The machine worked.

More available here, and various other places.

Seth Thomas Rasmussen 24 Aug 06

I like that quote about designing on a computer. I feel more and more that the value of getting away from the computer cannot be overstated.

I’m primarily a programmer these days, but even still, I occasionally find sketching out code to be ridiculously helpful. It’s still a design issue, and the value of shaking up your thought processes, however you do it, is generally great.

Languages using such a clean and natural syntax as that which is employed by Ruby, my current favorite, really helps facilitate that kind of thing, too. I remember trying to sketch out ColdFusion code and quickly becoming tired of all the extra shit I had to litter around my ideas.

I digress, though, and now I recall an audio/video teacher I had which liked to rant about many things including the decline of traditional animation for keyframes and tweening powers enabled by software. I think there is room for both, but that we power users often forget that the computer isn’t the end and that it didn’t replace anything so much as offer a new way of thinking and doing.

Michael Doan 24 Aug 06

Don�t you think a logo that a company is going to use on everything it ever does is worth more than $200 to them?

Yes, its worth more…over time. The Nike Swoosh is valued at $35 (in 1971) plus billions of dollars spent on marketing, and product design over the last 35 years. : )

Paul McCann 24 Aug 06

Sounds like the old story…

Arnold Palmer chipped in from off the green and someone in the crowd piped up with “Wow, that was a lucky shot Arnold”. To which Palmer replied “Yep, and you know the funny thing? The more I practice the luckier I get”.

[OK, more than probably apocryphal… ]

Arnie McKinnis 24 Aug 06

The adage — “time is money” - is really pretty much BS. Only money is money - time ticks along anyway. I’ve been thinking alot about the “value” of information - and what is more valuable - the information or the presentation?

Example: which is more valuable — Google Maps or NAVTEQ?

Just curious - about the same conversation as Hourly vs. Project. I’ve billed both ways - and tell you the truth - both suck! Your “Getting Real” book is a better example — write once, sell many (WOSM) - how about that for an answer?

shane 24 Aug 06

I happen to flat rate my projects, include two free minimal revisions (just to make the client feel safer) and any revisions beyond that get my hourly rate. It works great because I define the price while weeding out the scope creep.

Tim Jokester 25 Aug 06

BREAKING NEWS:
——————————————————————————

37signals no longer needs a system admin since they are now migrating their 14 servers to Bezos’ new Amazon server cluster service.

http://www.techcrunch.com/2006/08/24/exclusive-amazon-readies-utility-computing-service/

Just kidding. I really have no idea.

It would be interesting to know if 37signals was given the heads-up on this new service from Bezos prior to the release.

Jason Liebe 25 Aug 06

Well that explains why even routine medical procedures are expensive.

Paul Hepworth 25 Aug 06

Very inspiring video and comments. Its nice to be reminded that not everything important is a science.

Personally I have gone back and forth on pricing projects by the hour or project and have come to the conclusion that it depends on the designer and even more importantly the client. I tend to do both myself depending on the situation and projects that are billed by the project usually have some defined scope that when reached ends the project and starts the new hourly rate model. Its nice to be able to tell the client “yes” after they add things to the project, but knowing that the work extends beyond the scope of the quoted project ensures that they are not messing around with you. (My two cents.)

Great post!

vinnie 25 Aug 06

This is a little off-topic but actually related to freelancing. A recent job posting on 37signals appears to be bogus. It’s for a ‘Netscape/AOL, LLC: Webdesigner’, and the poster asked that resumes be sent to [email protected]. After a quick whois search, I discovered that Netscape Communications, Inc. does NOT own the ‘newnetscape.com’ domain.

I wonder if identity thieves are now posing as recruiters to get your personal data?!?!?!

Stephanie 25 Aug 06

Thank you for explaining how to quantify Creative work. Its allways a struggle to explain this to clients (the graphically illiterate).

And yeah, you do have some dubiosity on your job board.

Mark Imbriaco 25 Aug 06

Vinnie, I did a little research:

1. The nameservers for newnetscape.com point to weblogsinc.com, which is owned by AOL.
2. Those nameservers resolve addresses for the newnetscape.com zone to an address block assigned to Netscape — the MX record for newnetscape.com points to the same IP address as that for weblogsinc.com.
3. The whois contact information appears to be hidden behind a proxy — not unusual these days, but that’s probably what threw you off the trail.

In short, it looks legitimate to me.

trendoffice 26 Aug 06

“In general these days, experience seems to be grossly undervalued…It�s that sense of intuition that takes years, even decades to build up.” - these words of
Dave Astels above say it all. And it is true not only in the software field, as he says, it applies for every creative business, where quantity is hardly measured and quality is often quite subjectively estimated.

trendoffice 26 Aug 06

“In general these days, experience seems to be grossly undervalued…It�s that sense of intuition that takes years, even decades to build up.” - these words of
Dave Astels above say it all. And it is true not only in the software field, as he says, it applies for every creative business, where quantity is hardly measured and quality is often quite subjectively estimated.

Josh Farkas 27 Aug 06

Many thanks for your great article.

John Maas 27 Aug 06

To return to Pablo Picasso, a story current in the art world for a long time is that when a wealthy collector inquired as to what an abstract painting on the wall of his studio represented, Picasso replied- ‘200,000 francs, Madam’ Yet another way of saying- It is what it is.
If your customer can’t fathom an abstraction of time or money or value or design, keep on keeping on.

Aaron Maldonado 27 Aug 06

I’m freshly out of school but i’ve did some work for clients, my problem is that most of the clients don’t want to pay the money you’re asking for your job, how do you lead this situation???

Aaron Blohowiak 28 Aug 06

I�m freshly out of school but i�ve did some work for clients, my problem is that most of the clients don�t want to pay the money you�re asking for your job, how do you lead this situation???

Most people want to pay as little as possible. Be firm but direct, asserting your value and what makes you different from others (speed, quility, service.)

Tark 28 Aug 06

thanks for this post - the video was very interesting.

Christos Superb 28 Aug 06

Until you get to a stage where people are after your work because of your reputation, you’ll have clients that will want to pay as little as possible.

Build up a reputation by doing what Aaron suggested

Aaron Maldonado 28 Aug 06

Thanks for the comments!!! :)

Roy Blumenthal 02 Sep 06

The charging model I use is this:

An overarching project fee, with defined goals, and two revisions thrown in (I write and direct corporate and industrial theatre).

An hourly charge for any revisions thereafter.

Also, because of being burned one too many times, I have cancellation and postponement charges.

Blue skies
love
Roy

Leslie Burns-Dell'Acqua 15 Sep 06

I’m a business and marketing consultant to creatives (mostly commercial photographers) and pricing is always a tough issue. I’ve written several pieces about it on my own site and blog, but essentially the best pricing strategy for creative work is the project-based system using a value-related system for certain aspects.

Overall, well defined expectations combined with clearly written paperwork and project-based pricing results in satisfied/happy clients and better creative product.

Thanks for the great info and discussion!
-Leslie

okezi gift 23 Sep 06

i will like to know if your organisation do accept primary design of cars done by drawing and colour,i do design on anything mostly cars.
please advice me on how to work with you organisation to ensure positive result am very creative ,i also have at my collections designs been done.