Let’s talk about Pricing!
Published: 03 Oct 2016 By Alex Read
Whenever we meet students, one of the main questions they always ask is ‘How much do we charge?’: Alex Read of design studio Bamb tells all
Pricing is a bit of a taboo subject but why does it need to be? I know us Brits aren’t great at speaking openly about money and it’s always a worry to be judged based on our design ability and what value we put on it.
Let’s be honest, money is the absolute be all and end all. Without money we can’t continue to trade as a profitable business. So why aren’t we helping newcomers to the industry and being open about our charges, explaining why we choose to price how we do?
If we’re growing and building a customer base then that’s nothing to be ashamed of and if we’re at the top of our game and command a handsome sum, then that should be celebrated.
As a partnership Bamb is two and a half years old, although it is worth noting that I started as a sole trader three years prior. So the customer base was started over five years ago by one person, then added to by Kim who herself was a freelancer five years prior, and then by Dan who has been a partner at Bamb for over a year.
We don’t aim to provide work for people who are purely focused on cost. Our customers want a professional and experienced agency to supply a design that is right for their business and cost becomes secondary to this.
Hopefully that gives some context to our pricing and how it has changed over the years.
With our small team setup, we work on three to five websites at any one time, some will be nearing completion, while others are in early planning stages. We carefully manage customer expectations with realistic timelines and book people in with a 40% deposit, requesting a further 30% when we actually start the work and the remaining 30% on handover.
All our work usually comes from referrals and the customer journey usually goes – Meeting, proposal, verbal go-ahead, formal design meeting, formal on-boarding document, 40% booking deposit, 30% starting deposit, strategy, style tile, wireframe, prototype/proofing, design, build, handover, final 30% invoice.
We used to bill 50% deposit and 50% upon completion, but with some jobs being booked in two or three months in advance, our cashflow didn’t always represent the scale of work we were doing at the time of starting the work.
Just to reaffirm, this will probably change in the not too distant future, it just suits us at the moment and our customers are happy with this setup at the moment.
In fact, by telling prospective customers we will not be able to start the work for 10 weeks or so, not only do we make sure all customers receive our full attention, it sells us because a lot of people like to use suppliers who are popular and busy.
A lot of agencies allocate a certain amount of time to their projects and stick to a certain amount of hours depending on the investment. We don’t do this.
We’re really open that this is a creative process and some jobs are easier than others.By the end of the project our customers are always happy with their designs, but it isn’t realistic to think every job can be done in the same time.
Our costs are an average of what it takes to do a great job and we’re really proud that our projects don’t differ wildly in the time it takes to get it right and that we estimate project costs pretty accurately.
One last bit of context is our overheads. Every month we pay ourselves a base wage of roughly £1400 each along with a profit share every quarter after our VAT is paid. We all have the same mentality that we draw as little as we need from the business so we can cover months where we dedicate time to progress our own projects and designs as well as invest in the business. We also pay out around £250 for our coworking membership, £300 for two vehicles, £150 for three Creative Cloud memberships, £200 for three Macbook finances, £150 for iPhones and other small amounts for equipment, travel and fun promotional things like Bamb hoodies, trainers or Brooklyn Net Jerseys.
This really is small time to a lot of people, but this is the reality for a relatively new agency that is growing and building trust with customers willing to put their faith in us.
Although we guide our customers beyond branding, graphic and web design, into disciplines such as creative marketing, print productions and events, all of which add to our profits, for this example let’s keep it simple and focus purely on website design.
Most of you will know that web design can mean a lot depending on features, design elements, functions, back-end development and many other attributes. For this let’s just focus on a brochure website for a client who has content ready and is looking for a high level of design (whatever that is!). The website will be linked with a WordPress CMS but without the need for custom icons/design elements, or any advanced back-end development.
Show me the Money!
When Dan first joined Bamb, we didn’t know how many customers would want a website design and because we wanted to build a portfolio we charged our first website customer just £800 + VAT.
It was obvious this was too low so we we increased our price to £1800 + VAT and won a further three websites at this price. Although we added £1000 straight away, we realised that to spend the time we needed on the job and work as a team, exploring options and pushing our abilities, this was still losing us money.
Just split £1800 across two months to sustain one person alone and along with running costs such as coworking membership, Creative Cloud payments and equipment. It doesn’t take a business expert to realise unless we’re focused on speed above quality that we needed to further increase our costings.
With some custom website work under our belts and on our portfolio, we actually sat down and worked out what we needed to charge based on our business model.
£3000 + VAT seemed to be the magic number for a brochure website that is 100% custom designed, coded and built with a stripped back WordPress CMS.
It is worth reiterating that our process includes using years of experience, agency and marketing backgrounds, a big emphasis on user experience, strategy and researching our clients’ marketplace. We also deliver a design that is always built to the highest industry standards in terms of speed, best practices and search engine optimisation.
If you are positioning yourself to be the supplier of standard websites without the same level of effort and detail, then there is nothing wrong with that. Everyone is at different points of their business life and has different budgetary restrictions and expectations. It just gives our pricing context based on what we provide.
At present we are taking on new website projects for £5000 + VAT. This allows us to devote the time to design a high-end website as a team and impart our full range of skills and experience to produce something we’re really proud of and our clients love.
Should work dry up then we know £3000 is a good baseline for us. Luckily we have an okay amount of current jobs booked in and we’re hoping to further our reputation so we can start requesting upwards of £5000, allowing us to invest in ourselves by learning new skills and bring in an apprentice or two.
Obviously there are people who charge a lot less and will gawp at our pricing, as well as people who charge a lot more and may not feel we’re doing ourselves justice. All we know is it is right for us at the moment and we will revisit this blog in a year or two to see how things have changed. Hopefully we won’t be on ‘people per hour’ begging for work!
Whether you’re looking to source a supplier that suits you, or you’re entering the world of design, our methods and level of pricing won’t necessarily be right for you, but we hope you find this open and honest article useful.
Never stop learning!
Alex Read is Project Manager & Designer at Bamb; bambcreative.com