Smoke in mirrors, mystery, and shame often surround conversations about pricing for freelancers and businesses creative work… if those conversations happen at all.
We caught up with Linna Xu, Founder and Chief Creative Officer at Studio Wülf for a candid conversation to shed some light on those dark corners of business operations and learn more about her journey to fair pricing and establishing a sustainable and fulfilling creative business.
What pricing model do you use? Why?
We use value based pricing because, unless we’ve taken on a project pro bono, what we do directly translates into value for our clients. If we design something for Starbucks, it’s going have far more reach and bring in far more revenue for them than if we designed the same thing for a local cafe.
What are the shortcomings or risks associated with this pricing structure?
You really have to prove that what you do is valuable. It requires much more front end work (marketing, how you structure proposals, how you speak to clients) since you’re no longer competing on price. But once you do, the only risk is that you lose clients who don’t see the value of what you do. To me that’s not a loss at all.
Has your approach to pricing changed after gaining more experience? How?
Absolutely! I started off the way any freelancer does – by the hour. As I gained more experience and became more efficient at what I did, I found it punishing. Clients think they care about how long you spend on something, but really they only care about the bottom line and that it’s within their budget. If we can deliver what they want within their budget in half the time, that means they can put it to market 50% faster. Why should that cost less?
Hourly also doesn’t allow us to give our best service. If a client wants something changed 20 times because it’s human nature to test out a direction and decide to go elsewhere, we have to request a change order and re-calculate how many hours it will take, and create the new timeline. We also get annoyed, and the client gets irritated that it’s costing more than anticipated. It’s much more hassle for the client and for us.
If you’re paying us 500k (assuming the project is of that value), then we’re more than happy to explore new directions, or field 11pm phone calls. The client no longer has to hesitate about asking questions that might cost them more, and we’re more than happy to respond to those concerns. It’s easier for everyone and creates the conditions for the best work to happen.
How does pricing change between a freelancer and a business?
It is not the same, as I learned the hard way trying to transition from one to the other. You can’t keep the same numbers and transition. They’re structurally different.
Let’s differentiate the two and operate under the assumption that a freelancer is working alone, or at most contracting out as necessary when work comes in (versus an ongoing payroll). Let’s also assume that a business has multiple people, and at least some of those people are full time employees. (I don’t believe in “in-house contractors” instead of employees, and neither does the law, but that’s another moral debate for another time). There are exceptions to every rule, and there are some unique business models popping up, but in general, I think these are the main differences between the two.
A freelancer model is more flexible. The freelancer might be working out of their home, or in a smaller rented space. There aren’t employees to pay in the traditional sense – sometimes work can be contracted out, but it’s much more versatile. Equipment needs are minimized to the freelancer’s own needs. Other contractors are often expected to have their own equipment. A freelancer operates on a much smaller scale. Depending on the talent and reach of a particular freelancer, it might not be possible to take on large projects since the structure isn’t in place to support it.
A business, on the other hand, operates on a much larger scale. In order to get business to support itself, it has to have the structure in place to take on that business. It’s a chicken and egg scenario. It has many more fixed overhead expenses (more equipment, more furniture, more software licenses). You need a bigger space so everyone can work comfortably. You need a constant roster of staff available to be able to take on projects that will support the business. You need to constantly find leads and close new business to support all the overhead costs, which results in many more unbillable hours. Essentially, there are many more expenses ticking away steadily every month. A business however, is in a much better position to take on bigger projects that require manpower. It’s ready for those projects.
The two structures can’t price the same way since a business has more expenses to cover. This is why a freelancer might charge somewhere between $50-$150 per hour + value, and a business might charge a blended rate of $150-$500/hour + value.
What has your biggest pricing misstep been?
Not believing in myself. Mindset is key. If you don’t value what you do and how much you’re worth, no one else will.
How have past mistakes impacted you and your work? What was the biggest lesson you learned from this, beyond changing your rates?
Mindset again! What you believe about yourself and what your value is reflected in how you price, but it also determines what kind relationships you attract, including your clients.
I attracted a lot of clients that saw the work that I did and believed I could create high quality work, but didn’t value design (or me) enough to want to pay for it, which just really meant they weren’t serious about their brand. You know the type: “I want to build a brand like Starbucks, but I have $500.”
I wasn’t serious about myself, so we were drawn to each other. I think creatives don’t know that budget is a huge part of how someone values you. If you only had $5, would you walk into a 5-star restaurant and demand they give you their most expensive meal? The answer is, if you did, you probably don’t value the chef. The truth is, your clients don’t value you if they don’t have the budget. We seem to think these things are separate, and while it’s kind of nice that we have so much faith in people and their intentions, budget and value are hugely related.
Charities and your mom are probably the only ones that can say that they really don’t have the funds. This is important work and maybe also an opportunity, but everyone else is not a charity. They’re in business to make money, no matter how small their business is, and if they’re not serious about spending the money to do it, then they’re not serious about their business, and they certainly don’t see the value you provide.
It’s a funny thing, but when you believe in yourself and your worth, the world opens up opportunities for you. I don’t really know how the science of it works. All I know is when I started shifting my mindset, Harry Rosen called, and now we’re working with clients that reflect my current mindset.
Evaluate your clients and leads through how you feel about them. There’s lots of them out there, and my personal favourite are the “FUCK YES, or no” and the the phone ring test. If the phone rings and you see the caller ID – are you happy to pick it up?
Are there any resources, unexpected inspirations, or tools you have used to organize, change, or understand pricing your services?
Talking to people. For years I was just scared to talk to people who were more successful than I was. They seemed unreachable and I couldn’t fathom why they would want to answer my questions. Turns out they’re all regular people, with the same struggles, and they’re friendly and helpful. Just ask. If they don’t reply, they might be busy – which says nothing about you. Or even if they don’t care to share information, that just says a lot about them and still nothing about you. As my therapist put it, what do you have to lose? The worst thing that happens is you end up exactly where you are now. 🙂
I also have a business coach, Chris Do, who I couldn’t do any of this without. He runs a business school for creatives called The Futur. They put out a ton of information (blog posts, Youtube videos, podcasts, Facebook) to help creatives understand how to run their businesses.
Stay tuned for Part 2 of our conversation as Linna discusses strategies for changing your approach and understanding your business pricing structure.
About Studio Wülf:
Studio Wülf helps businesses connect authentically to their customers through design that’s grounded in strategy. The Toronto-based studio has worked on projects with notable brands including Earth Rated, Maison Apothecare, and Harry Rosen.
Linna is founder of Studio Wülf. She’s worked internationally on brands such as Algenist, Perricone MD, Workopolis, Random House, the Royal Canadian Mint, Coca Cola, and Bell. She was also the designer and calligrapher of the 2016 Lunar New Year of the Monkey stamp by Canada Post. Her award-winning work been internationally published in books by Gestalten, Magnet Verlag and Form Magazine.