Monday, August 28, 2006

How to Charge a Client

this is a re-post, the original article is here

Legend has it that Pablo Picasso was sketching in the park when a bold woman approached him.

"It's you -- Picasso, the great artist! Oh, you must sketch my portrait! I insist."
So Picasso agreed to sketch her. After studying her for a moment, he used a single pencil stroke to create her portrait. He handed the women his work of art.

"It's perfect!" she gushed. "You managed to capture my essence with one stroke, in one moment. Thank you! How much do I owe you?"

"Five thousand dollars," the artist replied.

"B-b-but, what?" the woman sputtered. "How could you want so much money for this picture? It only took you a second to draw it!"

To which Picasso responded, "Madame, it took me my entire life."

Even Picasso struggled with the same pricing issues that you face as an IP. He understood that it's the skill, the expertise, the end result that the customer pays for, not the time it takes. But customers may need a bit of education to really understand that.

What are you worth? How much do you charge for the wonderful work that you do? How do you communicate your value to your clients? Do you quote an hourly rate, and then present a tally of hours and expenses at the end of a project? That's typical of many IPs, who find this the simplest way to charge their clients. Or do you quote an up-front, flat rate for a project? This eliminates the sphincter-tightening moment at the end of the job when you present your bill. You run the risk, however, of seriously undercharging if the project turns out to be more complicated than you thought it would be.

Monola Robison, a management consultant in Atlanta, Ga., has developed a set of guidelines to determine which approach is most appropriate for a project. "With pricing strategies, the determining factor is how well the outcome of the project can be defined," she says. "The less ambiguous the project, the easier it is to charge by the job. If the scope is broad and ill-defined, then a per-day rate is more appropriate."

Time is on Your Side

Charging by the hour, also known as time-and-materials billing, appeals to many IPs because it's so straightforward. You take your hourly rate, figure out how many hours you've worked, multiply the two, factor in any expenses, and send the bill off to your client. Couldn't be simpler, right?

Charging by the hour is a good option for short-term projects with specific goals.

Charging by the hour is often a good option for short-term projects with specific goals. "If a client wants to pick my brain about a very specific project, like my opinion about a marketing piece, I will arrange a one- or two-hour phone meeting and charge by the hour," Robison says.

Time-and-materials billing can also be appropriate when you're presented with a poorly defined project -- say, a new client calls and says, "Help! Come fix my company! Everything's a disaster!" While a project like this should probably send you screaming in the other direction, accepting it and charging a flat fee would be a big mistake. You simply don't know enough about the project's scope. What if you grossly underestimate the time you'll spend implementing your proposal? You'll end up being grossly underpaid, too. Hourly billing is the only way to go in this situation.

But time and materials billing can result in misunderstandings with your clients. A client might ask, "Why did it take you so long? I had no idea it was going to be so much." Or maybe he'll protest, "I know another consultant who charges $50 per hour less than you do. I'll go with her next time."

Your customers aren't trying to be difficult. They don't know better! Clients ask, "How much per hour?" assuming you and your competitors are all the same and that rates are the only way to differentiate between contractors. But all IPs aren't created equal -- there's a big difference between a management consultant with two years of experience and one with twenty years.

When you're offered a long-term project with clearly defined goals, you should charge by the project.

To answer questions about pricing, you need good sales and communications skills to demonstrate the value of your solutions and explain why you're worth your hourly rate. You also need to be prepared to justify the time you spent on the project, which means accounting for every hour you billed the client.

The Project's The Thing

Of course, charging by the hour isn't the only option -- and often, it's not the right one. When you're faced with a long-term project with clearly defined goals, charging by the project is the way to go. Gail Gudell, an independent accountant, uses this approach. "I act as Chief Financial Officer at three of my clients' companies. They are relatively small organizations, and there is no need for any of them to have a full-time CFO. I developed a specific checklist of duties, forms, and reports that I'm going to provide on a weekly, monthly, quarterly, and yearly basis. And I am paid on a contract basis for performing these CFO functions." And this means steady income and stability for Gudell, two things that are hard to find as an IP.

Clients usually prefer to pay on a per-project basis. They're scared of giving IPs free rein and getting a nasty surprise down the line.

Alternatively, charging by the project works well when you're providing one specific service or product to your client. Take, for example, an illustrator who's been asked to draw a picture for a company's brochure. Charging by the hour doesn't make much sense here -- whether it takes him two hours or ten to complete the illustration, it will still have the same value to the company. Why should he be penalized for finishing the project quickly? He should determine what the illustration's value is and charge his client that amount.

A Client's Perspective

Clients often prefer to pay on a per-project basis. They like knowing just how much your services will cost before they sign on the dotted line. They're scared of giving you free rein -- and then getting a nasty surprise down the line.
Al Levi, owner of Oil Services, Inc., a heating company in New York, hires a lot of IPs to help him with various aspects of his business. He likes to pay them on a per-project basis and tells a story to explain why.

"I was traveling with my family in Houston, Texas -- cattle country," he recalls.
"We stopped for dinner at a steakhouse. The waitress recommended the off-the-menu special: Porterhouse steak. She eloquently described its generous portion size and melt-in-your-mouth taste. I ordered it. And the steak was perfect -- absolutely delicious! But when the bill arrived, I discovered the price of the steak: $32.00. And the salad, bread -- everything else -- was extra.

"Now, the steak was great, and $32 may be a fair price for such a nice cut of beef. But the other steaks on the menu ranged from $16 to $23. The price surprised me, and I don't like to be surprised when it comes to purchases. Let me know ahead of time, and I can say, 'Yes' or 'No, thanks.'

"That's how I feel about consulting services, too. I want to know what services will be delivered and how much it will cost before I sign on."

Determining Your Project Rate

Despite the benefits of per-project pricing, some IPs are reluctant to use it because they simply don't know how to decide upon a price. Well, here's a hint: every project-based fee is based on your hourly rate. But instead of figuring out how much time a project took you after the project has been completed, you estimate how many hours it will take you before it's even begun. To come up with a good estimate, follow these guidelines.

Assess the project. What's the problem? What is the full scope of the project? How can you measure results? How will you know when the project is finished?

Then, decide how many hours the project will take. Be realistic. No project ever goes off without a hitch. Add some hours to account for unforeseen problems. Some people even advise IPs to double their first estimate. Multiply the total number of hours by your per-hour rate. What resources will you need? Add these expenses up. Then, before you present the total price to your client, ask yourself, "Should I discount this price because it involves so many hours of solid work? Am I saving time I would otherwise spend marketing and selling another job?"

Adjust your total price according to your answers. Then, sell yourself on the price. Do you see the value in relation to the price? Can you describe the benefits of your service so that it seems like a bargain?

Present your proposal to your client. Don't offer a breakdown of time and materials. Reassure your client that you will hold to the price until the desired, measurable results are achieved, no matter what it takes. If you are efficient at what you do, and you bring the job in ahead of schedule, then you and the client both win.

Be Flexible

So should you charge by the hour or by the project? There's no one-size-fits-all answer. They're both legitimate strategies that work well in different situations. When you're presented with a new project, consider them both, figure out which is the better option, and present your decision to the client. Then it's time to get down to business and start wowing them with your work!

Friday, August 11, 2006

Just say NO! to Speculative work

I've posted this in my email group but not on my blog. This is a very important foundation for a creative professional. Read on.

The NO!SPEC campaign: Serves as a vehicle to unite those who support the notion that spec work devalues the potential of design and ultimately does a disservice to the client.

Our mission: To educate the public about speculative, or 'spec' work.

Our target: Those who use creative services, as well as creative professionals (designers, photographers, illustrators, writers and those in marketing, branding and advertising).

What you can do:

1) Place a "NO!SPEC" logo on your site.

2) Sign the NO!SPEC petition.

3) Distribute the "NO!SPEC" posters.

4) Contact us with your thoughts, comments, articles and insights.

Requirements: The only requirement for participation is putting the appropriate value on your profession.

Head on to their website. It is an interesting read, I promise

Thursday, August 10, 2006

The Millionaire Mind

This are excerpts from a the book by Thomas Stanley "The Millionaire Mind". This show shows the insights of how millionaires in the US think and act. This book is a result of a survey of many millionaires and their similarities. Why review this book in a blog that discusses design? Well, I want to be a millionaire, that's why!And principles taught in this book are applicable to all.

Most of the people profiled in this book became economic successes in one generation. They came from economic ground zero. Most inherited no money. They never received the proceeds of an estate or income from a trust account. How did they do it? Because they are of the millionaire mind.

You may never be able to generate the sizable income that many of these millionaires have earned. You may not become a multimillionaire in a few short years. But you can still benefit from understanding how these people maintained an enjoyable lifestyle at the same time they were accumulating wealth. Only a few people, even those with high incomes, know how this can be accomplished. Those with a millionaire mind know how, and they are profiled in this book.

Similarities of the Millionaire Minds

  • Nearly all them are (97%) homeowners

  • About twelve years ago we purchased our current home for an average price of $558,718. The median price was $435,000. We have enjoyed reasonably good appreciation on our home. On the average , it is currently worth $1,381,729. The current median value is $750,000. Thus we have benefitted financially and added our net worth by the appreciation of our homes

  • In spite of the high value of our homes, we generally have small outstanding mortgage balances

  • Most of us (61%) live in the homes that are currently valued at over 1 million dollars. But only one in four (25%) paid $1 million for our current homes

  • One in then purchased a home in the three years that followed the stock market plunge in 1987. Many of us who did were searching for foreclosure

  • We live in a home that was constructed forty years ago(median year). Fully one in four (25%) of us live in homes that were built in the last ten years

  • The majority (53%) of our group have not moved in the past ten years. Only 2% of our group has moved two or more times during the same period

  • Only a minority (27%) og our group has ever had a home built for them. We of the millionaire mind believe that's its better to purchase an existing home than to get into the "building business". It is much less time consuming and probably cost less to purchase homes out of existing inventory

  • Who among them are likely to have homes built for them? Attorneys! We have to wonder why they are so reluctant to build

Vocations of the Millionaire Minds

  • One in three (32%) of us are business owners or entrepreneurs. Nearly one in five (16%)are senior corporate executives. Ten Percent (10%) of our group are attorneys, 9% are physicians . The other 1/3 of our population is composed of retirees, corporate middle managers, accountants, sales professionals or new business development officers, enginners, architects, teachers, professors and housewives

  • Business owners overall are the richest among the group, bur senior executives are often among the ranks of multimillionaires. They account for 16% of the millionaires but for nearly 26% of the decamillionaires, those with worth of $10 million or more

  • Nearly 50% of our wives do not work outside the home. Those who are employed are business owners or entrepreneurs(7%), sales professionals(5%), corporate middle managers(4%), attorneys(4%), teachers(3%), senior corporate executives(3%), and physicians(2%). About 16% of wives whowere emplyed outside the home are currently retired

  • About two-thirds of us who are decamillionaires report that their wives do not work outside the home. About one-half of those who do work, work part-time

Education of the Millionaire Minds

  • We are well educated. Fully 90% of us are college graduates. More than half (52%0) hold advanced degrees

Friday, August 04, 2006

Useful Plug-in for Bloggers (Any blogs)

Performancing for Firefox (or PFF)is a full featured blog editor that sits right within Firefox
  • Works with all major blog software
  • Easy WYSIWYG Editing
  • Trackback, Technorati and support

Once installed, just hit F8 or click the little
pencil icon at the bottom right of your browser window to bring up the
blog editor and easily post to your Wordpress, MovableType or Blogger

A word of caution, just like any blogger tool, you still have to publish your blog post in blogger manually because it has the word verification process. Just like in the youtube video uploader. Enough rant, check it out.

Tuesday, August 01, 2006

The Benefits of Having A Web Site

Whatever your business it can benefit from having a web site. If your competitors have web sites you need one too to maintain your competitive advantage, but as well as this, your web site can benefit your organization in many other ways.

A brochure - but unlike traditional paper brochures your site is easily updated, always current and cost-effective.

Your web site acts like a company brochure, but unlike a traditional company brochure your web site is always current and can be accessed 24 hours a day.

Your web site is also high quality, full color, up-to-date and interactive.

Your site can be updated quickly and regularly, keeping product offerings and prices accurate without the costs associated with updating traditional printed literature and the delays of printing, publishing and distribution. A more environmentally friendly solution than traditional paper-based literature and without the distribution costs.

Your products, services and company information can be seen worldwide 24 hours per day. Rather than having to wait for a brochure, customers can instantly access the information they want.

Increase your customer base

Your web site is accessible to hundreds of millions of users worldwide.

Your products or services have a worldwide audience - something that would be hard to achieve by other methods.

In addition to this, your website allows everyone to compete on an even playing field, from tiny organizations to the largest of corporations.

Reach a new audience

Many people like to find out more about a company and their services before they contact them and a web site can give your organization the edge over a competitor who doesn't have a web site.

And many regular internet users now prefer to search for a service, product or organization on the internet rather than through a more traditional method like the Yellow Pages. If your organization is not on the internet you could be missing out.

New methods of communication

Not only can you communicate to your customers through your web site, but they can also contact you through it. Your customers will have new ways to contact you. Online e-mail facilities allow people to e-mail you easily. Online forms produce more specific communications and feedback. You can also encourage communications by setting up online quizzes, competitions and interactive questionnaires - valuable methods of collecting visitor demographics and generating leads.

Streamline your processes

Your web site can save your organization time and money. Information such as company news, announcements, new product launches, technical information and user guides can be published on the web site for viewing and download saving you printing and distribution time and money.

e-commerce functionality can be incorporated into your website allowing consumers to order their products and services online, greatly reducing administration expenses. Your e-commerce site will enable customers to order any time so extending your trading hours without the normal necessary human presence or office expenses. Receiving payments over the internet can reduce your collection costs to a fraction of the old ways of invoicing and collection.

Integrate your web site functionality with your back office processes to create a truly automated office system. For example - connect your online ordering system with your stock system so stock availability is always current, automate your technical support processes and introduce new online methods for customers to obtain technical assistance.

Improve customer service

Your customers will be able to find up-to-the-minute information on product and service ranges, availability, costs through your site - 24 hours a day, 7 days a week.

Your customers will have new ways to contact you through electronic forms or e-mail facilities on your website.

E-commerce facilities offering online ordering can save your customers time and administration costs.

You can offer your customers a more personal online experience by creating tailored areas on your site just for use by that particular customer. These sections can have secure access.

New marketing possibilities

Being online opens a number of new advertising options for your business. The internet unites the benefits of print and television advertising (text and graphics plus moving images and sound) and eliminates the usual time and space limitations of traditional media forms.

Methods of advertising available include:

- advertising banner placement on your own site or on other sites
- promotional e-mails which can have images and links to your site, particular areas of your site or even specific products
- downloadable games and screensavers, tailor-made and branded for your business
- digital newsletters

Unlike traditional media forms, the Internet is interactive. It can be an effective, low cost one-to-one marketing tool.

You can create an image for your business with your site. No matter how small your business, with a well designed and constructed web site your business can look like a PLC on the Web.

Improved internal communications

You can have a web site purely for internal use or you can have an intranet extension of your company web site. This site can be used for internal announcements and news, communications, information database and information sharing with areas for employees to post data. Online discussion forums can improve morale and act as valuable information exchanges.