In this episode, we aim our focus on pricing creative work. A topic that every creative professional has struggles with. Michael walks you through a step by step process on how to price your work and how to parse all the variables that come with it.
This deep dive episode comes from a livestream we held way back in 2019 on The Futur’s YouTube channel.
Our guest, Michael Janda, is the author of the best-selling book Burn Your Portfolio. He’s also a seasoned ad agency executive who helps creative entrepreneurs make more money with less stress.
In this episode, we aim our focus on pricing creative work. A topic that every creative professional has struggles with. Michael walks you through a step by step process on how to price your work and how to parse all the variables that come with it. Things like production cost, market value, and client budget, to name a few.
If you ever find yourself lost in the bidding process or pulling numbers out of thin air, then get ready to get schooled. Because you’re about to get a crash course in pricing creative work.
Greg: Welcome To The Future podcast, the show that explores the interesting overlap between design, marketing and business. I'm Greg Gunn. This deep dive comes from a live stream we held way back in 2019 on our YouTube channel. And if you don't already know, we have a YouTube channel, with like 700 something videos on it. Anyway, this live stream was a crowd favorite, so I thought it'd be nice to share it here with you. Our guest in this one is Michael Janda, author of the best selling book Burn Your Portfolio. Michael is a seasoned ad agency exec who helps creative entrepreneurs make more money with less stress. And in this episode, we aim our laser beam of focus on pricing creative work, a topic that I know every creative professional is struggling with. Michael walks you through a step-by-step process on how to price your work and how to parse all the variables that come with it, things like production costs, market value, and client budget to name a few.
So if you ever find yourself lost in the bidding process, or pulling numbers out of thin air, then get ready to get schooled, because you're about to get a crash course in pricing creative work. And real quick, before we get started, do me a favor and tell your friends to subscribe to this podcast. We rely on your support and word of mouth to keep this thing going. So the next time you see your friend, grab their phone, find the show and subscribe them. They'll thank you for it later anyway. Please enjoy our conversation with Michael Janda.
Michael: All right. Super excited to be here. Thank you. We've been talking about this for like a year.
Chris: It's been a year.
Michael: Yeah. And then your travel schedule and I had some travel.
Chris: And a book to write and courses to shoot, things like that.
Michael: Yeah. Things like that. So I'm happy that we finally synced up. It's going to be fun.
Chris: Here we are.
Michael: Thank you.
Chris: Yeah. You have your own audience and you've been pumping this out on Instagram. I can see it. You're so active now on social media.
Chris: You're putting me to shame.
Michael: No, nobody's putting you to shame. That's for sure.
Chris: Okay, okay.
Michael: Everybody's trying to keep up at best.
Chris: All right, let's do this now. Let's dive on in, share your knowledge. You guys get ready, get your notebooks out, get your minds open because I've seen a preview of the deck. It's really good. It's really good. Let's get going.
Michael: Awesome. Thank you. Okay. So where this all came from, there's a chapter in my book, Burn Your Portfolio, called The Fixed Bid Pricing Dartboard. And in that, I kind of just glossed over three variables that you need to know to price your work. And those three variables are production costs, market value, and client budget. And it was like a page and a half in that book. And the idea was designers feel like they're just client comes to you, asks for a scope of work and you throw a dart at the board to try and decide where you're going to price it. And a lot of designers, this is kind of the methodology. What I decided last summer was to turn that one chapter into a blog post. And then a month later, it was a 200 page book. So once I opened the can of worms, I was like, "Man, you're either just going to gloss over the topic, or you've got to go all in and explain the psychology behind it all."
So my objective, and I'm going to take you through a cursory overview of this today, enough that you can apply some of these things in your business right now today. But my objective is to teach you the numbers you need to know, and then how you should think when you're pricing design work. So that you're not just guessing when a client comes to you and says they have this scope of work, you're not just guessing at where to price it. There's going to be a structured methodology that you can follow to help you come up with a price that you can stand behind, that you know is right, that you can, when the client tries to negotiate you down on price, you're going to be able to stand your ground because you're going to know your numbers.
So we'll dig into that right now. And we're going to start by talking about the three variables that you need to know when you're pricing your work. The first one is your production cost. And your production cost is how much money is this going to cost you to produce? For this example, let's use a brochure. Client comes to you and they want you to design a brochure, a tri-fold brochure, that's the project. You meet with the client and you get the scope and you talk about their goals and objectives, and then you're going back to price this work. This is the process you're going to go through. The first thing, going back to that slide, is production cost. That's the first variable. You need to know how much it's going to cost you to produce the work. I'm going to give you a little formula on how to do that here in a second.
The next variable is the market value. And when we talk about market value, we're talking about what is the market threshold that other people, like you, are charging for this same type of work.
Michael: Take your house, for example. You own a house and if you think your house is worth a half a million dollars, that's great. But if you can only get a buyer to buy your house for $400,000, well, that's the market value. What you can charge for it is the market value. So some people want to charge $5,000 for a brochure, but they can't get a client to pay them more than $2,000 for a brochure. That's because the market value in their area with type of business that they have sets a certain threshold. It's the market threshold for the price.
So I'm going to teach you how to understand and know that number, what the market value is for the work. And then the final variable is the client budget. And honestly, when I started my agency, I probably spent the first three years never asking the client the budget. You just get the scope, you're afraid of that conversation.
Chris: Right, right.
Michael: And so you just take the scope and you go back and you create your proposal and you throw it into an email and send it and hope that it fits inside their budget. And I probably lost so much money doing that process, leaving money on the table because the client had a budget of 5,000 and I charged them 3,000. And I'm going to try and help you not be in that situation. And I just posted on Instagram today, my tag is @morejanda, I posted a how to ask the client their budget post. So you can see some of what I'm going to talk about on that post, but I'm also going to have it here in this deck.
So let's start with variable number one and that's production cost. And I want to really emphasize here that I'm not talking about pricing your work based on what it costs you to make it. This is just one of the three variables you need to know. In fact, that's the worst way to price your work because it doesn't take into account the market value or the client budget or the return on investment value, the value that it is to help that client's business. It doesn't take into account any of those things. But you have to know your production cost so that you have a floor that you know you're not going to go below your production cost ever. You're always going to have a profitable project and you can't know if you're profitable if you don't know your cost to produce it. So your cost is here and you're going to bid it anywhere above that.
So let's talk about how to calculate your production cost. It's a really simple formula, even though I spend like 40 or 50 pages in the book explaining this, and it's this formula that's on the screen right here. So first you have an hourly rate. Everybody knows what they want to charge per hour. Let's say you're a freelancer and you're in Nashville, Tennessee, and you charge $50 per hour for your work. So you take the $50 per hour and you multiply it by the number of hours that you're going to spend on the work. This is easy math. So you have $2,000 of your hours of time that you're going to spend on this project. And then you add any hard costs.
And hard costs are things like any outsourced elements, like you have a hard cost because you needed to outsource illustration. That's on this slide here. You're outsourcing illustration for $300 to your friend, who's going to design some icons for you and they gave you a flat rate of $300 for that. Or it could be things like a photoshoot, or it could be stock photography that you have to purchase, or it's any cost that's outside of your hourly rate, times your production hours. So this gives you, for this calculation, $2,300. Now this is the first variable that you need to know when you're calculating a price for your work. So you want to know $2,300, and that fills in variable number one. Okay. Now we're going to move on to market value. And again, just to emphasize, production cost is not your price. That's not what you're sending to the client. It's just one of the variables you're considering, and we'll talk about that more in a minute.
So we go to determining the market value. And you can do this, again, the market value is all about understanding what other people charge for work like what you're doing, or what other clients like your client are paying for work like what you're doing. So the first way that you want to try and understand the market value of your work is to survey your clients. And in this case, I would go to some of my clients, my most trusted clients, and I would talk to them and ask them the question, "Hey, what have you spent on brochures in the past? We're doing a tri-fold brochure for a new client of ours. What have you spent on tri-fold brochures in the past?" And get that from these most trusted clients that you have, get an answer. So you survey your clients. That's that's option number one.
Option number two, to establish market value, is to survey your designer friends. Everybody has designer friends. You're part of AIGA or other organizations, you have friends who went to school with. Everybody has a designer friend. Well ask your designer friends what they're charging for this type of work. So you can say to them, "Hey, Joe, what have you been charging for brochures? What have your clients been green-lighting?" Have those kinds of conversations. This is all about surveying your designer friends. And it's nothing formal. It's just asking some questions to get a sense of where they're pricing those same types of projects.
Okay. The next option is industry surveys. Industry surveys, The Graphic Artists Guild every few years now publishes a book that has surveyed pricing for various projects. And you can see here that that's always the highest, it seems. Like everybody, when they fill out a survey on what they charge. You know what I'm saying?
Chris: They brag a little bit.
Michael: It is.
Chris: They stretch the truth.
Michael: I looked at this Graphic Artists Guild handbook when I was like five years into my agency, and I was like, "Man, if I was charging this, I'd be billing five times as much as I'm billing right now."
Chris: Ben Burns, you know what he's talking about.
Ben Burns: Oh, yeah. I know exactly how you feel on that.
Michael: It's so true.
Ben Burns: It's like $14,000 for a brochure. What?
Michael: Yeah, exactly. Yeah. So it's always the highest, but it's still, there's some valuable information that you can find, especially in that book. I think AIGA posts a similar type of survey data. I get that request sometimes, it shows up in my email to fill out the survey so that they can get a sense of the market value of what other people are charging for these types of projects.
Chris: Yes. I fill those out too.
Chris: I'm pretty sure we skew the price the other way.
Michael: Yeah, yeah. I doubt that. You're the ones given the price way. It's like you're skewing the average. Anyway. So you can look at industry surveys to find out what other people are charging and all these things give you a market value range. And then the final way is to leverage your past experience. Now, if you're not tracking all your projects and what you bid it for, and what you green-lit it for, you need to start doing that. Get out a spreadsheet, put in every single proposal that you send to a client, put in the price, just in a general scope and then track your win/loss record. And I can go back in my agency, you can go back years and years and say, "Okay, in 2010, we were averaging $18,000 for a website and we were green-lighting 40% of them. And in 2012, we were averaging $28,000 for a website and green-lighting 30% of them."
You should be able to track that info. You need to track that info so that when you're bidding projects, you can look for a trend in what you're green-lighting and what's not green-lighting. So track it on a spreadsheet. But that's how you leverage your past experience. You have this data that you've been tracking over time, and it influences your understanding of the market value of the work that you're bidding now.
Okay. So that's how you determine market value. Now you have those four variables inside of here and admittedly here, you're just going to take an estimate. There's no science behind this that says, okay, add them all up and divide by four to get the average. That's not always how it works. You just want to kind of get a sense. And from this, I can get a sense that the market value for this brochure that we're bidding is somewhere between 3000 and $4,000. That's what, based on all the data I got from my friends and whoever, that's the number. So I'm going to put in here the second variable as $4,000. So we now know two variables, 2,300 for your production cost, 4,000 for the market value.
Now we want to go and we want to know the client's budget. What does the client have allocated to this project? Now let's talk here about extracting the client's budget. The first thing that everybody needs to do is just ask the client. And a lot of designers are afraid to talk about money. It's a big, scary thing. You got to get over that fear. You should never be bidding a project without asking the client what their budget is because two things can happen. The first one is that if their budget's too small, you're going to waste all kinds of time scoping the project, creating a proposal, giving them the proposal, talking it over with them only to find out that they don't even have close to the amount of money that it's going to take to do the work that they want. So you're going to save your time by asking the budget.
And the other one, which is even more important, is that a lot of times you're going to leave money on the table. If you don't ask the client their budget, and you go to bid something, this brochure for $3,000, and you find out afterwards that the client had $5,000 budgeted for it, you just left $2,000 on the table that you don't get to take. And so client budget is such an important variable to ask, and a lot of designers struggle to ask it. So I'm going to give you, in this principle number one, here's how it's done. You don't just come out and start asking the budget. It's not the first question, it's the last question.
Client in the discovery meeting comes to you, they say, "Hey, we want to create a brochure for our business." And you start asking questions. You ask a lot of questions. You ask about the scope of the project, you ask about what their goals are. You ask about their business. "How's your business doing? How long have you been in business," this small talk kind of inquiry about their business to get to know them. You ask about their past experience with other designers and what works and what doesn't and what their pain points are. You ask all these kinds of questions.
And then at the very end of that conversation, by the way, while you're having that conversation, you're taking notes. You got to be interested in what they're saying. So take notes, have something to type on or write with. And then at the very end, you say something along the lines of, "Okay, great. Sally, this is awesome. Thanks for all this information. We really, really appreciate it. We've got a really good sense of your business and what you want to accomplish with this brochure. One final question. Do you have a budget range that you're trying to work within for this project?" And then the client doesn't feel like you're gold digging. You ask it last. Be genuinely interested and ask it last. So that's the first technique, ask the client their budget.
Now let's go on to the second technique. And let's assume that the client doesn't want to give you the number. They say here, "We really just are trying to get bids. So we don't really have a budget yet." What I've found, and Chris you can back me up on this, is that almost everybody has a number.
Chris: Everybody does.
Michael: Yeah. Whether it's a budget number or not, they got a number that they're comfortable with spending.
Michael: And it might not be their official budget, but you do the same thing. I walk into Walmart to buy, what's a movie coming out now? I like digital movies, Captain Marvel or something. And I'm going to walk in and I'm going to say, "Okay, if it's $19.99, I'll buy it, but if it's $22.99, I'm not going to buy it."
Michael: We do it all the time. We do it on groceries, everything. It's all just on these little price fluctuations, and clients are the exact same way. They have a number. So you got to dig deep to try and get the number out of them sometimes. So if they don't share it when you come right out and ask it, we're going to try and get a sense for what that range might be. So let's go to point number two, they don't give it up on point number one. So you're going to go to point number two and you're going to ask them about past projects. So they say, "Oh, I get it," this is what you would say, "I get it. You don't really have a budget in mind yet. You're just kind of getting bids. I totally understand that. What have you spent on projects like this in the past?" It's easy.
Chris: Wait. Can't they just figure it out? You just tried this technique number two.
Michael: We're going to do a role play.
Chris: Okay, we're going to do a role play?
Michael: Yeah, we're going to do a role play.
Michael: And you can see that it doesn't come across like that.
Chris: All right. I remain skeptical. Convince me.
Michael: Yeah. You'll be convinced.
Chris: This is good. I like this.
Michael: Okay. So you ask them about past projects and it doesn't have to be a brochure. You can say, "What do you guys spend a year on marketing?" Or, "Have you done any projects lately? What have you spent? What'd you spend on your logo design" or whatever. You can kind of just get a little sense for where they spend on services similar to what they're asking you to do. All right.
Let's go to number three. If they still don't give up your budget, you can float a price range, and I do this all the time. But if you're going to float a price range, you've got to know your own numbers. You got to know what you've been green-lighting in the past. So let's say we're bidding this brochure, we asked the client, we asked about past projects. They're still tight lipped. We say something like, "Hey, I get it. You don't really know what you want to spend. Past projects that we've done like this, kind of have been coming in on the range of three to $4,000. Does that feel in range with what you're hoping to spend?" And then you just stop talking and gauge their reaction. And people, nine times out of 10, they're so open in their body language that you'll see them be like, "Ooh, that's a little much," or they'll immediately say, "Yeah, that sounds good."
You don't do this if you don't know that you can be profitable at the price range that you're floating. So you want to know that in advance, which goes back to tracking your projects from the past. But you float a price range, that's the next one. And if the client's still doesn't want to give up their budget, they still are reluctant to even give you the body language you're looking for, then you move on to the next technique, which is to compare other products.
And I love this one and this one's been really successful for me because you can weed out if a client is looking for a high end product or a low end product. And this works especially well for digital products like websites and apps, which have a lot of, you can have a high-end version or you can have the MVP version, the minimum viable product version. And there's a big difference in price between just getting to market and getting to market with the high end version already. So the way that this goes, you compare other products that are not related to the project that they're doing.
I use cars a lot. Everybody knows a high end car versus a low end car. So I would use something like this for comparing other products. "Okay, you don't want to tell us what the budget is. You're not really sure what you want to spend. Let's talk, let's compare your project to a car. An Aston Martin Vantage and a Chevy Malibu are both going to get you from point A to point B. They both have wheels, engine. They're both going to drive. They're both going to be a decent ride too. But the Aston Martin Vantage has all kinds of bells and whistles and features that the Chevy Malibu doesn't have. It's stitched leather interior, and it's got more cylinders and it's got better sound system," you go down the list of all these things that it has. Now with your project, if you are going to compare your project to an-
Michael: With your project... If you are going to compare your project to an Aston Martin Vantage or a Chevy Malibu, which is it? Are you wanting something super high-end right out of the gate? Or do you want to start with something minimum viable product and then add features later? And I love that part. I always add that to the end, because then it makes them not feel bad when they come to you and say, "You know what? We want the smallest budget project you can do for us." So you always give them an out. Because they can say, "Yeah, that's what we want".
Michael: "We want a Chevy Malibu for now, but we're going to add features. Don't worry about that." They do that, almost every time.
Chris: Give me the Fred Flintstone model. I'll pedal myself.
Michael: That's what they want.
Chris: I do offer them models.
Michael: It's totally true man. It's totally true.
Chris: Yeah. Okay, keep going.
Michael: Okay. So, you do that... So you take them through that process, do you want to high-end out of the gate or do you want a low-end? And what this does too... It's really fun, because a lot of times if you have multiple people that are your clients, and there are multiple people from their side in the room, they start to debate what their car is. They're like, "I think ours is a Toyota Camry or no, it's more like a Honda Accord." They start to debate what the... Where their project fits on the spectrum. No, it's a Kia or whatever. So it creates kind of a little lively discussion of trying to compare their car to... Or compare their project to a car. Hotel chains work well too; do you want to stay at the Embassy Suites, the Grand Hyatt, or are you going to stay at the Motel 6?
Anything that people already understand, a spectrum of range. So, that technique is the next one. And then we can go to the final one here, that if they still don't give you a sense of what their budget is, even if it's high or low, then you can send them a rough estimate. Whenever I get a client to this range, it's always about making sure that I'm not going to spend time creating a 30 page proposal for their new website, and then find out that I'm not in the budget range that they can't afford.
So you send a rough estimate. And a rough estimate is just one paragraph, an overview of the scope of the project, maybe a few bullet points of detail and then a price range. And it's an official document. So this is you saying, "okay, we're going to bid it in this range." And you send that to them and you talk it over with them and you ask, "is this a range that you're comfortable with?" But you don't spend the time on the 30 page proposal, scoping it, creating a contract unless you know this. And so this will weed out the people who don't have enough money. And you're putting yourself out there to really get a sense of their budget. So those are the five techniques. And then the final one here, is determining the budget, which admittedly I added just so that I had a symmetrical design.
Chris: I'm glad you're honest about that.
Michael: We do that all the time. [crosstalk].
Michael: People will be like, something's missing there.
Chris: We can't set our finger on it, but something is wrong.
Michael: All right. So you determine the budget. So going onto the next slide. Now you have three variables. You can say in this sense, they have 3,500 for the client budget. Okay. Do we want to do a role play? That'll be fun.
Chris: Yeah. We're going to do role play.
Michael: Okay. All right.
Chris: We'll do a role play. Before we do that. I just want to say thank you to Rodrigo Tasca, who did a super chat function. He's just saying five. I don't know why five, maybe high-fiving us.
Chris: And other people are saying, if you want to do the super chat, it's better to do it through becoming a sustaining member, because we get a 100% of that. I put the link in the comments below. You guys save up your questions, it's going to get really good. As you can tell Michael has got some straight fire on you guys right now, some knowledge, okay. He's going to make this process easy. Some of you guys are commenting. You want to see us fight. We're not going to fight just yet. We'll save that for later. We'll save that for where we disagree. [crosstalk].
Michael: But we got to arm wrestle or something. Not verbal fight, but physical. It's just physical.
Chris: Mental fight.
Chris: It's like professor X versus... I don't know who is the other guy.
Michael: There's two professor Xs.
Chris: Set up the role play. Aaron's going to be your foil or your counterpart to this. And he's going to play the role of the client I believe.
Chris: Set it up for us.
Michael: Okay. So client comes in. We've talked about all of the scope. We've asked all the questions and then we get to that final question of asking the budget and I say, "hey, okay, great, thanks for all this information, we love this project, it's right up our alley, we're super excited about it. One final question. Is there a budget that you're trying to work within for this project?"
Chris: And Aaron, you're going to play a tough client.
Michael: Yeah. You're not going give it up. [crosstalk]. Don't give it up no matter what. Yeah.
Chris: Do your best. Make sure you're into the mic.
Aaron: So can I ask you a question before we begin?
Michael: Yeah. It's not a real project though. So, don't ask too much.
Michael: Yeah, just kidding.
Aaron: So, for the scope thing... So what do I want exactly?
Michael: Well, we're doing a brochure, so this is just a tri-fold brochure for your company. That's it.
Aaron: Okay. Does it matter what my company is, or?
Michael: No. It makes no difference. You just try... Don't give me the budget. That's all it is.
Chris: You're a filmmaker.
Chris: You want tri-fold brochure for some reason. Don't worry about it.
Michael: Yeah. You're... Yeah.
Chris: Okay. You ready? And be tough on him.
Aaron: Okay. I'm going to do my best.
Michael: Okay. So final question; is there a budget that you're trying to work within for this project?
Aaron: Well, I don't really have a budget in mind. I don't really know much about brochures and how much they cost. So, I really just want to get a sense from you, just what kind of a price I should be looking for here.
Michael: Yeah. Okay. That's that's good. I get that. We have a lot of clients that we really walk them through this process right from the start. They haven't worked with people. Good thing for you is that we've done thousands of projects like this in the past. So we're a good fit for you to really help you through. So, I understand you don't have a real budget. Have you done design... Have you worked with designers in the past and spent money on design services like this in the past?
Aaron: Yeah. I've worked with a couple of designers. Some were good. Some were not so good.
Michael: Yeah. Were the not so good ones cheaper than the good ones?
Aaron: Sometimes the cheaper ones were much better than the expensive ones.
Michael: Yeah. Interesting. That's interesting. Sometimes it goes that way. Yeah. Do you have like a marketing budget that you spend each year for your business?
Aaron: I don't. Like I said, I'm a small player in this video business, so I'm really just hoping to get this brochure out so I can get to drum up some business.
Aaron: Let me ask you. You said you worked with clients in the past. What have they charged you for a brochure?
Michael: That's a great question. Sidebar. That's number three in this spectrum here. Float a price. So he's given it to me right there. And sometimes clients will do that. And so I would say to you... We're back in the role-play now. "That's a great question." The past brochures that we've been green lighting have been roughly in the kind of three to 4,000 price range. Is that something that you'd be comfortable with for this project?
Aaron: Well, that sounds pretty high for a brochure, just a brochure. What goes into that? Why is does it cost that? Where are you coming up with that number from?
Michael: Well, we work through our numbers based on what the market value is that other people are charging for this type of work. We have a lot of experience doing this. We're going to give you a great product right from the get go. You're not going to go through all the bad rounds and the headaches and challenges. We've been doing this a long time. So, you're paying for the smoothness of the work that we produce. And then we're also going to go and we're going to help you get it actually printed. We're going to work with the printer. We're going to get the printer specs for you. We're going to do press checks. So there's a lot of work that goes into creating the brochure and getting it in your hands beyond just the design work itself.
Okay. So I get that. So, that's kind of the price range that we've been in. And I understand that it might be a little bigger when we create a proposal for you. We're going to make sure that you understand in great detail, everything that we're doing. Now, you were a little nervous about that price range when I said it. And I understand that might be a concern for you. Let's compare your project to a car.
Now, an Aston Martin Vantage, and a Chevy Malibu can get you from point A to point B. And if we're bidding for you, the Aston Martin Vantage at the three to $4,000 price range, maybe we should look at scaling back the scope of this project a little bit, and trying to bid it a little bit lower by extracting some of the tasks that need to go into it. Instead of a three panel brochure, what if we created a bi-fold brochure, so that we're only designing four panels instead of six. We could bring the price down a little bit if we did that, because it's less design work. Is that something that you'd want us to explore?
Aaron: Well, really I just want a good brochure that's going to give me business. And if you think... I'm not sure two folds, three folds, really what you're talking about here. But if you could just give me a solid price that I could just... Maybe I'm trying to shop around for prices. I'll be honest with you.
Michael: Yeah. Okay.
Aaron: I'm talking to a lot of people here, and I just want to get a sense of; if it's a good fit and if your price is good, and if this is something I need. So maybe you could just send me a proposal.
Aaron: And then we can maybe just go from there.
Michael: Yeah. That sounds good. You know what we're going to do? Why don't we send you a rough estimate, and the rough estimate... We're going to give you three different price options in it. We're going to do one that isn't a brochure, but it's just a two-sided sheet. So it's going to be a one sheet. And when we do that, we'll only have to design the front and the back. So it's less design work than trying to make a folded brochure work together.
We're going to give you another bid that is a bi-fold. So it's one fold, and then we'll give you the other one that's the tri-fold brochure. And then from that you can kind of tell us where you're comfortable spending and we can move forward. Any of those could be a good option for you. That's going to help you out, and help you grow your business. So why don't we send you just this rough estimate with some rough pricing for each of those, and we'll send it by end of business tomorrow. And then we can jump on a call and talk it over maybe the morning after. Does that sound okay to you?
Aaron: That sounds okay.
Aaron: That sounds pretty good.
Michael: Awesome. Thank you. Okay, here you go.
Chris: Good job. [crosstalk].
Michael: You know what? He's good, because so many of the conversations go just like that.
Chris: They're saying on the internet right now, [inaudible].
Michael: That's why people like us only last 15 years in the industry.
Chris: [inaudible]. Somebody on the internet is like, "just price it for a one full brochure." Just write one word on the brochure, will you?
Michael: Yeah. I didn't go into the fact that this would be minimalist design too. We can do it for $200.
Chris: Okay. All right. Let's do the recap.
Chris: Do the recap.
Speaker 1: I just can't get past the, onefold, twofold, threefold. [inaudible].
Chris: [inaudible], onefold, twofold, threefold, fourfold, five. [crosstalk]. Okay. Michael went through the whole laundry list. He did every [phonetic]-
Chris: From the book. He did everything. He went one, two, three, four, five. He did the whole bit you guys.
Michael: You can notice is that it's not... You were skeptical at the start, but when you do it in just a conversational way, it's not that hard to transition-
Speaker 1: Ladies and gentlemen, Chris is on the floor.
Michael: But when you do it as a conversational way, it's not as awkward as what it initially seem.
Chris: [inaudible]. Good job. You've done your job. You can go home now.
Speaker 1: It was a good job.
Michael: He's been in a lot of client meetings, that's for sure.
Chris: [crosstalk]. We just call Aaron in the room, he does the job. I knew I had the right guy for the job. You can see my ab workout later today. All right. Okay. I don't know what we're talking... Okay. Guys get professional.
Speaker 1: Good job. [crosstalk]. Everybody give Aaron a round of applause.
Michael: Hey, how about a round of applause for me? I had to do all the work man.
Chris: Nobody cares about you Michael. [inaudible].
Michael: You know what? That's the truth. Nobody cares about the designer. The designers is there sweating.
Speaker 1: My God. We'll be right back after this commercial break.
Speaker 2: Time for a break, but we'll be right back with more from Michael Janda. Thank you to Organic Analytics for sponsoring this episode. When it comes to analytics for social media, it's hard to tell what's important, let alone what you should be doing to grow your following. And that's where Organic Analytics can help with Organic Analytics you get the power of a full-time social media analyst without the full-time cost.
So if you're starting a business or want to grow your business online, then Organic Analytics can help. They'll help you fine tune your content to beat the algorithms and get eyes on your brand, without having to pay for advertising or boosted posts. Now most social media analytics giants reserve these kinds of insights for their big clients. But with Organic Analytics, you get tailored, actionable tips that you can use to get more likes today. So visit organic-analytics.com/future50 to get 50% off your subscription for life. That's right. As your social media pages grow, you get to keep that 50% discount forever as a thank you for joining early. Visit organic-analytics.com/future50. Welcome come back to our conversation with Michael Janda.
Michael: We'll go on. Now we have the three variables. Now we have our three variables and we have here 2,300. We know that's our production cost. Market value we're putting at 4,250 and then 3,500 for the client budget. So let's just say that these are your three variables. You've gotten this data and you've put it out into your little... Into your brain or onto a little scrap of paper or whatever. These are your three numbers. And the next thing you're going to do, is you're going to put these numbers on a sheet. You have 4,250 for your market value, 3,500 for the client budget and 2,300 for your production costs. And this is where the psychology component comes into place. Where do you choose to price your work based on these three variables? How do you pick? Are you going to bid it at 4,250, 3,500, 2,300, 2,750?
Well, how do you pick the number? Now picking the number has everything to do with the state of your business, the needs of your business. It's, the psychology that goes into this. And I'm going to walk you through a couple of scenarios. In the book I have 12 different scenarios that cover almost every type of a situation you might be in, but I'm going to walk you down through these right now. So you have the first one. If you have a client who shows signs like Aaron, of being a difficult client, you might want to bid it high on the spectrum.
Chris: [inaudible]. I can't believe you can go back to that. You're the man Michael Janda, you're my hero. I salute you. You're such a pro. I'm terrible you guys. Keep going.
Chris: You're so good.
Michael: Okay. So, difficult client, Aaron and his photo business, 4,250, we're going to bid it there. So, if you can go back to the slide real quick. All right let's look at another scenario. If there's a project and it has heavy competition, you know that Aaron's business has three different agencies bidding on this same work, which he mentioned. He's just trying to get some prices. You're never going to green light it at the client's budget. You need to come a little bit. So, if its heavy competition, take the client budget and bid it a little lower so that you have a better chance of green lighting it. Sometimes you might be just under like 3,250. Sometimes you might undercut it significantly like 3,000, but you want to bid it in a way that gives you a better chance of green lighting it.
If everybody knows the budget, you want to be under the budget, because the client is probably price motivated. We know that Aaron is. Okay, the next one. If you're busy, but if the price is right, you could fit it in another project. A lot of times in this situation, I'll bid it just a little bit above the client's budget. I know my floor is 2,300 production costs. And if I bid at 3,700, a little above their budget, but there's still a chance that I get the work, because we did great salesmanship during the discovery meeting. If I get it, great. I know it's super profitable and if I don't get it, that's fine. I'm busy anyway, I don't really need the work, so I can bid it a little higher to make it a good profitable job if I land the work.
Okay, the next one. If you're trying to grow your business, wait, actually there was one more right here. Experience merits money. Now some of you like Christo, for example, can charge high market value for everything, established business and a great market, 20 years of being in business, they can charge top dollar for things, because the experience that they bring to the table merits the money to charge that higher amount. So when you're in this situation and your reputation sells the work, then charge the higher dollars, pick it right out of the graphic artists, [Gill] handbook and triple your profits right now today by picking numbers out of that survey.
Okay. The next one, if you're trying to grow your business, you can see that pointing to 3,250. You want to grow your business, but you don't want to do it based on unprofitable projects or low profit projects. So I'm trying to land as much work as I can. I'll probably come in right under the client's budget to have a better chance of landing the work, but it's still plenty profitable for me, almost a thousand dollars of profit in that project. The next one. You are hungry and need work. Now this is... A lot of freelancers are afraid, they want to green light the work and they need the project because next month you don't have any projects, so you're nervous.
So if you're in this situation, pick a profit margin above your production costs. That is enough to make it worth your while, but still gives you a high likelihood of landing the work because you need the cash flow. So here I put 2,750, our cost is 2,300. So you have roughly a 18, 20% profit margin in that project. And then the final one that I'll use just for this presentation, is that you never bid below your production cost. And this is the only reason that I recommend that anybody calculates their hours against their rate. It's not to price your work above that number, but it's to keep you from bidding it below that production cost number. Everything else should be... Everything should be higher than your production costs.
So you want to know how much it's going to cost you to produce it, but not because you're pricing it based on that number. You're pricing it. You're doing that so that you don't price it below that number. It's a little shift in psychology, but it's an important one. And then the final slide here. If you're Christo, you can charge clear up at the top of the page, we move the whole spectrum down and Christo can charge whatever he wants. And that's because he's selling based on his reputation and people are coming to him to buy what he produces. So if you're in that... In the book I call it creative superhero. And maybe I was thinking about Chris when I was writing that thing.
Chris: I appreciate that.
Michael: But if you're the creative superhero, you can charge whatever you want. And there are these people out there.
Chris: There are.
Michael: And we admire these people. All the designers in the world, we look at them and we're like, "man, I want to be that." We want to be that. But the reality is, a small percentage of the people become the creative superhero, where they can charge whatever, and people will go to them and pay whatever, just because it has the clout of being them. And so that is a reality and you might be a creative superhero in your market. And if you are, then you're going to be able to charge a higher dollar amount than your competitors, because you're the one in your market. So start somewhere, start small, try and build this creative superhero persona, starting with your own market and then go from there. Okay. Now let's go to, how do you verify your price? You've kind of gone through this spectrum. You plotted your variables and how do you...
Michael: ...Kind of gone through this spectrum, you plotted your variables and how do you verify that you have the right price? There are three questions you can ask, and they relate to the three variables. The first one that you ask is, "Am I comfortable with the amount of profit I have factored into my price?" That's a production cost related question. Do I have enough profit? The second one, "Is my price in harmony with what other creative professionals like me are charging for this type of work?" Now I emphasize like me because you can't just decide that market value is a global number. You're comparing your price to other people that are like you. If you're an agency with five people working in Chicago, then there's a certain market value for the type of work. If you're a freelancer working in a small town in Alabama, well your market value is going to be a lot smaller. So you're comparing yourself to people like you. And that's the question about market value.
And then the third question is about the client budget, "Is my price in a range that my client will approve?" So you're asking yourself that question to verify whether you have the right price or not. All right. So that's the three variables and how you extract those numbers, create a spectrum and choose your price based on this spectrum and how you verify your price. I have the last little thing, that's six pricing rules. But do we want to talk about any of this before we transition to that, Chris?
Chris: Well, we should just mention you guys, Michael has published his second book, The Psychology of Graphic Design Pricing. It's available now. I've dropped the link to it from Amazon, so you can use our affiliate link to purchase the book. Can they buy the book directly from your site too?
Michael: No. It all pumps out of Amazon.
Chris: Okay. So Amazon. Go to Amazon. This is what it looks like. It's beautifully designed and typeset. It's consistent with what you're seeing on the show here with much greater depth of different scenarios. I've really enjoyed what you've shared so far. So if you guys like what you're hearing, go do yourself a favor and pick up a copy of the book. If you want to talk about this conversation, make sure you use the hashtag psychopricing. That's psychopricing, psychopricing. I'm back, I'm serious now. I'm ready for round two. Not with Aaron though, just with normal people.
Michael: Aaron's still out there. He didn't leave. He wants more.
Chris: You don't have to leave. You can just hang out. It's all good.
Michael: I'm waiting for him to start asking me questions.
Chris: Yeah, he has a devilish look on his face right now.
Michael: I know, he's got things he wants to say.
Aaron: I had some questions.
Chris: Hold on.
Michael: He's like, "Tell me about this project." It's not a project, Aaron. It's just made up, man. It's made up.
Chris: Okay. Let's get into your six points.
Michael: Okay, so six points.
Chris: Yeah. We'll get into some fun stuff in a second.
Michael: All right. Awesome. So the first one, right there. Always discuss money with confidence. Your client can smell it on you. If you don't know your numbers and you're wishy-washy, they can smell it out and they will attack you and drive your price down. So you got to know your numbers so that when you have this pricing conversation, you have confidence behind what you're saying. When the client tries to negotiate you down, you know where your floor is. When they're throw a numbers out, or they're not saying their numbers, you know what market value should be for what they're asking. You got to know those numbers and talk about pricing with confidence. Next point.
Chris: Wait, I have a question though.
Michael: Go, ask.
Chris: I'm a young person. I don't have confidence. How does one talk about confidence where we're not confident?
Michael: Well, a lot of lack of confidence comes from lack of knowledge.
Michael: We feel inferior to the task. So educate yourself, which everybody watching your channel is all about that. You have capitalized on the self-education of design. So the audience here already wants it. So tell your friends to start watching the channel because they need to educate themselves too. So education is number one. But knowing your numbers is everything about confidence, man. If you go in and you know exactly where those three variables are, you're going to be able to stand behind it. The client's going to see the confidence in you because you know, you're not just guessing you don't feel outclassed by the client.
Another thing about confidence too, is you have to know that your client would not be coming to you if they already knew how to do any of this stuff. They're coming to you because you know more than them. Don't forget that. You're going to the table. You're the expert at the table. If you weren't, somebody else would be there. So they asked you, have some confidence behind what you bring to the table. So I think those are those three ideas about confidence that are all equally important. All right. Did I answer your question?
Chris: Yes, you did. You did a perfect job.
Michael: All right. All right, good. All right. Going on to the next one. Never feel bad about your profit. This is a tough one for designers too, man. They're like, "Wait a minute, 2,300 and the client's budgets 4,250, is it okay for me to have a $2,000 profit on this?"
Michael: Yeah, and you should never feel bad about it. And that's for two reasons. Number one, if the client will green-light it, then that's the market value and you should feel comfortable charging that. If they will green-light, if they will pay you that number, then your value is higher than what you expect. So never feel bad about that. Number two, is that guaranteed, you're going to have some projects that you lose money on and it all balances out over time. So you're going to have some big winners and you're going to have some losers. And so never feel bad about the big winners because I can promise that your client doesn't feel bad when you have a big loser. Your client is fine with you losing money or struggling to make a profit on the project.
You agreed to a price and they don't care if you're making any money on it. Most of the clients are in that boat. So if you're not going to care about losing money, you can't care about making a lot. So don't feel bad about the profit that you're making. Ultimately, graphic design or design creative businesses like this, it's a business. And a business exists to make money and you should never feel bad about making money in your business, even if it's a lot.
All right, going on to number three. Never take on a project that will be unprofitable. Designers do this all the time. You've been there. You're hungry for work, you really need to green-light this. So you say, "Oh, you know what? I know our cost is 2,300 to do this brochure, but let's bid it for 2,000 because the client only has a $2,000 budget. Let's just take it on because we need the cashflow." Man, this is the start of the end of your business. Once you get into this mindset, eventually it's going to catch up to you and your business will die. And it's going to die an ugly death because you're going to be laying off employees along the way and you're going to be fearful about money and cashflow because you've been under charging for your services.
So production cost is your absolute floor. I can see some circumstances where you might take on a project at a breakeven, a client you're trying to repair a relationship or you really need cash flow and everybody else is around that same price. And so you take it on. I could see a justification in a breakeven project, but never in an unprofitable project. So that's point number three, never take on a project that will be unprofitable.
Point number four. Let me go back. Oops, sorry everybody. A little bit of lag. Okay.
Nearly every project should be fixed bid. Don't charge your clients by the hour. It is the least profitable way to do design work, creative work. You're trading your time for money, it's the worst because it does not take into account the market value, it does not take into account the client's budget. It does not take into account the value of the work that you're providing and how it will help the client's business. If you do an ad campaign for $5,000 and it grows the client's business by $100,000, that's not fair to you. It should cost them more for the work. So don't trade your time for money. You want to price your work based on market value, client budget, and you know your cost just as the floor for that negotiation. And you do it as a fixed bid, not by counting your hours and multiplying it by your rate. Yes, you do that, but not because you price that way.
Okay. Next, never tell your client the amount of profit in your price. It's none of their business. It does not make any difference. If they want to green-light the project to you for 4,250, and you're going to make $2,000 on that project, it shouldn't matter. The question is, do they want you to do the work or not? Not how much profit you have in the price that you're proposing for that work.
And then the final one is never tell your client the number of hours in your bid. I was just on a coaching call with friend of mine in London and she had a client asking this, "How many hours in this price? How many hours of production?" And the response when a client asks this is this. You say, "Oh, we don't price our work based on hours, we price it based on market value, like what everybody else is charging for the work. That's primarily where we price our work. But we also take into account the value that it is to the end client, to the client that we're producing it for. But we don't do it based on hours. That's not how we price our work." And then you stop talking. You don't owe them any more explanation than that. It's not their business, it's your business.
You come to them and you say, "Here's my price. I'm going to stand behind this price and that's what it is." And that's how you go about it. You don't have to answer that question. So deflect it by saying we don't price it that way, we price it based on market value. And they'll be like, "Okay." It's a big word for a lot of clients. So they'll stop talking. They'll be like, "Oh, okay." Anyway. Okay, so those are the six pricing rules. The book has eight, but I didn't go into some of the techniques that we talk about in the book relating to eight. So I just included six here. And that's the summary of this pricing methodology. You can download this presentation by the way.
Chris: There you go guys.
Michael: MichaelJanda.com/thefuture, if you want to pull that down.
Chris: We'll drop it in the notes.
Michael: Yeah. And there you go. All right, Chris. So what else are we going to talk about?
Chris: Well, Aaron has some questions. He's been patiently waiting.
Michael: Okay, good. Yeah.
Chris: We need you to reward Aaron for being such an A-hole.
Michael: I don't like Aaron's questions.
Chris: Go ahead Aaron. Now you've got Michael kind of on the ropes, go in for the finish.
Michael: He brought me an extra water. So that was of him.
Chris: Yeah, he did. That was really nice.
Aaron: That was for Chris, actually.
Chris: Oh, it was? Oh man.
Michael: There you go, Chris.
Chris: I'm good. I just want to make our guest comfortable, even though I could be parched. That's okay. Keep going.
Michael: All right, Aaron, what do you got?
Aaron: All right. My question is what you were just talking about, like when I have my cost, how much it costs me to make, I'm the guy making the work, right? I'm the designer.
Aaron: So I have my cost, how much it costs me to make it and then I have the profit I put on it and that's kind of my price. Why is it bad to just tell the client that, like, "Look, this is how much it costs me to make," what you're saying, "This is my profit. That's the rock bottom price there, dude."
Michael: It's the car salesman approach is what you're asking about, where you tell them, "Okay, here's the numbers." I don't know. I don't sell cars, man. I don't like it that way. I don't think it's any of the client's business. And do you ever believe the car guy who tells you that when you're going and they show you the invoice. They show you the numbers, they're like, "Hey look, our rate on this, we're $30,000 into this and we're going to sell it to you for 30,500. We're crazy to do this, but you should sign." Do you ever believe that guy? Nobody believes that guy. You know that there's all kinds of numbers in there that they're making more profit than the $500 that they tell you. So for me, it just comes across as that shifty car salesman kind of approach. I don't like that style of business for me.
Chris: It's sending out the wrong vibe for you. It reminds you of some sleazy dishonest person and you don't want to be that person.
Michael: Yeah. I mean, you give your number and you stand behind your number. And I stand behind my number all the way to a break even, or a loss project because the project goes astray or whatever and sometimes you get stung. It happens.
Chris: Michael, I have a question for you about the book.
Chris: Do you go over proposals and contracts in this, once you determine the price?
Michael: I do not.
Chris: You do not, okay.
Michael: This is a 200 page book, that's a 700 page book.
Chris: Hey, that's book three.
Michael: It is. It's on the list.
Chris: Yeah, it's on the list. Okay, good.
Chris: Just so you guys know. So somebody's asking here in the chat, let's see who's asking. I don't remember who asked it, but he's saying, "If you don't do hourly pricing, then there's a lot of changes and it could just go over the top, over the bid." This is Lori Ashcraft.
Michael: Yeah. So your contract is everything for that. And in the contract, when I do a contract, I include the scope of the project, but I also include all of the milestones that we're going to have. You're going to get three rounds of design delivery, and you're going to have three chances for feedback. And you're going to have one press check, if we're continuing on the brochure idea. But I include all the milestones, and then we include that as part of the scope.
So when the client goes to round four, round five, or round six, you can go back to your contract and say, "Look, it's clearly laid out in the contract here that we had three rounds of changes, and now we're on round six." And you can go back to them with the reserved right to rediscuss the price, or to send a change order based on adherence to the scope. So that's how you handle that. But I get it. It's a concern if you're pricing hourly. And if you have an hourly mindset, you have to kind of shift that mindset a little bit to be thinking I'm bidding against a certain scope.
Chris: Okay. Miles Coulee has just let you know he just purchased a hard copy. So we've sold at least one book.
Michael: Hey, nice.
Chris: At least one book we've moved. Where's the ding on that? I'll just hit the bell. There we go.
Michael: Now we're a call center. Yeah.
Chris: Aaron, you have another question or are we going to turn this over to the wild stuff we have prepared?
Aaron: Just one more thing.
Chris: Okay, go ahead.
Aaron: It feels like just in general that Mr. Janda would disagree with you on a lot of things. I feel like you guys would have a lot to argue about.
Michael: Is that your question or you're trying to set up the fight here.
Aaron: Yeah, now it's a fight.
Michael: I weighed like twice as much.
Chris: It'll have to be an intellectual battle [crosstalk]. We can do a pull-up contest later, maybe.
Michael: Yeah, maybe.
Chris: It has to be body weight stuff.
Michael: Okay. That sounds good.
Chris: Okay. So, Michael, I think you had prompted your audience on Instagram some things, or you have some things you have set up. So let's get into that.
Chris: Let's do it.
Michael: What do I have set up?
Michael: Oh, you want to hear your comments, your compliments.
Chris: Whatever you want to do.
Michael: Okay. So here's the a compliment. So I posted yesterday.
Chris: No, we don't need any compliments.
Michael: No, Chris is searching for like, okay, let's make this about me now.
Chris: I'm so needy.
Michael: Let's make this about me.
Chris: No, I promise. That was not it. I thought you had some comedic bits that we can get into.
Michael: No, this is comedic. It's comedic now.
Michael: Bazi Ramez says he is awesome.
Chris: Thank you.
Michael: Yes. RSquare Media. Oh, he says to release all the episodes of his new YouTube series about building brands. He's a binge watcher. He wants the Netflix effect. Let's release all 15 episodes.
Chris: If you can release 15 and editors to help us cut this. We haven't finished. We can do that, most definitely. Everybody that's watching this, go ahead and subscribe, send us a hundred bucks each and maybe we'll get this thing done.
Chris: All right.
Michael: Bays and agency, my friend, Stephan. He says, "How did Chris overcome his fear of starting the school, and how did he get himself to do the first episode?"
Chris: Okay. Okay. So I'll answer that really quickly. I actually wanted to get more into dialogue about pricing with Michael because we have some differences in points of view.
Chris: And I want to talk about that because people are like, why don't you ever argue with your guests?
Michael: Okay. So we're going to argue.
Chris: I argue all the time.
Michael: Okay, good.
Chris: Let me just tell you something. There's a lot of things that you're scared of because you're afraid of the consequences. Like what if this happens and what if that happens? But the one thing that you need to do is to focus on what if something positive happens, focus on the reward. And it might be the one thing that you need to listen to and just go for it. We do know this about ourselves. The things that scare us should be the things that we chase for or run after. We should run towards it, not run away from fear. So there I am, I'm scared to do the show, I have a lot to risk, but hey, what the heck? Let's just go for it. What's the worst that can happen? So what if I lose a few clients? So what if I make a fool of myself? I can use that opportunity to learn and get better. And here we are, five years later, almost hitting 500,000 subs. See what happens?
Michael: It's awesome.
Chris: See what happens?
Michael: It's awesome. You know what, and this is marketing Seth Godin, and I know he was on your show, but I love his it's not for them kind of mindset. And you have to go for it. And if you lose your subscribers and your followers, well, it's not for them.
Michael: You're trying to find who it's for, and there's plenty of people out there. And obviously, you've found a half a million of them so far. But that's still a drop in the bucket, worldwide millions and millions of designers worldwide.
Chris: That's right.
Michael: And so that's just going to continue to grow.
Chris: Yeah. You cornered the Russian market. We've got to take over the rest of the world.
Michael: Yeah, exactly
Chris: Okay. Let's talk about some of the differences and why we're talking about this and leaving space for each other. Michael told me beforehand, I know you have a different approach and you talk about value-based pricing. And the truth is it's not for everybody. It's not that you can roll out a school on day one, like I'm going to value price this thing because you're still practicing your craft. And so we all go through an evolution, all of us, you and I. We've made the, I guess I won't even call it a mistake, but we've gone through hourly-based pricing. We've bid fixed project fees that were too low and we've kind of just lost it in the shorts.
Chris: We paid for it dearly. And so we know. This thing of losing money is a great teacher.
Chris: Okay, process that. Then we learn how to bid properly by talking to smarter, more experienced people. We learned, trial and error, we get comfortable talking about money. So for a lot of people who think value-based pricing is too exotic, I think you need to rewatch this entire episode, get smart about your production costs, knowing that that's the floor, not where you start. That's just the floor you cannot go below that and start to learn about market value and price based on those things. Now Michael, is there something that's obvious to you that we should do a little wrestle on?
Michael: I don't think there's any wrestle because I know that you talk a lot about value-based pricing. But ultimately, you still have to choose that final number.
Chris: That's true.
Michael: And I saw a video, it was a year or two ago, somebody interviewing Ben and he was talking about having done an $85,000 strategy session that you guys did on a one day strategy session. Huge money.
Michael: Awesome. And I'm sure that you guys provided enormous value for that company.
Michael: Why didn't you charge 100,000? Why was it 85 and not 100? And it's because of the exact same thing, because you're weighing the client's budget and you're weighing the market value and you're weighing what your production cost. And your production costs to do that, is probably minuscule compared to the thing. So you're not charging by the hour or that would have been a massive loser for you.
Michael: But you're weighing those same three variables. Even when your value-based pricing, you still got to pick a number and 85,000 instead of 100,000 says to me that you're choosing to be just under a certain threshold so that the client is way more apt to green-light at 85 than they are at 100. It's that same thing, on big scale projects, on small scale projects, it still applies, you're still kind of balancing those variables. And the truth is when I started writing this book, it was all about what happens in my brain when I sit down to price a project? And I'm a big systems guy.
Michael: And I tried to systemize my own mental process, which is why it started as a blog post and turn it into a 200 page book, because to turn what goes on in my brain, into a system, I needed all those pages to explain the psychology behind it.
And you're in the same boat, Chris. You don't have to do the worksheets in this book to know what to price. In fact, I know because this is where I am too, in my career, I can sit down with the client and start talking to them and I ask three or four questions, and I know what their budget is already. I don't have to ask the number. I know a sense just based on the type of company they are, how confident they are in the room. I've bid thousands of projects and been in thousands of those meetings. And you know, you have the sense already. You also know what your production cost is without even calculating it. You know that based on all the projects you've done in the past, it's going to take so-and-so five hours to do this and 20 hours to do that. You don't have to calculate it, you know.
So as you progress in your career and you're in more and more of these meetings, you start to get a real sense for that. The same thing with value-based pricing and your strategy session. You sit down with the client and 85,000, you know that that's your number because you have other opportunities that it's the opportunity cost to say no to all these other things to say yes to this. So it's going to cost them that much. If they want to buy your time, that's how much-
Michael: So it's going to cost them that much. If they want to buy your time, that's how much value there is in your time to you. So you're going to charge that price to the client. So all of it happens in your head. And I think that that's really important. This, what I've shared today is a really good starting point to help you start to understand the numbers, the variables, that go into how you choose those prices for your projects.
Chris: This is fascinating. It's fascinating because you and I, besides our haircut, have a lot of commonality because you're a process guy, you break down, this is really what I'm going through. Now, you're doing it in a snap. But you're slowing it down, and that's why I took 200 pages or whatever blog posts to diagram it and explain it to some other rational human being who may not have the 20 plus years of experience and go through it with relative confidence, knowing that this is grounded in research and experience. That's where the confidence comes from. I'm the same way too. I also have a system of pricing and I usually just explain it on the fly. It's a little simpler. It requires a few pages, but it's-
Michael: Hey, mine was only 6 slides. It took so much work for me to get it down to 6 slides. [crosstalk].
Chris: I bet. Because what? The book is how many pages?
Michael: 200. It's 200.
Chris: The book is 200 pages [inaudible].
Michael: But it's a lot of worksheets. [crosstalk]. It's a lot of worksheets.
Chris: Yeah. [inaudible] you guys, this is how it looks, right? It's beautiful. It's simple. It's Helvetica. It's bold, it's [inaudible], is nice. I'm sure he's following all the type setting rules that you know about.
Michael: Oh, but I found a typo this morning.
Chris: Oh, snap!
Michael: So say, fee book to whoever finds the typo. Message me, tell me what page it's on. First one to find it, I'll send you a new [crosstalk].
Chris: That's a sales gimmick.
Michael: [crosstalk]. I didn't even think of it, but yeah, okay.
Chris: I love it. Send me a hundred dollars, and when you can tell me what's wrong with me, I will give you a few bucks. I love it. Okay. What else can we agree to disagree on? Michael is totally right. It doesn't matter if you have chicken bones or you're doing an Excel spreadsheet. At some point, you do have to present a number to your client for them to approve, or not to approve, and that's it. So there's a lot of psychology that goes into it. There's a lot of science and data research. We all have a different approach. Here's the thing. Do what works for you and your style, your position, and where you're at in the marketplace.
It could be a little bit of this, a little bit of that, make your own hybrid thing. It can all work. As long as you start to be able to sustain yourself, doing this creative thing that you do, because we need more people just like you.
Michael: That's such a good comment. I'm a hundred percent onboard with that. The new designer right out of college, getting their first three freelance clients, is going to struggle to go and try and talk to their clients about value pricing and what the impact of their design work is going to have on the client's bottom line next year. They're just going to struggle with that conversation. You can get there, but you get there over time.
At the start of my agency, and we spent the first five, six years doing production projects, and they were great clients, Disney and Warner Brothers. If we would have gone to Disney and said, "Okay, you want us to create that Hannah Montana dress-up game? What is the value to your organization for that?" They would have said, "I'm just a marketing manager with a budget. I have no idea what the value is going to be to Disney for that, they just told me to get it made." So there's a lot of that type of work out there, but value pricing, if you're doing the $85,000 strategy session, and you can plot the success of a project over the course of a year, and the strategies that you implement, you can see a real impact on the bottom line of the client's business, then you can charge a lot more money.
So I guess, you know what I'd say, Chris is, the goal for any designer is to get out of being the production monkey, and get yourself to being the strategic thinker.
Michael: The other great thing about that, is that the production monkey jobs go away and the strategic thinker jobs do not. I mean, design is getting automated. Anybody can pull up software now and download a theme or a template and throw in their text and make it look halfway decent. Squarespace won't even let you make it look bad.
Michael: It's becoming an automated process where the robots are doing a lot of production work now, and that's only going to get worse over time. But strategic creative thinking has a long life ahead. Any designer needs to get from production to that level, and be working toward that.
Chris: I hear [inaudible] clearing his throat, he must be ready to say something important. [crosstalk]
Ben: You guys are being too nice here. [crosstalk].
Chris: Why don't you come in.
Michael: You come in we fight.
Chris: Go ahead.
Ben: [inaudible], you're more his side [inaudible].
Michael: Yeah, I would be. And he's an ex cop too, so it's...
Ben: All right, here we go. Go ahead. Who sets the price first, the client or the designer?
Chris: Who should set the price?
Ben: Who should set the price.
Chris: Okay. Michael, you go first.
Michael: Well, so you can see in my flow, I asked the client, "What's your budget?" That's the step I talk to them about the scope, and I ask the budget. A lot of times a client who's organized, sends out an RFP and has a price in the RFP. You find that a lot of times too. So a lot of times clients are comfortable doing that so that they're getting people, designers, who don't want the job don't even bother replying to the RFP.
Chris: Right. Okay. I used to think that the client should say the price first, and then I came upon Blair's book Pricing Creativity, and it's the opposite of what you think. We were taught this, when you're negotiating a car, somebody says the price I'm going to negotiate them down from that. But what we didn't realize was they're price anchoring us, because of an anchoring bias that we tend to operate with too little information. So whatever the first number you hear, you tend to work with it. And I have real life examples when this has happened to me on both sides, where I'm like, "Oh my God, I'm aware of it, and I have to work really hard to counter it." So the new rule is, you should say the price first and you need to anchor high, because there's no penalty for anchoring high and then you can engage the client's feedback and work down from that.
If you do what Michael was suggesting, which is you know your floor, then you know you've got to be far from that, so that there's profit margins so that you can fight and win another day. Because nothing goes according to plan. And if it does, good for you, you're a good project manager. But more often than not, something is going to change. You're going to ask for a little tweak here and there. You're going to give it to them. And if you didn't account for that, you're going to just lose money. So I would say, now you must say the price first.
Now, typically, if you guys were to role-play with me, you'll hear me say the same thing. I'll say, "Wat kind of budget do you have?" And that's almost just an excuse for me to tell them how much it's going to cost, because I know 99 out of 100 times, they're not going to tell you what the budget is, because they are going to play a game with you. They feel, if they tell you what their budget is, you'll just say more than that budget, and then they're screwed. So they just want to see who blinks first. So you can blink, this is a great thing. An example of the tri-fold brochure. If you're thinking four or $5,000 as your price, you should say eight to $6,000 and see what happens. And then everything else Michael says, exactly the same. Stay quiet, read them, gauge their interest. From time to time they're going to say yes, and you have made two or $3,000 more than what you're going to ask for, at which case, send me 10% send Michael 5%, something like that. [crosstalk].
That's our thing. 10%. I can't change the hashtag [crosstalk]. #10%. You guys know the drill. Okay. All right, then, is there something else we need to argue about?
Ben: Well, I have another question that would be interesting. A couple people have raised it. But how do you guys individually feel about free work, especially for somebody that's starting out?
Chris: [inaudible] little context, sometimes free work is okay, and sometimes you should never do free work.
Ben: Okay. Give us those situations.
Chris: Okay, Michael.
Michael: Okay. Let me make a comment on that.
Chris: Go ahead.
Michael: No work should ever be free. There should be some kind of compensation and the compensation does not need to be dollars. So if I'm going to do a spec project for a client and I can completely justify a new client that I want to land, because I want to land a bigger budget or something with them or their marketing budget for the year or whatever. There are some certain scenarios where you might do it, but it shouldn't be free. You should put in your contract. You should still do a proposal. You should still do a contract. And in that contract, it should that you have the rights to use this in your portfolio. You have the right to use their logo in your client logo list. You ask them to give you a testimonial about your business. If you're giving them something, there should be something given back to you in return. So from my perspective, never free, but sometimes you do it, not for a trade of money, but you do it for something else.
Chris: So you're saying that every transaction there's a value exchange, sometimes not in dollars.
Michael: Oh, this is Chris Do language. So yes, a value exchange [crosstalk].
Chris: Value exchange.
Michael: [inaudible] the dumbed down version. You got to trade something.
Michael: You got to trade something.
Chris: You've got to [inaudible]. [crosstalk] Because nothing comes from nothing.
Michael: Okay. Value exchange, you can look at those terms if you need to find the definitions, but yes.
Chris: Yeah. Okay. Now, let me tell you something here. I think I got caught off guard, so I'm like, yeah, give away free work. And then luckily Michael bought me some time for me to figure out to explain that. [inaudible], oh, hot potato. [crosstalk].
Michael: My answer was good, man.
Chris: Yeah, your answer is good. Okay. Internet, you guys, we're going to turn this into a game show and we're going to vote who's answer's better. Now I want to turn this. Now the fire's coming you guys. Here comes the fire.
Michael: Here's what I think. Hey, wait. It's a middle of the night in Russia and half my audience [inaudible], so this is not fair.
Chris: We've successfully figured out how to avoid collusion. [crosstalk] stall. They're going to send the Russian robots and vote artificially for us. Okay. So here's my answer. My answer is this. I think there is a time and a place to give away free information, because I think we're so hardwired to think very transactionally. Like when you're in school and your friends asking you for help, do you help them or not? And you're thinking, I'm not getting anything out of this, but you're building a relationship. So there is some kind of value being exchanged.
If you think about our entire ecosystem here at The Futur, we are bringing in an amazing guests like Michael, who then put together an amazing presentation, is sharing information with you because there's value being transmitted to you right now. I believe in the law of reciprocity. So some of you guys pay us back by watching, commenting, subscribing, sharing with friends, or you show up to an event that we produce. You come out and see me, or you just give me a hug or you send me a sweatshirt like some of the guys from [Refuge Mountain]. I really liked that.
So I think is the new currency, it's not necessarily monetary anymore. It's not just numbers. Even if it's Bitcoin, it doesn't matter. I know for a fact, the more value I give to you for free, no strings attached, there's no marketing funnels, there's no trap door, email funnels. There's nothing here. We're going to give you value. And some of you will be able to give it back to us because I believe if you become more valuable, at some point you will level up and you'll say, "You know what? I'm going to give you guys five bucks. I'm going to become a sustaining member and I can wait. I'm playing the super, super long game here."
Michael: Yeah. I love that. And you know what, for me, I've been posting a lot of content lately on Instagram and kind of change my strategy. When I get up in the morning and I have comments from people that say, "Oh, this was so valuable to me." Or direct message that says, "I just found your channel. I love this content." Man, that is all the reward that I need. I don't need them to buy my book. In fact, I feel bad sometimes when I even tag my books on a post, because I am not trying to sell my book.
Michael: I just want to help. If they buy my book, great, but the reward for me is that feedback, that positive reaction and response, and that, it has value to me. It's not financial, but it sure has value, and I love it. It's the highlight of my day. Wait a minute. I'm married. I love my wife. Love my kids. So that's the highlight of my [crosstalk 01:21:50].
Chris: The third highlight of the day, yes.
Michael: It's social media feedback. That's the third [crosstalk].
Chris: Honey, he loves you. Don't worry. We love you, his number one. Okay. You guys get a vote right now. Team Janda, #teamJanda. Russians are asleep right now. Or team do, let us know who you guys prefer the answer from. So #teamJanda, J-A-N-D-A, [inaudible] letters. Team do, D-O, it's simply easy. You guys go and vote in the comments below. What else can we debate about? Let's pick another topic.
Ben: I don't have another debatable topic, but I want to share something.
Chris: Go ahead.
Ben: Okay. Mike, you slipped this in and I think this is huge. We didn't talk about it too much. Rule number one, always discuss money with confidence. Now that's huge for me. When Chris first started mentoring me, I was a mess. I couldn't talk about money at all. And he told me to call, I think it was like 30 people, right? And say the line, "Hey, my minimum level of engagement is $10,000. Does that feel about right for you?" And so the next day my wife walks in the room and she hears me go, "Oh yeah, my minimum level of engagement is $10,000." I'm on the phone. She's like, "Oh my God, this could be a huge job for us. We've never made this much money." And she's like biting her nails, trying to figure out. And then I said, "Okay, mom, I got to call other people. Thanks."
But I have to say that, that practice, just getting the muscle memory of saying those words, it helped infinitely because your mind kind of goes blank. You go sweaty and nervous, and practicing this language on people that you know and you love, can help you when those lights go out.
Michael: I love that. I remember when we talked a few years ago, you told me about that. You told me that Chris told you on your very first phone call that, "Hey, I think I can help you, but I don't think you're going to be able to help yourself. I don't think you're going to do what it takes to change." And then that was because you're probably competitive, because I know you enough to know that. You probably were like, "Wait a second. I can change. What are you talking about?"
Ben: I'll show you.
Michael: Anyway, that's good. The idea of practicing is so important. And Chris Do is giving you script after script on his show, of how to talk to people about money. Take that out and type it up and memorize it, so when you walk to the table, you're going to personify him. You're going to channel Chris Do and it's called emulating. You're going to emulate him and pretend that you're him, you're modeling behavior. That's Tony Robbins', modeling behavior. So model his behavior, even if it's not how you are or feel, fake it. They say fake it till you make it. Well, if you're doing it, you're not really faking it, you're actually doing it. So use him as an example. I mean, he got hundreds of hours of content of you talking the way that you talk to clients. Follow that process, it's not that complicated. If you have the script memorized, it's going to give you a ton of confidence going into those conversations.
Chris: Every time you do something for the first time, it's going to be the worst time that you do it. So if you practice and practice and practice, and I read books on this, that there is no difference between doing something for real and doing it through your mind. Famous golfers, professional golfers, would dream and think about swinging that golf club a thousand times in their sleep. And they train their mind to that. And it's true. So having Ben just say, getting his tongue, his mouth, his tonsils, and his vocal chords, his body, his diaphragm, getting used to saying 10,000, so it's not like vomit in his mouth, that was just it. And so the more you do, it's like, okay, I can say this. I can ask that girl out. I can drop a $10,000 minimum level of engagement. I can do that.
Hold on. Something's coming in. Hold on. I've just been handed this piece of paper. The official results have come in on the poll from YouTube, and it looks like it's a draw. It's a draw.
Michael: And I did it without the Russians still, so I feel good.
Chris: No, the Russians [inaudible] [crosstalk]. We've got your back comrade. And they're doing the new #teamJanda. [crosstalk]. They're so kind. That means that's a big compliment for you sir, because usually my audience will tear you apart. So that's a really big thing. Is there anything else, Ben? Thanks for sharing that story.
Michael: Yeah, it's good.
Ben: No, that's it. It's all you.
Chris: Is there any other questions? Otherwise I think we need to wrap this up. I'll let people know how to get this book one more time. They've been asking for an audio book, is there an audio book version yet?
Michael: There's not, but I slam that, and I am sharing a lot of this content in video snippets and in slide posts, and things on my Instagram and a new YouTube channel I started a couple months ago. So there's content coming. Again, the truth is you don't make a lot of money off the books.
Chris: You do not.
Michael: It's the truth.
Chris: [crosstalk] most of it.
Michael: Yeah. So it's not to try and sell books, you're either going to have to be Seth Goden and sell millions of books, or you're going to have to write dozens of books, and either of those ways. So it's not about money. Just follow me on social media and you're going to get a lot of this content. And ask me questions too. Send me a message. Like I said, it's great value to me, so I love to get the message and I'm creating custom content. If you have a question about pricing or whatever, I'll answer.
Chris: Yeah, [inaudible]. We're going to do some details in a little bit, but I know that you're also teaching, consulting, lecturing. You're now like you're done with the agency life.
Chris: Good for you.
Michael: It's the greatest.
Chris: Good for you. [crosstalk].
Michael: It's the greatest to be done with agency life.
Chris: So when you're not in Russia, you're writing courses, you're responding to people on social media, all that kind of stuff, right?
Michael: And doing business coaching too.
Chris: Business coaching?
Michael: I love it. I really love it. [inaudible]. I have to charge.
Chris: Why change? Why the change though?
Michael: You know, it's my passion. I always loved, my whole career, my favorite role was like art director, creative director. When I was in the weeds of it with the employees and helping them to take their design from 80% good to a hundred percent good, just that mentoring element, I love it. And I've been through the ringer. Man, I mean, the clients and thousands of projects and big projects and small projects and cash flow and fear and tears and blood, and all the stuff that comes with building an agency. And I love to help people not go through it that way.
I never had a mentor. I never had the person to call and say, "Oh man, this client is trying to stiff me on 70 grand. What do I do?" I didn't have it. So I just had to sort through it. So my greatest passion is trying to help other people not have to go through it that way.
Chris: I see. You want to be the change you seek?
Michael: Yes. Maybe that's... It's true.
Michael: So I say I love it.
Chris: Yeah. Awesome. Okay. All right, guys, I'm going to tell you how to get in touch with Michael. I guess we're wrapping it up here. I know we could probably sit here and talk a lot about different things. I wanted to compare social media notes with you, how you were able to grow your Instagram account in the last couple of days to six, 7,000 people. That's been amazing. So I'm sure we'll sit down and talk, but we want to keep this episode super focused. All right.
I don't have summary show notes because what you did was already a summary. There's no point to summarize the summary, so I'm going to let you guys know how you can get in touch with Michael. Here it is, michael@morejanda. That's on Instagram, on Twitter and on YouTube. So go check them out on all three platforms. You guys he's producing different kinds of content. Do yourself a favor, get some Janda in there, get more Janda. And if you want to look him up, he's at michaeljanda.com. We've posted links to the book where you can purchase it through Amazon. I'm going to say goodbye. Michael, thank you very much for joining us on the show.
Michael: Hey, thank you. Super fun. [crosstalk]. That was great. Thank you so much. I love it.
Greg:Thanks for joining us this time. If you haven't already, subscribe to our show on your favorite podcasting app and get a new insightful episode from us every week. The Futur podcast is hosted by Chris Do and produced by me, Greg Gunn.
Thank you to Anthony Burrow for editing and mixing this episode and thank you to Adam Sanborn for our intro music. If you enjoyed this episode, then do us a favor by rating and reviewing our show on Apple podcasts, it will help us grow the show and make future episodes of that much better. Have a question for Chris or me? Head over to thefutur.com/heychris and ask away. We read every submission and we just might answer yours in a later episode.
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