Designing Your Rate

I am a designer. I love to build things that people use. Recently, I started consulting and I came up against a question…

What is your hourly rate?

…and some how “I don’t know” didn’t seem to cut it ☺

So, how does one know their rate? Is it $50 or $150. Is it cost plus pricing or value based pricing?

The only concrete directions I got from friends were:

  1. The client should be insulted by your first offer.
  2. If the client rejects your first offer, counter offer once then walk.

As someone who just wants to get paid a fair wage and get on with it, this was not helping.

So I looked for other methods of negotiation. Excitingly, I stumbled onto a negotiation process that consisted of not asking for anything at all.

This seemed to be a great method for me, so I gave it a shot. I have to say in trying it, it works. That being said, it is hard to do. The reason for this is because it requires behavior change for the client. They are used to having consultants tell them their rate, so when you suggest a different process it can be odd for them. That doesn’t mean that you will lose the opportunity but do expect it to take longer.

While this did work, what I really wanted was some sort of objective measure which I could use to set my rate. (Basically AngelList’s salary index but for contractors.)

To create this, I surveyed my design peers to see if I could round up some data on this issue and provide the anonymized information to the greater community.

I surveyed 33 design consultants. Mostly in the bay area. Mostly doing product management / general design work (making prototypes / testing with users). Almost all of the work came in through word of mouth / networking. Most of them have 10+ years of experience. Also, majority of the respondents come from the Stanford Design Program / d.school.

Here is an overview of the respondents:

Startups 2–50 ppl, Med Companies 50–500 ppl, Large Companies 500+ pp

Next, I wanted to see what we could learn from the data about the rates they charged. First off, let’s look at how rate is effected by the size of the client company.

There were only 3 respondents with less than 4 years of work experience and they were paid low regardless of the company, so I limited the calculation to those with 4+ years experience. Looking at the average rate per category, the data supports a trend showing that larger companies pay more.

This makes sense.

Larger companies are generally harder to sell into but they also have larger budgets.

Next, lets look at how the type of design that the consultant is selling effects the rate. Each respondent was asked to designate the type of design they practiced resulting in a wide array of types of design from UI/UX to food design. To get meaningful data, I looked at two categories: management vs designing and physical design vs digital design.

As expected management pays more. What it interesting is it is only about 10% more. More interesting was that there was basically no difference between physical product work and digital product work.

Finally, I looked at pay vs years experience.

As you can see there is a nice correlation.

From that trend line, I was able to create a chart for hourly consulting wage based on years experience for a designer / product manager in the Bay Area.

Now, this is not to say that everyone should get paid this amount. First off the sample size is very small and there is quite a spread on the wages. Also, while years of experience is a good indicator of ability, it more of a guideline than a rule.

My hopes are that the effect of this data is for it to add to the conversation and help people have a better understanding of what the current market rate is for their abilities.

Because, if we can all get a fair deal & feel valued, that means we can get back to what we love doing : creating amazing products!

#Boom #LetsDoIt

P.S. Thanks to all the awesome designers who contributed to this inquiry. If you didn’t and would like to here is the survey.

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