It is no secret that I believe all creative business get paid for three things: design, production, reveal (installation). The price of design is what you say it is while the price of production and, often, reveal is market driven. In other words, there is a huge difference between coming up with what IT is and then making IT a reality. And since making IT a reality is a known entity then the number for what it takes to do the work is also known.
This post is my shot at blowing up the canard that percentage pricing is in any way doing what you want it to do for your creative business.
If you are in an industry that gets 15% of a production budget to produce your design and that production budget is $100,000, you get $15,000. If it takes three months to produce your design, then $5,000/month is equivalent to 15%. Easy enough (I hope).
Now if you want to be in the “what we charge is what we charge” camp, you want to separate your price from the cost of production. In the above example, if the production work is the same, truly you are indifferent between say a $100,000 budget and a $110,000 budget, meaning you really do not need the extra $1,500. So you would be happy to make $5,000/month for three months even if the production budget slightly changed. Your client should love the idea of a flat monthly production fee. And yet they do not trust the change because they know you love your percentages and believe somehow they are worse off with a flat production fee (they are not).
Why? As a business you have told the story for so long that if they change their mind you, your art and your creative business need to be covered. Which, of course, is ass-backwards. It is your job to know the level to which you design and to communicate that. If the scope of the project radically changes, then you are starting over and the price of design (i.e., what it takes to come up with IT in the first place) explodes.
The price of design explodes because you now have less time to come up with a much bigger design (project risk) and you have to take care of your other clients that did not change their mind (systemic risk). Last, you don’t want them to change their mind (penalty) because your timeframes exist for a reason. Greed is such an allure though.…
By the way, your production fee also has to explode since you have less time to do a much larger project.
So tell me again how your percentage “protects” you, your art and your creative business? Let’s not even talk about when the production budget plummets.
Back to the example, if your client decides to double the budget and you just get your 15%, how does that work out for you? Yes, you are now receiving $30,000 but you are getting nothing for redesign (presuming you had a design fee in the first place, if not, why not?) and have to twice the work in half the time. If someone came to you and said produce this $200,000 project in three months versus six, the percentage would have to go up since you would charge 15% if you had six months. Hmmm…
A caveat. If your industry has notoriously undercharged and percentage pricing moved the needle closer to value, I am down. Just like a booster rocket is necessary to leave orbit, no booster rocket, no space flight. Once in orbit however, the booster rocket is dead weight. So too percentage pricing today, at least the way it is currently constructed. If you do not have an exploding percentage if there is a radical change in scope post design, you are kidding yourself in believing that percentage pricing is doing its job. Same goes for charging hourly to hedge against scope creep. Something is NOT better than nothing when it comes to getting paid for risk as it just creates confusion.
So what to do? Know where you are and what is expected of you, your art and your creative business. If situations change (and they always do), then be forthright in what it will take to make your business indifferent to the situation.
Which brings me to my last thought — your business is neither positive or negative in its delivery, it just is as it needs to be to ensure your best work. If someone comes to you a year out to do a project, your price is $x. If they come four months out, presuming your best is possible (sometimes there literally is not the time), the price might be $5x. Your business does not care which one shows up as both will give you what you need to create and manifest your best art. This concept of indifference is lost on so many as you feel like you are being negative by establishing great guardrails. You are not, you are just allowing your business to do its job to nurture the art that drives it, never the other way around.
It leads to counter-intuitive results that, for me, anyway are always better. If you get $5,000/month for production but are in a creative business where it is possible for you to finish early, I would always trade the $5,000 monthly fee for finishing a month earlier. Finishing early would mean that all went beyond according to your vision and your best was fully supported. It would set the stage for the next great project and the ones after that.
Oh, but greed is so cruel. Most would choose that extra scope and a delayed project where your best is in jeopardy every day all day as it would mean more dollars to you and your creative business. The dollars might be a lot (in my example an extra $15,000 is not small potatoes). I hear P.T. Barnum….
If you take anything away from this post, I hope (i.e., pray, plead, beg) you ask yourself: “At what price?” If you do, you might just find that it really is not worth it. Get what you need, no more no less no matter the circumstance and without apology. Then, let your work speak for itself, over and over (and over) again.
