All creative businesses should price from the top down. Decide what you want (need) to make and then figure out what it is going to take to get there. Pricing from the bottom up (i.e., “marking things up”) almost never captures the true value of your art. Where you can, charge a fee and leave the cost of production out of your profit equation.
Even if moving to a complete fee-based business is not possible, a real goal is to include some combination in your pricing. And, even if your creative business has to be a “mark-up” model, try to focus on maximizing the less risky aspects of your business. For instance, if you are a florist, perhaps you can incorporate a design fee into your work. If you are a graphic designer, where appropriate, you can assume the risk of delivery and charge a full mark-up on some of your deliverables. One caveat, though, if you are not in the business of delivering perishables or managing skilled labor (i.e., a florist, caterer, draper, lighting designer, set or furniture fabricator, etc.) do not assume the risk of delivery. It is hard enough to make money in these creative businesses if it is all that you do, nearly impossible if it is not.
Regardless of your pricing structure or strategy, the goal is to maximize value. Today’s reality is that, most likely, you will have to negotiate with your clients. It might sound counter-intuitive, but your flexibility should be on the lower margin items/services you offer, not on your fees or high margin (and/or less risky) items/services. Even though you might have more “room” in the higher margin business, it is what is most valuable to you and your creative business. Don’t give it away.
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Right on. And I totally agree with that last paragraph. Negotiating down on what you’re charging for the creative component ‘just because’ feels like it cheapens the value of what you do. I’d much rather be flexible with the items that aren’t about talent/creativity/art (or whatever you want to call it).
Thank you so much for sharing this- absolutely perfect timing for me! I struggle with the negotiating process because it’s so subjective with creative fees, but there is a specific value that photographers (and other creatives) can place on their services and experience, just like lawyers etc. It’s very difficult for clients to understand this sometimes, especially with photography because many people own a DSLR. Echoing Jake’s comment, it’s also a bit easier for clients to understand negotiating with tangible items, versus trying to quantify creativity.
I’ve been giving a lot of thought to my pricing recently, and this is brilliant! It is subconsciously what I did, but having a logistical reason behind doing it truly helps.
Thank you for sharing!
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