What Is Value-Based Pricing? Value-based pricing is a way to not only get paid for your time and expenses but a way to get paid for the value of the services and products you provide to your clients.

Value-Based Pricing = Time + Expenses + Value. With hourly pricing and project-based pricing, you are compensated only for your time and expenses. This way is ok for newer designers just starting out. But once you’ve established yourself and start to build a reputation as a skilled designer, you become more valuable to your clients than merely the time you spend on a project. At that point, you may want to consider switching your pricing method to value-based pricing.

After all, If that new website or logo your designing will help your client’s business grow and perhaps earn them a half million dollars over its lifetime, that’s a great value to them, and your prices should reflect it.

Establish a baseline price. Before you start using value-based pricing, you need to establish a baseline price. Your baseline price will be different depending on the scope of each project, but they all start off the same way.

When submitting a quote using value-based pricing, it’s important to remember the formula: Value-Based Pricing = Time + Expenses + Value.

To start, you need to estimate how long you think a project will take and multiply it by your hourly rate. Make sure your hourly rate reflects your skills as a designer.

Once you have your time figured out, estimate your expenses for the project. Not just project specific expenses but business expenses as well. Business expenses are something many designers overlook when quoting.

How much electricity will you be consuming while working on the project? If you are renting space, you should know how much per hour it costs you and include it as an expense. How much does your Adobe Creative Cloud subscription cost per hour of use? All of these are considered expenses and you should bill for them. Just because it’s a business expense doesn’t mean you can’t charge your clients for it.

Remember that besides your time, you should be charging enough to keep the light on and keep your business running as well.

Taking all of this into consideration, you will have a different baseline price for every project. A website will take more time to develop than designing a business card will. Don’t forget to add a buffer to your baseline price. We all know about scope creep so compensate for it in advance by adding anywhere from 5-20% or more to your baseline price.

Once you’ve determined your baseline price for a project, you can then adjust your quote based on the projected value of the project to your client, that's value-based pricing.

Determining the value of a project Determining the value part of value-based pricing is tricky. Through back and forth conversations with your clients, you need to figure out what sort of return they expect to achieve with what you provide them. Only then can you figure out a percentage of that amount as the value part of your price equation.

When first starting out with value-based pricing it's normal to offer lower prices as you get used to the concept of how much value design can provide. Over time as you practice and gain experience, you will get better at determining the true value of a project. The trick is to try and let your clients estimate the value for you by asking lots of questions about their business.

Be more than a designer When you first start your business, chances are you'll run it more like a technician. A client tells you what they want, you design it for them, and they pay you. Many designers continue using that model their entire career. And there’s nothing wrong with that.

But If you want to use value-based pricing you need to do more. You need to establish yourself not only as a designer but as a design consultant.

As a designer, most of the communication goes in one direction. From the client to you. As a design consultant, communication evens out or even tips in the other direction with you directing the project more than the client does.

To establish yourself as a design consultant, you need to be inquisitive about a client's business. Ask them questions like “What sort of growth do you anticipate for this upcoming year?” or "How do you think this proposed design project will affect your bottom line?" or “How much money are you willing to invest to ensure the success of your business?”

By asking these types of questions from the start, questions that have nothing to do with the actual designing of the project, your clients will realise that you bring much more to the table than merely your design skills. You deliver insight and value that will continue long after you’ve completed their project.

If you establish yourself as a problem solver, which is what a consultant should be, and you approach clients with confidence, you...