How to Start & Run a Design Business: Pricing & Estimating Creative Design Jobs

Hey everybody. Welcome to The Process. On this episode of Ask Me Anything we’re going
to be talking to Frank Shi he’s got a lot of business questions I think
you’re going to be interested in hearing and answers that we’ve got. So stick around. Let me try this again. I want you guys to listen to me– Yeah. I design sandwiches. My name is Jose Caballer
and I talk about the business of design. hahahaha I talk about a lot of stuff. My name is Chris Do
and I talk about the business of design. At the center of this operating system it’s
about underst– [Cough cough] Jose, can we just tell em what the show title
is? I hate you dude. You are watching, The Process. Hahahaha, nice. Alright So let’s give everybody a little context
about for what you are doing Frank. Talk to me. Frank: Um, so I’ve been given this unique
opportunity to have a partnership with a Chinese production company
and they have a lot of clients under their belt that’s looking for
high quality studio production. Chris: Mhmm Frank: …and my partner has come to me because
a lot of international brands are using China as their main point of sales and their wanting
to kinda keep that production domestic. Chris: And what’s your background? Frank: My background is, I graduated from
Otis College of Art and Design and the folks in digital media. Chris: When did you graduate? Chris: Two years ago. So thats 2013? Alright cool. So just two years barely. Interesting. Summers almost over. Alright, so let’s get right into the questions
and let’s see how we do. This is kinda unrehearsed so let’s roll. What do you got? Frank: Uh so first questions what are some
common business mistakes as entrepreneurs make in the creative field? Chris: Hm, common business mistakes. Ok now I gotta think back to my past here. Um, some things I got right some things I
got wrong. So let’s start there. First is, you need to get paid upfront. A lot of designers do work and don’t collect
any money. And there’s a lot of people out in the work
that want your creative services, want you to design them a logo, build you something,
but you need to get paid first. That’s how you know the job is real, cause
otherwise it’s just all talk and I think as creative people we get really flattered when
people show interest in us and they wanna talk to us about a commercial or some kind
of branding film, and then you get real excited. Frank: Right, right, right. Chris: So let’s contain the excitement and
turn it into something that’s very real. So what I would do is, uhh, put together a
proposal or talk about a budget and get that 50% upfront. That’s when you know it’s real. You need to get the 50% upfront. So, get paid upfront, ok? And then about 3/4 of the way through the
job get paid another 25%. And when you deliver the project you can either
ask to get paid on delivery which is not realistic sometimes but you can get paid the remaining
25% net 30. Meaning in thirty days they have to pay in
full or they pay interest. And that way really what you’re risking is
that 25% which should be your profit margin. So if you do it like that you should be ok. Cause the last thing you need is to especially
book a big project and for them to bankrupt and now you’re stuck holding the bill. And this has happened to a lot of designers
out that own studios and run companies. Ok? So get paid upfront. Umm. If you’re in a partnership, which you mentioned,
now we’re just talking about the partnership not so much with the clients, is you gotta
start thinking about, unfortunately, the exit scenario. We all go in with all the hope and optimism which
is really great but we have to think about how are we gonna separate. If you can bring the conflict up front and
have that conversation out in the open, you can sleep at night not worrying if this is
ever–how it’s going to play out when it falls apart. Cause eventually partnerships do fall apart. Nothing is forever. So you have to start thinking about that. And you need to learn how to bid. So I believe you told me before that you’re
a creative and you’re partner’s a creative. Somebody needs to know how to bid. And so do you know how to bid? Frank: Yeah, I’m learning the process of how
to bid slowly, umm. That’s some of the questions I have for you
also how to bid. He’s more of an EP. Creatively he doesn’t really have much control. He’s more about like the business and the
bidding. So he’s helping me kind of sell like our services
and what–build that relationship between Chinese clients and me because of course their
value on well what we do is a little different um compared to here. Chris: Ok, so executive producer when you
say EP, some people in our audience may not know what that means, excuse me. Stands for executive producer there are a
couple different types of executive producers. The one type is in charge of new business,
business development, sales. They really just go out and hustle and meet
with clients, potential clients and try and sell the services of the company. They typically do not sit down and break out
the excel spreadsheet and work on the bids. That’s a different kinda mentality. This person is usually very outgoing, very
short attention span, really is gregarious, extrovert, and isn’t always the best on details. And you need that kind of person. Cause that person’s–guy or gal who’s gonna
go out there and get you business. The other kind of executive producer is one
who runs your company for you. In some instances they’re referred to as Head
of Production. They do the bidding, they do the calls, they
set things up, and they close the job. Closing the job requires very specific set
of skills that we may or may not have time to talk about. So, that’s a different kind of person. So sometimes you have a person that does both,
so they’re going to be a little bit weaker or stronger one than the other. And you have to kind of think about that. So, that leads me to the next thing about
common mistakes is, sales is everything, sales and marketing. With robust sales and big budget projects,
you can fund any kind of company and you can run it the way you want. Without those sales, without that cash flow
coming in, you’re going to start to suffer severely. Okay? The other thing I wanna talk about is, there’s
two ways to make money. There’s one way to make money which is to
bid high and produce it um–to build yourself a cushion of profit. The other way to make money is to spend less
money to produce the project. And so you kind of have to think about that. Sometimes people focus all on getting higher
revenue, grossing revenue and they’re not thinking about how to spend that money. So if you get a million dollar job but you
spend $999,999 it’s really a $1 job. And so we get caught up in the idea that it’s
a $1mil job, when really it’s a $1 job. Conversely, you can do a $100,000 job and
only spend $50k and have a gross profit of $50,000. Now if you ask somebody, would you rather
get the million dollar job or would you take the hundred thousand dollar job. Most people don’t think about it and they
say “I want the million dollar job”. It’s really at the end of the day what you’re
able to keep after all expenses are paid. Including paying yourself and your partner
and seeing what else there is in the profit margin. Alright? Umm, let’s see what else I got here. So we talked about bringing the conflict up
front in negotiations. I would do that with my clients as well. So often times I think we sit around and think
the client has all the power. And they have a lot of power, but they don’t
have all the power. They have as much power as you’re willing
to give to them. So if you’re concerned about certain things
like the schedule, the budget, maybe they’re asking for something that would be fairly
tricky to do, given the budget, you need to address those upfront. And that way we can act like adults and professionals
and run a real business and talk about these things verses dealing with it after the fact
and kind of griping about it later. There’s a really great line in here from The
Win Without Pitching Manifesto, get a shot of that, by Blair Enns. He talks about this. He says you know a lot of times we underbid
projects. We underbid projects and later on we regret
doing that so he says in the book, think about the client when they call. Are you anxious to pick up the phone? Or are you grimacing and trying to avoid that
call? And often times it is directly related to
the budget. So a client that’s asking for lots of revisions
and needs a lot of hand holding and customer service and you’re feeling bad about that
relationship is because you’ve charged too little. But if a client’s gonna pay me a million dollars
you can call me as much as you want and you can bug me as much as you want cause I’ll
take care of it. Cause it’s worth the trouble. Usually what happens is the lower paying clients
tend to pay less and are harder to deal with. That is the tricky part. Ok? Alright so let’s go. What other questions do you have? Frank: Um, so. The second one was how to effectively communicate
your business ideas to partners and we say “be more specific”. I thought about it from what you just was
saying–talking about. How do I negotiate like fair terms between
like, um, ok let’s can we rewind? I feel like– Chris: Yeah fine. It’s your question man. Frank: Ok, so, how do you sell your company
or your service without much experience to show? Chris: Ok, you’re going to sell your company
mostly on your confidence. Believe it or not. You can have a gigantic body of work that’s
won every reward but if you don’t go in there representing yourself well, in terms of like,
“I know what I’m doing. I can take care of this.” Then it won’t matter at all. So there are a lot of people out there–think
about this if you are an executive producer or you’re a sales rep a sales agent, you don’t
do the work. You didn’t do any of it. But what you do is you’re managing the relationship
between the client and the person who can get it done. You as the head of the company aren’t that
much different. You know, I don’t know if a lot of our clients
are out there thinking that I’m the guy who’s working on the box. I opened up After Effects the other day and
I was a little rusty. I haven’t opened it up in a while. It’s coming back to me but that’s not what
I sell myself on. What I’m selling is I’m a problem solver. I’m a business designer. Come to me with your problems, I’ll help to
solve them in a way that makes sense for the parameters of what you’re trying to achieve. So that’s what I’m selling. I’m selling confidence and assurance. Assurance not insurance. Assurance, I’m going to assure you that the
job is going to get done and based on my experience and my confidence the client’s going to make
a decision if I can do it or not. So you actually don’t need any work. Believe it or not. Because later on if I walk away from this
company and for whatever reason I sell all the assets to the company including the portfolio,
I’ll still be able to go out there and get work. Cause I’m selling who I am and what I can
do. Not the work. Okay? So, number one mistake there is to sell the
portfolio. Number two mistake is sell the process. I think you should sell the people. Frank: Sell the people? Chris: Yeah, sell the people. The people are the ones who are going to make
this work. Ok? Alright what’s your next question man? Frank: Um, how do you effective–efficiently
excuse me brand what we do and who we are? Chris: How do you what? Frank: Effectively like, um so we can also
look into the kit with The Skool and there was a mission statement and I was having a
really hard time writing one. Chris: Writing one? Yeah, they’re really hard to write. Frank: Yeah because you have to kind of like–I
was looking at the Jose’s and he talks about it and his mission statement. I was like “Wow, this is really kind of broad– Chris: Pretty broad. Frank: Yeah but it’s hard for me cause I know
who we are as a team and what we wanna do but how do we communicate that and how do
we put that in a sentence or effectively get the client to look at it and be like “Oh I
get what you guys do”. Chris: Ok. One way to look at writing your mission statement
is to think about your value. What value do you provide to your customers? What do you really do for them? It’s not really about you. Okay? So I know that writing a mission statement
is very difficult and if you go through the exercises in The Core 1.7 kit it’ll help break
that problem down to much smaller kinda bit size piece. But it’s really not about you. Think about the value you provide. What value do you provide to your customers? So the one way to do this is to profile your
customers to figure out who are they, are they ad agencies, are they entrepreneurs,
are they startups, who are they, in China, and who’s gonna need your services and what
problem are they facing what challenges what pain points do they have? Think about their job and think about their
pain points and think about which one of those pain points you can solve and start thinking
about how to communicate who you are, based on that. K? Frank: Um, ok. This is close to some of the budgeting stuff
questions like that so. Chris: Sure, like money stuff? Frank: Like money stuff. It’s like an awkward topic for a lot of people. How do you budget for unexpected things that
goes wrong in a project? So other than label costs, overhead, stuff
like that, how do you budget–how do you bid for a project, ok this might be a mistake
or someone might screw up this and that. Chris: It’s a mistake that is caused by you
and not by the client? Frank: Yeah so unexpected–say you hire someone
who’s like a effects artist who’s like super expensive but he’s like one of those dudes
who just puts stuff on a reel and doesn’t really have any, you know. You kind of like, “Ohhh, my God. This is really expensive but you didn’t really
do anything.” And how do you budget for that and how do
you deal with that? Chris: You talking about our last job? Frank: No. Chris: Ok, hahaha. Ok hiring uh “experts” that don’t deliver. It’s a big problem especially in effects. The effects world is fraught with challenges
because you come in under budget and often times the scope of the work is, well we don’t
like it so you have to just keep working on it. And so you can easily drive your company into
the ground so you have to be very careful about how you bid. There are only a handful successful visual
effects companies out there that are still doing what they do today. And why is that? Because they’re under bidding projects and
they having hard time managing very expensive artists. Ok so let’s first look at who you are. Let’s look at your company and your infrastructure. Something I’ve learned is that where relatively
small company. We don’t have dedicated departments or teams
of specialist who can do a particular job. So larger visual effects companies they have
a whole department that just does modeling or does lighting, like there’s a lighting
TD and there are technical directors who just optimize the code for rendering. So when the models and all the lights you
put in it can’t render and it can’t render it under four hours a frame, which is unacceptable,
they have a guy go in and or a gal, and the code and they optimize the scene and then
all of a sudden it can render in 10 minutes. You don’t have that. So what happens is you have people that come
from that world who are moving on. Either they quit or they were laid off and
they’re used to working with a pipeline and a technical director and all these kinds of
people and then they come in and they can’t produce. It’s not that they’re not capable of doing
it or they’re misrepresenting the work it’s just they need a certain infrastructure. So more specifically like houdini guys need
a whole team, generally speaking. I know I’m making a broad accusations here
but they need a big team to make it work because it’s a very computationally intensive thing
that they’re doing. Lot’s of processing power. So that’s one thing. What I’ve learned is, I would be very upfront
and this is gonna be a theme in business here, whether you’re gonna be dealing with your
partner or a client or a vendor or artist, is to be very upfront. Say ya know what, we’re a team of six people,
we need more generalists to work on the project so if you have a problem I need you to fix it. Can you do that? And here’s what we got. And they say yes and you’re still not sure,
I’d just be very upfront. I’m willing to try you for X number of days,
and if it doesn’t seem like you’re gonna hit it I need to be able to move on. You need to know that upfront. Are you ok with that? If you have a–you’re booking with Weta,
I advise you to take that. Because this is not that stable. Just be very upfront. That way people can’t get mad at you cause
you were hiding something. And I think on the other side, if I was a
vendor I would appreciate that kind of level of honesty and directness versus somebody
who’s like, “Oh we’ll book you” and then unbook you and I missed out on an opportunity or I
canceled a vacation with my wife or girlfriend. That would be horrible, right? So, the thing that you also need to know is
if you’re a business owner is, cut your losses quick. You bring somebody in you say, “You know
what I’m give this x number of days.” And you stick to it and you talk to them,
“We’re not hitting it, the benchmarks. We’re not doing it. I’m gonna give you two more days to kinda
figure this thing out. Do you feel confident about that?” And, one thing that I’ve learned is you need
to give them space to say, “No I can’t do this.” I think especially for guys cause you know
if effects world there’s generally it’s very male dominated, there’s an ego issue and a
pride issue. I don’t wanna say I can’t do something. And so if you say, “Can you do it” of course
I’m gonna say, “Yes I’m gonna do it. So you gotta give me an out. Say, “Look, I can see that we’re all stressed
out here and”–put it on yourself to say that, “you know what, this job’s harder than
I thought and our pipeline isn’t there.” Or whatever reason there is tell them that,
“so if there’s a chance you don’t think you can deliver I would rather shake hands
with you and part ways and look at you for something else as opposed to us kind of burning
this together and maybe moving in a direction where we can’t recover from this.” Be very upfront and be that transparent and
you don’t have to be a jerk about it. Frank: And, another one talk moneywise– Chris: Talk money as much as you want. Frank: So like if an artist cost like $1,000
a day and they’re like– Chris: Don’t hire them. Frank: –like example, top of the crop like
and you have them say booked for 5 days. How do you put like a margin on their mistakes
if they do screw up? Chris: Ok, you should not be–ok so, this
is actually to the heart of your question cause I see now what you’re saying. How do you bid a job and cover for unexpected
delays or missteps? Now when we get to bidding cause I had asked
you before, do you know how to bid, and you said your EP knows how to bid. So I just shelved that whole topic all together. But I’m just gonna give you a broad overview
ok cause this is something I learned early on. So let me tell the people how you’re supposed
to bid and if you guys want to know more just comment below and we can do a deeper dive
into that and do it with fancy shmancy graphics ok? So how do you bid? Here’s how you don’t bid, you calculate your
time and you do an hourly rate and you guesstimate uh–so let’s just give me a reasonable hourly
rate that somebody starting out might charge. What do you think? Frank: $50. Chris: Ok $50/hr so that’s, 8 hour day–let’s
say for 10 hour day that’s $500 cause those numbers are more round ok? So you’re gonna charge $500 day so you guesstimate
that it’s gonna take you 10 days. Keeping number really round. So that’s gonna be $5,000. So you submit that. So $5,000 is the number you submit to the
job and they say, “Ok go ahead and do it.” What’s the problem with that model? Well that’s not a business. There’s not profit and there’s no room for
error. Ok? The way you look at it as a business person
as an entrepreneur is, how much would you have to pay someone else to do that job and
that’s how you bid it, and you have to pay yourself. Ok so there’s things that we’re missing in
here. Alright let’s go to the board here. Can I? Alright so, here we go. So you have an artist and they’re $500 right,
a day. That’s pretty typical of a person who knows
what they’re doing, ok? It can go much higher it can go a little bit
lower, but that’s about it. So you look at it as that times–so there’s
a rate there, times 10 days. So your spreadsheet would look something like
that right? The name of the artist times the number of
days. So this is days and this is rate and this
is the tile or job description, ok? And so then you would have a subtotal here. And what’s the math on that Frank? Frank: $5,000. Chris: $5,000 ok so far so good everybody
is following me, right? Ok so $5,000. Like I say, if you submit the bid for $5,000
you’ve done yourself a disservice. Ok, so who’s managing that artist? And what if that artist takes longer than
10 days? Now you’re paying for the job. So the first thing you’re gonna need to do
is you need to mark this thing up, ok? So you can mark it up to–what rate do you
think you can mark it up to? Frank: I’ll say $600. Chris: Alright $750, I like that number. So you’re gonna mark it up to $750, ok? Because artists always underestimate what
it’s gonna take to do the job. So so far if you do it $750, the new number
would be $7,500. So if all goes well, which it never does in
visual effects, you’ll have made an extra $2,500. You can send 10% of that to me. Everybody that’s watching that if you make
that money send 10% to me, alright? I’ll do a PayPal thing and we’re all good. Is everybody good? Ok, I don’t work for free. Frank: We’re good, hahaha. Chris: I got two kids to raise and they go
to private school so we’re gonna do this the right way. Alright, so now who manages this person? You have a producer coordinator, ok so you
have a producer. Ok what are they a day? Let’s say $400, ok? And so they’re gonna run that project for
the duration of it which is another 10 days. Ok so now you’re gonna come out at $4,000. Ok that’s a number that you didn’t put in
there. Now whether or not you hire a producer and
pay that amount isn’t relevant. It needs to be in there because somebody has
to manage the project. So again, if you wind up producing the project
yourself that means you’ve made another $4,000 on top of the $2,500 so so far we’re up $6,500. So initially you were talking about having
an artist at $500/day for 10 days. So by the math that would be $5,000 but the
problem is if you run into a problem if things are delayed or you underestimate the job,
you are now gonna go into the red. So you cannot pay the person and you cannot
charge the same amount as you’re gonna pay the person. It doesn’t make any sense. So there’s two areas in which you can do this,
one you change the rate and you can also change the number of days. But I like just working on the rate. Ok because perhaps is a hard deadline and
in 10 days this thing is due, so you can’t just put more days in there. Ok there is a way around that too. So the difference there just by doing this
is a potential profit of $2,500. The difference being from $5,000 to $7,500. Now you’re going to need to add in a producer. Cause somebody’s gotta run the job. Somebody’s gotta look at the assets and manage
the team. Ok so the team is one person that’s fine I’ll
just put in their rate of $400/day. In Asia you’re gonna pay a lot less than that
so let’s assume that’s ok. So at 10 days that $4,000 now, ok. So, who’s gonna direct this person, this artist? Oh, that would be you. So I’m gonna put in an art director. Ok an art director what do we gonna put in
for an art director? What dollar amount should we put in for the
art director? Frank: I mean I would say like $700 – $800. Chris: $700-$800? It can’t be less than this guy. So this guy’s coming in at $750 I’m gonna
say like $900, ok? Now we don’t need to art direct this person
every single day of the job. So you can just put in a random number there. Let’s say 5, ok? So let’s say 5 days and it’s not that you’re
not working with him everyday it’s just you’re prorating your time across the length of the
job so there now we’re up $4,500, ok? So let’s say that’s pretty good. Now if you need more artist help I would put
that in there. So are we good yet? Should we submit the bid? $7,500 plus $4k
plus $4,500–it’s $8,500 it’s um, $15–$16k I believe. So, right now we’re at $16k. Is my math right? Uh my business majors? $16k? Ok so we’re at $16k. Remember initially you were gonna come in
at $5k. So this is how you do a bid, ok? What else do you need in here? Are we good? Frank: Um, what about overhead? Utilities, rent, etc… Chris: Right. You can’t just show that in there. Frank: Yeah so how do you– Chris: How do you put that in there? Ok well these guys they don’t work on paper,
they work on a machine and there’s software attached to that machine so I’m gonna call
it a workstation. Now I can’t charge for the laptop to do the
bid but I can charge for the PC/3D workstation, ok? And I find a reasonable rental rate. What’s a rental rate for a machine? You know per– Frank: Per day? Chris: They usually do them by the week. What is it per week? What do you think? Just throw out a number. Frank: $1,000? Chris: That’s too much. $1,000 a week? Let’s say $500 a week. I don’t even think it’s that much. Cause we rent computers. So $500/week times 2 weeks, right? So now you have another $1,000 in here. So this number just keeps growing. What else do you have in there? Now I’m gonna roll in hardware and software
cost cause I don’t wanna delineate every single part to the puzzle right? So let’s just do a subtotal now. So now you have $17k. That’s your bid now, ok? $17k. I drew that one too close to the dollar sign
so you guys are gonna have a hard time seeing that, $17k there. Are we done? No because now as a business we need to make
profit. This is where we cover our overhead and our
stuff, k? So profit is gonna be anywhere between, depending
on what country and where you’re from and what industry you’re in, can be anywhere between
10-30%. So you just mark that up. So let’s just say because my math is not so
good, let’s say it’s 20% ok? So we’ll say 20% is our markup and you just
tell them, it’s markup, it’s our profit. Everybody that runs a business understands
that because if you paid everybody you still wouldn’t make any money. Ok? So 20% of that–so 10% of that is $1,700
so $3,400–so it’d be $3,400 right? So you’re gonna add that together, so now
you’re at $20,400 for this job. That’s how you do a bid and that’s how you
stay in business, ok? There’s a lot more parts and pieces to this
like a modeler, um you can charge for rendering even. Cause those are things that are out of your control. Does that help you understand how to do a bid? Ok, so I’m gonna come back to here. Alright. Now, those of you that are watching and you
just saw how you did a bid, if you wind up making an extra I dunno, let’s look at this
again cause I wanna make sure this is on camera. The difference between your initial bid at
$5,000 now and your new bid at $20,400 is $15,400. You can send me a check 10% of whatever that
profit difference is cause I got kids they go to private school. Somebody’s gotta help me out with the bills, alright? And I don’t do this for free. Ok. What’s next? Frank: Um so, how do I insure myself as like
a business owner to get over that first year? That first hump. Chris: The first year, first hump? What do you mean? Frank: Like the–um, I’ve been talking to
a lot of business owners they say the first few years are the hardest. So how do I play my cards right so I ya know
get over that hump and don’t like crash and burn? Chris: Ok. So your question is, how do you prevent crashing
and burning because you run out of runway? Right so you have a cash flow issue. There’s a couple things you can do. First, you can get a line of credit if you can get one. So if you have some kind of credit history
you can get a line of credit from your bank. Right now I think we have a $400,000 line
of credit with Wells Fargo. It’s necessary. It’s how companies fill the gap
against pending orders right? So if you get a new contract, say it’s $100k
contract now you gotta staff up you gotta buy machines, you can usually use that and
go and take that invoice to the bank and get a line of credit. Because clients don’t always pay you upfront. The good new is, if you’ve been listening
to this episode you have gotten $50k upfront. But before you even get that you’re pretty
sure it’s a lock you need to start getting the team ready and get things together. So you may do a little expenditure. I would rent everything I would work on crates
and boxes and buy your furniture from IKEA if you can. You don’t need fancy shmancy furniture and
things like that, ok? I would go to Office Depot and buy a $79 chair
and don’t worry about getting the Herman Miller Aeron chair. You don’t need it right now. And the last thing that you wanna do is create
this cash flow expenditure that you can’t manage. So run it very lean. That’s why when you go to startups, you’ll
notice, it can be some of the most valuable companies but they’re working on milkcrate
boxes with a door for a table top. Do it like you would do it in college, keep
your expenses down, ok? That’s how you manage that. So once the job comes in don’t start spending
that money right away. Some people thing, “Ok it’s a $100k job. I got $100k in my pocket I’m gonna go buy
a new car.” Don’t do that. Do not do that. So live within your means, ok? Where you want to spend money that you don’t
have is potentially because there’s a staff or an artist or a designer or somebody that
you really think you need and you need to take a little bit of an educated guess or
risk at the new work that’s gonna come in and you roll the dice and that’s what entrepreneurship
is about, ok? You have to take some risk. Don’t be stupid about it but take some risk, k? Frank: Here’s my follow up question to that. What’s the benefit between I would say doing
a startup from your home like digital nomads just kinda like everywhere scattering and
managing that team compared to say having a small space thats kind of like very manageable
like very small space. So what’s the benefit and pros and
cons between the two? Chris: It’s a lot–ok so the question is,
what’s the difference between a brick and mortar company verses a–
I think the term is fluid model? Where you just have a very small core team
of people. Everybody else just works remotely from all
over the world and you manage things remotely. Well, the first thing is–you wanna compare
the benefits and the pros and cons, or just one or the other? Frank: The pros and cons. Chris: Ok pros and cons and you know what
the pros and cons are going to be. Communication is gonna be much more difficult,
you’re gonna spend more time dealing with project management because you gotta get the
assets out to everybody, and not everybody’s working with the same version of software
and not everything’s synced up so you have to figure out some way to manage that. And what are some of the tools that people
use to manage teams across the globe? They might use Trello, they might use Basecamp,
or Slack, there’s a bunch of project management software that’s out there that can help you do that. And they can ever use it to track time, like
time sheets, things of that nature. The benefits are, you get to work with anybody. It’s a higher quality of life for those artists
cause they get to work from home and do whatever they need to do as long as they do the work. It would most likely pay less because you
can work with whoever you want wherever and so you gotta look at in the U.S. or the U.K.
maybe the pound or the dollar is quite high relatively speaking cost of living’s quite
high, and so there are a lot of people in Brazil, amazing artists and animators, some
people in Korea and Japan or wherever else it is, I shouldn’t say Japan. Japan isn’t gonna be cheap. Or in China, in your case and India would
be another place so you can leverage what the local economy is cost of living with the
quality of the artist. Now generally speaking, the best artist do
go to the biggest markets. So they’re gonna come to San Francisco, LA,
New York, the U.K. you know probably London. Wherever the big effects shops are. That’s where they’ll migrate, ok? So you probably will not be getting the same
quality artist that you’re used to seeing here. So more management. Alright, I’m gonna give you one more question
because I think we’re way over time. So what other question do you have? Frank: Um I guess, the last question would
be, what is good company culture and like team building? I feel like you’ve been talking a lot about
management and I feel like the way I have to run this thing it has to be you know digital
where everyone’s scattered, for the initial startup. So how do I manage the team and um you know
get them to feel positive and feel confident in me and themselves to do this work cause
i feel like that’s very important in this kind of upsetting. Chris: Right, so you have multiple time zones
now you’re trying to sync everybody up right? Assuming that they’re not all local to you. So, first of all getting everybody on the
same page is tough. So let me just talk about company culture
first and then we’ll figure out how to do that over distance based operations like this
kind of fluid agency that we’re talking about. Company culture to me is one of the most important
things that you need to focus on as a company. You get it right at the beginning and you
just go from there, ok? So what values are important to you as an
artist because you’ve worked at places where you are an artist and now you’re gonna flip
uh you’re gonna go on the other side of the game, so to speak, you’re gonna go on the
other side of the fence. So now you gotta remember what was important
to you as a person. What attracted you to a place? Now chances are when a freelancer’s out there
or a person who’s kinda considered taking a staff position, they’re looking at everything. They’re looking at how much am I getting paid,
how good is the work that I’m doing, and how do they treat me, and how do they manage their
companies. So very likely you cannot compete on price
or the quality of the project so you gotta focus on the other two components. How do you treat them, how do you manage projects. So that’s your competitive advantage to kind
of level the playing field if you will. Some companies, won’t mention who they are,
they do amazing work. Their company culture is less than desirable
but they can get people to come in because the work is so good, right? So you’ve been there you’ve done that so you
know and so you kind of know what kind of company you want to have. I kind of look at it like this, people that
come into our company whether they are freelance or staff, I wanna make sure that their long
term career is protected and nourished as supposed to just using them up and spitting them out. Because if you go at this kind of rate where
you’re working all day and night, and I’ve done that. I’ve stayed up all night I’ve worked all night
with freelancers before, when the sun’s come up together, right? It takes a toll on you and you can only do
that for a certain period of time. So the idea is that you wanna minimize those
moments when you’re taking those kinds of jobs that require you to do that. Where you’re staying up all night. Something’s telling you it’s wrong. You accepted a job going in knowing, that
there’s not enough time, the job is too big or complicated, and you don’t have a big enough team. So that’s the recipe for burning everybody
out, including yourself. I’ve been doing this now for almost 20 years. I’m as passionate about the work I do today
as the day I first started. Cause I learned how to manage the projects,
my time, and what I put into it. So what else we wanna know about company culture? And if you haven’t done so already, I would
highly recommend, I don’t have the book here. I could go grab it but, Delivering Happiness
by Tony Hsieh. Definitely read that book and Tony Hsieh for
those people who don’t know who he is, he’s the founder of Zappos and he sold his company
for like a billion dollars to Amazon. That’s not an expression. I think it was right around a billion dollars
and he’s selling shoes and he writes about how the margins are so small, the only thing
they have is culture and he’s a big believer in that. So, read that book then come back to me and we’ll talk. Again, if you have questions after you read
that book, Happiness, I’ll provide a link down below to buy the book. Once you guys read it you can post questions
or we can have a little conversation about it. These are two books that I believe are really
important in shaping my thinking about business. First is The Win Without Pitching Manifesto
and the other one the virtual book I’ll hold it up here maybe there will be a graphic that
Aaron can provide for us and it’s called Delivering Happiness by Tony Hsieh. He sold his first company when he was in his
20’s for a couple hundred million dollars so he know’s what he’s doing. Frank: From what I heard he lives at like
a trailer park. Chris: He lives in a trailer park now. Frank: He I was looking at a video of him
like he cherishes experiences and culture more than anything. That’s something I really admire. Chris: So there’s one thing I read about him
recently he says everybody’s talking about work life, balance, to manage those two things. He’s like that’s not his idea right now. His idea is about work life integration. That if your life and your work can be the
same you’re living a pretty good life and you’re working in a pretty cool way, and that’s
why he lives in this park that he’s asked everybody to come out and live next to him. So he’s got a llama living in the desert in
Las Vegas so it’s pretty cool work life integration. Frank: Is that something you– Chris: I’m striving to achieve that same kind of goal. Yeah. Frank: Yeah I mean that’s most questions I have. Chris: Alright. Well guys, thanks for tuning in for another
episode of Ask Me Anything. Thanks for tuning in, see you guys next time. [music]

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100 thoughts on “How to Start & Run a Design Business: Pricing & Estimating Creative Design Jobs

  1. I can't stop looking at the Evan Hecox skateboard and the art piece. The Danny Way AWS board is also great 😀 love the information thank you

  2. Mr. Do, your philosophy in the business of design, inspired us to incorporate. And it works!!! we felt more confident than ever! and can mark up (reasonably) with our clients 🙂 so a massive grateful thank you!

  3. Chris I discovered your channel over a month ago. Since the eye-opening discovery I’ve shared The Futur link with follow designers, as well as, students that I mentor. This is the third time I’ve listened & watched this particular video. I find that all of your videos are loaded with amazing insight; but this video, is a cornucopia of sound wisdom and actionable steps. I will be watching, learning, and sharing as much as possible.

  4. I switched directions in my career at the late age of 51 and graduated with my BFA in Graphic and Web design. These episodes are invaluable to me as a newbie and n the industry and have helped me understand so many concepts and business development standards that I would never acquire on my own with little experience in the field. Chris….you are a Monster speaker! Bringing me all of the pertinent information I need in an innovative and cutting edge format. You are the Man!

  5. I want to start a Web Development business and it would just be me starting out. How do I generate business for myself with out going to a freelancer website?

  6. It takes knowledge and experience to feel more confidence in what you do in that career to explain yourself well and to get your messages across to sell yourself, as you know.

  7. 3 years late but this video is great. I own a construction company but i do design as a hobby, and the business side is just the same.

  8. I don't know if you know this but I think your intro style was stolen by a podcast called RadioLab, just FYI.

  9. Finally got to hear the logic on branding when it comes to a client's value in terms of their return, my gain.

  10. AMAZING!!! Chris, you are such an inspiration! You are an incredible mind. I have learnt so much and I am so grateful for this knowledge going into the freelancing world.

  11. How do you figure out what fair market value is for your services? My business instructor told me to research what designers are charging for their projects. But everywhere I've looked it shows the overall cost of the project and not how much they are charging for their time or materials as a breakdown.

  12. This has helped me a ton, I work in software and I usually underbid on projects, where I end by giving myself a small salary just to keep things running. Now I understand why many of the online calculator nearly take 50% over what I do.

  13. I know this video is almost 3 years old, but as an 18 year old looking to pursue a degree in Visual Communications/Graphic Design, the more videos of yours' that I watch, the more I think I should minor in a business degree.

  14. Chris you really are a pillar of inspiration and motivation to me (clearly you are to thousands of designers & others) but I make sure to watch your videos EVERY SINGLE DAY! Even when im working I have something playing of T.F in the background. I believe even if I am totally focused & in the zone creating something, the words you speak are planting positive creative seeds subconsciously in my mind. I am 70% self taught in design, which includes you & your teams videos..The schooling I did in field of design was many years ago, but I dont believe that matters, if you got it you got it. Creativity comes naturally to me, and ive now been running my own small GD biz for about 2 years! I have a solid base of clients, over half of them are return clients, & then the rest word of mouth, this is my full time gig & I dont pay for any advertising whatsoever. All my reach is organic, & I network with other small biz peeps, it just seems to happen. Always looking for ways to expand & improve my business & services, im obsessed with ideas & implementing them. I am so grateful & blessed to be doing what I LOVE, love doesn't even describe how I feel, im super PASSIONATE & when im having a moment, I look for your videos that pick me up & get me back into the GRIND! Always works! Right now, im under charging for what I offer, my value – so im stepping up my game. Anyway, I know this is an old video back from 2015 but ive watched it twice now & you are just super helpful, knowledgable & smart , dont mean to blow smoke up your arse but just saying it how it is lol 🙂 – ill leave you with a saying of mine, theres prob similar out there but I live by this "Theres no 9 to 5 , late nights & early rise, we grind to thrive " – Loz @ LOZ CHAI DESIGN xx (Australia)

  15. I'm part of a new design company and I am so glad I found this video. I can't thank Chris Do enough for the amazing insights!

  16. Love it, As for the 10% if and when I do make a bid…just restarting this type of business I'm obligated now to pay that 10% but if an when I do. I'm marking that as education/consultation fees. May I also obtain a receipt upon submitting, when I submit 😉

  17. I would love to see an episode on how to deal with being too perfectionistic and how to know when to stop and say something is good enough. Really, you could work on something for ages if you didn't say it's time to stop. Where do you draw that line between balancing time and quality? That is my problem. I take too long and am never really satisfied! I get to a point where I think it's good but I always want to do more.

  18. This video is 3 years old, I would have suggested the guy having a hard time with writing a mission statement, Read Start with WHY then Finding your WHY 🙂
    I'll leave this here just in case someone is similarly struggling with that.

  19. 14:00 A smaller 3d/vfx studio is what you need with an expandable network of artists working remotely, it's the future of vfx and 3d – that's how we roll here and it works very well . You only pay for the artists on board (which could be one guy plus a project manager or 10 guys) and not the MASSIVE building they are all working from. If you need a great 3d and vfx company search for companies that have been in business for over 5 years and are still churning out big brand videos.

  20. Thank you so much Chris for taking the time to teach us about the Business of Design…your lessons are very helpful in my career! I appreciate it very much. Cheers!

  21. Well, I guess this is the video I'm looping for the next year or so. Do you recommend that, as a student, I should start working towards running a business early on? My dad has agreed to help with some of the costs, and he heads a few businesses of his own (in fashion, rather than design). I'm thinking that if the plan includes time to improve my work quality and get a better handle on many sides (business, design, etc.), that I might have a shot at it. The location would be a bit of a commute but my father makes the same hour-long trips every day for his main business. Either way, do you think this is too ambitious? I am at the top of my class with honors, but it's at a "D-school" community college in the middle of nowhere (maybe an F-school, more like) which probably doesn't say a lot. But my plan is to invest in the literature that you and others have recommended and start there.

    P.S. I see that you reply to a lot of the questions and I wanted to thank you. It shows your willingness to help young creatives, which I'm very pleased to see in an age of selfishness and hyper-corporate, cold sales. I know you're running a business but you seem kind-hearted and good. Thanks in advance.

  22. Thank you so much Chris, I loved the bidding table and combining all the costs that I don't usually think of. The idea of what would it cost for someone else to do the work is brilliant – definitely takes me out of the 'do it all myself' model. I loved all these questions and really enjoy the way you succinctly answer them. Thanks heaps!

  23. Is there a video on all the books that have informed or inspired Chris Do out there already? If not, I need them readssss. <3 D

  24. i loved this episode so much. So much of those questions that i have been longing for an answer has been clearly given here. Thank you so much for this. Means a lot

  25. After starting our web/app design business, we found that another company in another country has the same name, now we are looking to change names out of respect, how important is having the .com for a design business? Any feedback will be appreciated

  26. Free advice:
    1) Mic technique (Frank! 🙁 )
    2) Compression (gently)
    3) Post-normalize!

    PS: Only the 1st taste is free 🙂

  27. Just discovered your channel this afternoon, liking what I see.
    Very clear and practical.
    You're like my #DesignSpock or #RateSettingTuvac

  28. Hi..
    I am Manjunath.. now I pursuing final year mechanical engineering degree. I know very good in design softwares like catia, autocad,solid edge, & ansys, cnc programming. Can I start my own Design consultant service business..??
    Please suggest me..

  29. Started pitching $500 websites, after encountering Chris Do, pitched $4.5 and have 3 verbal agreements, plus 2 payments of part of the quotes, for part of the deliverables. Then I pitched $50k for a web app (albeit delivered by a world renowned partner development firm) Nevertheless, the fact that I even had the notion to pull in a superstar partner firm and go for $50k is absolutely a function of Chris Do's transformational education.

  30. Hey, What's up! 2:34AM your videos are keeping me up way past my bedtime, BUT I can't really stop watching – Firstly I'm absolutely in love with the pricing structure of this episode. I've honestly never seen anything like it and I think that there are a number of people out there who have been using this Blueprint to cost their "Build You're Social Media Business" Tutorials which the charge hundreds, if not thousands of dollars for people to enrol in.

    5k to 20k Dollars, let's talk about that.

    Living in South Africa, I think that the only people who have the capacity to charge those amounts are agencies because of the South African, 3rd world mindset (not for long, these are totally going to be my agencies going rates).

    You see I KNOW that in the South African industry, almost everyone I know has adopted the mindset of feeling bad about charging people a fair amount of money because they feel as though the client will not be able to find value in their work. The Truth you're bringing to the table is that YES " by saying NO, you're making room for bigger clients".

    The BIG difference for myself as a creative is without a doubt experience with work which is why I'll be taking the time to go through as much of your content as possible, and creating my own success blueprint which will function within a South African context. It's not that I can't go and start meeting with clients immediately, it's more along the lines of what I've seen so far on Futur. I feel as though I would only be lying to myself if I were to perform strategy for a client BUT I was not up to scratch with my own company strategy.

    I don't want to become a brand who doesn't practise what they preach and I want my clients to see that I am able to perform the services I will be offering them, for myself.

    This will include a Mission Statement (I think that was the first few minutes of the video @ ). I completely agree on how difficult that is, however, I like the value profile model – WHO, WHAT, HOW TO SOLVE.

    Just to clarify on the middle segment – Accounting for error – (@ ) – I have charged somebody (MORE LIKE THEY SIMPLY PAID ME) – R2500 OR about $200 to film for 3 days and perform an edit which took me about 3 months to complete. I have also worked on projects until completion for free with NO way to redeem my earnings from the client. What I've learned, are the different ways it hurts. You see, because I was working at the time I didn't realise just how bad it was, however, I now think more critically about the Freelancer who is sitting at home and will accept minimum pay to perform extraordinary amounts of work because they are desperate for the business.

    I can confidently say that after being a part of the process for a good few videos now (50+), I will NOT be held responsible for the degradation of creatives by reducing my rates & I will inform other creatives of their disservice to the community by undercharging and undervaluing other creatives work during the bidding process, which even I have been guilty of in the past. Little did I know just how shallow minded I was being.

    However, I am older and wiser now. 3:02AM
    I have work in the morning – thank you all for always bringing the STEAK, I will probably be writing one of these long ass comments in one of your videos which I will watch tomorrow.


  31. so so love all your tutorials and classes ( i am on some on your site) – much love from india <3 and both books are gems I refer, and try to implement 🙂 (hopefuly)

  32. Just want to thank you and send some good energy your way, I truly appreciate your insights on the design industry!

  33. Hello The Futur, I know this video was already 3 years ago, but when I saw, watched and understand the thoughts and ideas about your videos, it inspired me to be an artist again as I abandoned it long time ago. To cut it short, may you please help me, or just give me a tip or an idea how to start or become an graphic artist/ freelance/ or to make it as my own business? I just occassionally draw an anime because thats all I know, trying to learn to draw realistic drawings using graphite and charcoal, but I want to have an extra income. I'm a full time barista working more than 12hrs for a coffee shop. I earn a minimal salary here in philippines. I only have a laptop, no graphic tablet, knows a little bit of photoshop, I usually draw using my graphite pencil on a type writting paper because I don't have much money to spend on any materials. May you please tell me what do I need? How to start? When? Do I need grapic tablet? Better computer? What programs do I need? May you please tell me how did you start? Really need info or even just tips? Thanks alot in advance… sorry for my bad english…

  34. Обучаю бесплатно, каким образом легко получать каждый день до 90 долларов на свою карту. Изучите видео на моём кaналe

  35. The best thing I've done for myself is to go back and rewatch some of this content. I was going through a slump and depression was setting in and I remembered days when I was grinding and building and absorbing all this knowledge. Thanks to you and the team for steadily putting out such inspiring and educational content.

  36. LOVE THIS!! Question – do you mark up all subcontractor work on bids like this? And what's the range you usually mark it up?

  37. Hey, where can I the in-depth video about bidding that came out of this? Seriously loving what you guys do btw.

  38. I loved that you connected this with VFX/Film. It would be cool to see talks like this related to this field or Video Games as well.

  39. I guess you can take this bidding model and apply it to a soloprenuer by seeing yourself as the producer, project manager and designer and charging accordingly.

  40. In my country the final product turn outs mediocre and yet most of them expect 145-300% profit (3rd world country indeed)!! 🙁

  41. Do not believe the million dollar client answer, it'll cause a large amount of issues on their part and yours if you tell them to call you whenever they want and then you have to change things up (which can happen depending on how they got their money and how they are deciding to keep their money). They get comfortable with the project early and will have buyers remorse regardless of how much they have because a million dollars is a million dollars, and some millionaires are lotto winners. Be careful of pricing and your time no matter how much they offer.

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