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Estimating Projects by Long-Term Asset Value

In 1998, I remember catching up with one of my former classmates from college and hearing about their experiences of working at their first design studio as an intern. She related to me the following story (which I hope wasn't mangled by my faulty memory banks):

"All of the designers were really busy, so one of the owners gave me an identity project to work on over a week. I worked on a few concepts, but the one that I was really excited about had the last letter of the logo (a T) working like a construction crane picking up the letter to the left of it.

My boss showed the logos to the client and they immediately fell in love with my favorite. With just a little bit of further work, we delivered the logo and invoiced the client their standard fee for the logo. At the time, it seemed like a robbery for the amount of time I put into it.

My boss was really happy, they didn't have to spend much time art directing me, and they offered me a job when my internship was up."

As I asked her further questions about how the project went, then did the math:

One logo. One intern with minimal oversight. One week. $8,000 flat rate fee for just the mark.

Join Me for AIGA Seattle's "Design Business for Breakfast"

Whether you’re a freelancer, an in-house designer, or working at an agency or studio, you can never know too much about the business side of design. And in today’s tough economy, you need that business edge even more.

In "Design Business for Breakfast," a three-part series presented by AIGA Seattle, David Sherwin of frog design will host professionals from the Seattle design community—each of whom has deep experience in client service, project management, and design studio management. David and his co-presenters will give you a fresh perspective on professional practices and provide you with tips and tools that you can start using right away.

Each month's event will take place at Il Fornaio, Pacific Place, 600 Pine Street, Seattle.

 

Connect With Your Clients
Wednesday, January 13, 2010 | 7:30 - 9 a.m.
How to develop and sustain strong relationships with clients, whether you manage them directly or work through an account manager. Led by Erica Goldsmith, former Account Director at both Hornall Anderson Design Works and Cole and Weber United, and Executive Producer at Worktank.

Registration
Single Event | includes presentation, light breakfast, and materials
AIGA Members: $25 | Register
Nonmembers: $35 | Register

 

Structure Your Projects and Process
Wednesday, February 10, 2010 | 7:30 - 9 a.m.
Heighten your project management skills and build stable business processes that support your creative work. Led by Fiona Robertson Remley, who has built processes and managed projects at many Seattle agencies and corporations, including Worktank, Big Fish Games, Martini Design, Methodologie, Nordstrom, and Microsoft.

Registration
Structure Your Projects and Processes | includes presentation, light breakfast, and materials
AIGA Members: $25 | Register
Nonmembers: $35 | Register

 

Follow the Green
Wednesday, March 10, 2010 | 7:30 - 9 a.m.
Learn how design businesses make money: follow a designer’s earned income for a project, for a month, and over the course of an entire working year. Aimed at working designers and agency professionals. Led by David Conrad, Partner/Studio Director of Design Commission, an interactive design agency in Pioneer Square.

Registration
Follow the Green | includes presentation, light breakfast, and materials
AIGA Members: $25 | Register
Nonmembers: $35 | Register (link coming soon)

 

Full Breakfast Series | all three events
Connect With Your Clients (1/13)
Structure Your Projects and Process (2/10)
and Follow the Green (3/10)

includes presentation, light breakfast, and materials

AIGA Members: $60 | Register
Nonmembers: $90 | Register

How to Estimate Design Projects: Tips from a Pro

Two words that make a designer's ears bleed: "Over budget."

Estimating is the scariest activity that designers manage for themselves or their studios. We are experts at making intuitive design decisions based on qualitative information—but in the rational world of dollars and cents, that same intuition doesn't always make for a better profit margin. We learn (and forget) this, over and over again. I've heard countless designers say to me, "I haven't done this kind of work before. I don't know what to charge. So I just made a guesstimate, and if I go over budget, I'll just eat the difference."

Sadly, "the difference" is not edible. While designers may hate estimating, it's a business skill that you'll need to develop—that is, if you'd like to make some money.

For professional estimating advice, I emailed Fiona Robertson-Remley, a fantastic project management guru I'd worked with at Worktank Brand Storytellers on a wide range of interactive and traditional marketing programs. This is what she had to share on the subject.

Design Business in a Nutshell

Almost two years ago, I wrote these notes to myself—so that I wouldn't forget these key lessons I'd learned about working in the design business.

Not Good Proposals. Great Proposals.

With titanic battles happening nowadays over new business, it's crucial that you craft great proposals to win life-sustaining projects.

Not good. Great.

In the past, I've worked at agencies where proposal writing consisted of creating a laundry list: one final logo in the necessary formats, two rounds of client revisions, and so on. That worked fine when the money was flowing. Nowadays, the cost of entry is higher. Clients look at the deliverables, the price, and then start to haggle without mercy. Maybe that worked a few years ago. Not so much now. If you're bidding on a serious project for a new client, you need something a bit more... thorough. Be prepared to ante up with a great proposal.

Here's what to keep in mind when you write it.

Time Estimating Essentials for Designers

What do designers hate most? Other than improperly kerned type, being grilled by their superiors about why they went over budget on their time estimates.

Design isn't something that can be easily done on a deadline. Ideas come flying at you in the shower, while you're longboarding down Fremont Ave., and sometimes even while you're in a creative brainstorming meeting. Cut me some slack, all right? This is the way I do my best work. Can I skip out of that meeting about the TPS reports?

Yeah, that line of reasoning flies real high when the agency principal pulls you aside and lets you know that your last few projects have been a drag on agency profitability, and as a team you all need to find ways to keep costs down. Is it even possible to change your working methods and try to fit yourself into the narrow boxes you keep getting handed? Or should you start looking for the kinds of agencies and companies that give you more time to do your projects? (Oh, wait... that last one was a trick question.)

The 97% Rule

When I was a designer, as opposed to a design manager that also happens to design things, I would always chuckle inwardly -- in a kindhearted manner -- when my creative director, art director, account manager, copywriter, or CEO would tell me to give 110% on every project.

You'll never hear those words out of my mouth. The concept of giving 110% is misguided, and not just for the illogic of exactly where that extra 10% comes from. (Your sanity?)

It's hard to do your work profitably unless you plan for giving 100%. So I say, limit yourself to 97%. The last 3% isn't the meat and potatoes of the work. It's polish. And it's usually where the profit gets burned up on your job.

Giving of your personal time in a self-sacrificial desire to meet a corporate goal is 110%. But in those circumstances, time is the only thing you have to sacrifice. Time is the easiest commodity to give away, but many agency professionals forget it's also the most valuable. It's much harder to keep things at 97%.

One agency that I worked at would dole out an 110% Award for those who had put the most effort into their job in that month, or demonstrated something that showed they went "above and beyond" the level of service anyone would care to expect. I recall being nominated for said award once because I put together a new business PowerPoint with voiceover over a very long weekend, capped by an overnight and an 8 AM team presentation. Bleary eyed, tired out, they patted me on the back and let me leave a little early so I could sleep it off, then be in bright and early the next morning for the pitch, Round 2. (Ding.)

The same agency noted above would assign us very short timeframes for projects in an attempt to keep the projects profitable. "Go ahead, take as long as you want! But the comps are due in three days." Really, if I gave 110% on this project, I'd need a cot in the corner, a personal chef and masseuse available at all hours, and a Schnapps IV drip. Neither of the three were ever forthcoming.

In those situations, we designers on the creative team banded together and hatched what I can call here, posthumously, the 97% Rule. The rule, put quite simply, was save the polish for the very last moment in the project and only allow yourself a narrow window in which to futz around/clarify any small layout problems. Otherwise you'd be there until 11 PM, kerning merrily away, every single night. That's not sustainable.

You'd think the work would suffer. But it didn't. What suffered was your pride, turning work in for multiple rounds of review without perfecting every last detail of every page. There's nothing that drives us designers more insane than turning something into our client's hands knowing that a few details still aren't right. And knowing that our clients won't know it. Sacrilege.

But when you think about it, giving up control of the microdetails until that last round frees your mind and elevates you to make sure the concept and layout are sound. The designers got strategic very quickly, and knew how to battle for the idea first, the layout second, and the micro-details last.

Thankfully, I've been able to shake this 97% habit at subsequent agencies, where the Ford Factory assembly-line model does not predominate. However, in estimating projects, I had to re-account for those extra hours past concept where we would get out the towels and start polishing the silver to a bright glowing sheen. But certain bread and butter projects just don't require 100%. There's no way anyone will ever know you gave 97%. (Except another designer. So don't put it in your book, okay?)

And the 97% rule doesn't hold up well when you're talking about truly artistic projects. A great idea executed well (at 97% percent) can be trumped by a great idea executed fantastically well, with care and attention to every aspect of its being, right down to how the jute strings are tied on the Japanese binding of the annual report that you had to letterpress-print using only wind power and ink derived from crushed Goji berries...

Designers Hate Estimating, Pt. 3 of 3

In Pt. 1 and Pt. 2 of this series, I shared some of the common variables that designers should take into account to reduce their "cone of uncertainty" when estimating a project.

In this final post, I want to talk about the things that designers often don't quantify when creating an estimate.

Factor: What the client needs, as opposed to what they articulate they need. The client wants a new logo, but that's not the business problem that comes out in your exploratory call or meeting. If you need to reframe the problem for them as part of the process, you need to consider it as a variable and secure more time and money to do that work. The way I couch this to clients is that designers aren't just problem solvers. They also have talents in helping clients to understand their problems, clearly define them, and then solve them. This is our strategic role beyond providing decorative assets.

Factor: How the client will behave through the course of a project, and if that will influence your work. Clients ask designers for references, but it's not always a bad thing to check up on your clients and/or closely observe how they interact with their peers or other vendors. This kind of gut check should govern what kind of buffer or multiplier you apply to your project fee, or whether you wish to engage with them at all. Sometimes you need to say no gracefully.

Factor: Not budgeting for potential failures through the design process. Why do we budget for exactly how long it will take? There should always be contingencies for at least one point of failure. Assume that at least one thing will go wrong, and be prepared for it in advance of it happening.

Factor: Not having an articulated business process that fits another designer. Let's say you're indisposed and you need to pass off your project to another designer. Many designers make the fatal mistake of estimating it to a person as opposed to a role. Don't just say, "It'll take me twenty hours to design this logo." Think about how long would it take any designer to design that logo. Leave room, should you get too busy or need to hire a freelancer, that the project can be covered without losing your shirt on the estimate. This may sound like heresy to some solo-flight designers, but this is what keeps large agencies alive.

Factor: You've never done a specific deliverable before. If a project is outside your realm of expertise, most designers usually assume they'll eat the cost of learning how to do it. This opens up risk from the client's perspective, and also gives them a point of negotiation to have you burn up hours meeting impossible goals. Do your due diligence and consult with one or two colleagues and ask them for advice on how to bid the project. Don't just give it away if you haven't done it before, or let the client know you can be taken advantage of because you're not an expert regarding this one type of deliverable. You should always continue to control the process of the project, follow your established design methods as they apply to the deliverable, and not allow the situation to become a power play.

Designers Hate Estimating, Pt. 2 of 3

In Pt. 1 of this series, I introduced Construx's "cone of uncertainty" and how to narrow the risk in your estimates by determining what unknown variables exist in your project scope.

Let's work through what these variables usually are, and how they can be brought in line in your estimate.

Define the Problem before You Estimate

In your estimate, what you need to demonstrate most is your understanding of the problem. Your approach to how it should be solved would follow, and should always be consistent. As a quick example, let's think through the variables that exist in creating a new logo for a local business.

Many years ago, I would estimate doing a logo by looking back through previous project to see how long it took for a project of a similar type, bash together an estimate based on how long they think it would take, multiply it by 1.3x to give some cushion for contingency, slot in some money for printing costs if they need to create any supporting materials as part of their bid, and send it off to the client.

Today, I focus more closely on what the client needs before I think about how I'm going to create it -- even if I've done a similar type of project for them before. And I charge my client for this extra time spent on the estimate as part of my overhead and creative fee, because they're getting more than just a cost for creating a logo.

Let me try to break it down here.

There's data from your prospective or current client, relating to specific needs out of the project (looking for brand lift, increase in perception, greater sales, etc.), as well as competitive analysis and market research.

There's qualitative information that your client provides in the way of what customers and staffers think about the old logo, which adds up to an impression of why they need a new one. These elements shape up into a business problem, which must then meet your process.

This information can usually be teased out in a single phone call, with some follow-up via email. I recommend making a set of questions you always ask in the exploratory call and keeping them by your phone in case you're surprised by an opportunity.

Have a Consistent Process for Creating the Solution

Within that same exploratory phone call, you should delineate what standard steps the client would take through the project, and what they are given with regard to rounds of review per each deliverable as part of the scope of work. Get that on the table from your very first conversation, so they're aware that they will follow your working process, not vice-versa.

It should go without saying that all of your rounds of review and costs for work outside the scope of the proposal must be in writing to protect your interests. I also recommend providing an hourly estimate of your work for a project, not a flat fee. There is always risk in accepting a flat fee, as it places the onus on you for understanding all the ways a project could go sideways and accounting for them.

There's qualitative information that you control in forming your estimate, such as what kind of creative approach you think you'd take -- but I'd recommend articulating that in your creative brief. I wouldn't recommend writing the brief before getting a signature and a portion of your fee, but I generally have a glimmer of an idea of what approach I'd likely take. This thinking can sometimes provide some color in the estimate, but should never be doled out for free and can sometime be shared anecdotally if the client is looking for a detail to tip the scale in their choice of a designer.

In Part 3 of this series, we'll explore some of the incidental details that many designers overlook when estimating a new project.

Designers Hate Estimating, Pt. 1 of 3

Have you ever met a designer that likes to create time estimates for projects?

The process is fraught with peril no matter how you approach it. Estimate too many hours, the client balks at the price and you need to negotiate to a resolution. Estimate too few hours, the client gladly signs on the dotted line, and you end up taking it in the gut. Hit it bang on the nose once in a blue moon, and take yourself out for a double-tall latte to celebrate, before walking back to the office and rebalancing your books.

Well, I could alleviate some of your estimating stress by telling you that there is no perfect estimate...

...and then raise your blood pressure by venturing that your estimate could deviate as much as four times from your original figures, depending on the scale of the engagement. That is, if you don't properly define what you're delivering, and assess the risks appropriately.

Get out of the "Cone of Uncertainty"

For a quick lesson in estimation, take a page from the software development playbook, which doesn't really differ too much from the large-scale interactive estimation process -- and can be scaled down to apply to most design estimates.

Construx, a well-known software development consultancy here in the Seattle area, has an article on their Web site regarding the "cone of uncertainty" that's essential reading for any designer who is responsible for managing large-scale design engagements.

The "cone of uncertainty" is the zone in any project where a number of interrelated variables -- the details of the work to be done, your process of doing the work, who will be creating the work, etc. -- have not been defined. Any methods of reducing uncertainty can limit "scope creep" (or just plain "lack of scope"), and also create further clarity with your client over shared expectations for the life of the project.

The only way to escape from this scenario is to put all your information out on the table and determine what you don't know -- and get the answers -- before delivering your estimate. That'll be the subject of Part 2.