Pricing your skills in the art and culture sectors
Pricing your skills, product or copyrights you transfer to clients is challenging. It requires you to look at things from many perspectives, particularly when you are pricing your first service.
Some say that pricing gets easier with time, but pricing products and services always requires updating and constant thought. The grounds for your pricing will also change over time, as your competence will expand, your brand will grow stronger and your knowledge base will develop.
The point of pricing is to give you compensation for your work that allows you do to work happily, with passion and consideration for clients’ wishes. The skills and expertise you accrue over the years affect your pricing and income generation. What is more, in the art and culture sectors we cannot really speak simply of pricing but rather of income generation, as professionals’ total incomes come from many sources.
To understand your own income generation, you need to examine your work from a pricing perspective at the annual, monthly, weekly, daily and hourly levels. Every profession has its own distinct characteristics, but by looking at larger entities you can reach a better result.
Pricing and long-term planning also help you cope better at work and achieve a more predictable livelihood. You have to understand the extent of your time commitments, the kind of assignments you are able to complete and how you structure your working time. Without these basics, you cannot price your work.
Principles of income generation
When thinking about how your income is generated, the most important thing is to clarify for yourself the kind of jobs you’re ready to take on. What kind of professional skill does your portfolio contain? Are you a trainer, teacher, producer, consultant, workshop facilitator, artist, writer, a visual arts service manager or an illustrator? It’s impossible for your client to know what you do unless you yourself say it.
To get a floor for your pricing, calculate the costs of doing your work. This could mean your monthly outlay on a studio, software, materials, equipment and other work expenses. Even if you’re not an independent business owner, you have to know these numbers and factor them into your pricing. You also have to be able to break your costs down into parts to make unit pricing easier.
You should focus on earning money primarily as either an entrepreneur or an employee, as that will help you forecast your income flow better. By focusing on one or the other you also affect the amount of time you are at work each month, which is relevant for things such as unemployment benefit.
Note that salary consists of three expenses: the salary and personal bonus; holiday compensation and holiday pay; and employer’s overheads. These all have to be taken into account, including when you pay yourself salary.
Let’s take the minimum salary recommendation issued by the Art and Culture Professionals’ Trade Union TAKU, which is part of Akava Special Branches, as the basis for an entrepreneur’s or freelancer’s pricing. That gives us a good overview of what pricing should consider. Click here for salary recommendations.
Example of a cultural producer working in the private sector and living in the capital region:
Target monthly salary is €3,200.
Employer’s overheads are 35%, including salary overheads and holiday pay. So, 3,200 * 0.35 = 1,120 (these expenses are roughly the same in all types of companies).
Fixed work expenses €500.
As a freelancer or entrepreneur, you cannot work 24/7, so let’s estimate that you should be paying yourself 10 months out of 12.
There are 22 workdays in a month. You do billable work for 4 hours a day.
Billable hourly rate: (3200+1120+500)*12/10/22/4 = €66 + added value of your personal expertise. In this example, the billable hourly rate would be €70/h + VAT 24%.
Incomes from many different sources
A challenge the art and culture sector faces is forming the vocabulary to talk about income generation. Talking about salary alone does not match all professionals’ situations. In addition to salary, the famously diverse artist or cultural professionals may often have grants, royalties and honoraria they invoice as if they were business owners.
A freelancer’s annual income will often consist of piecemeal projects, commissions and grants. The available working hours annually could be the 22*10*4= 880 from the example above.
When calculating how income is generated, different portions have different weights from year to year. If you are awarded a six-month grant, that will affect what other commissions you can take on during the year.
The general price level also affects pricing. Clients are ready to pay for a service when they know what service you’re offering. When you’ve thought your pricing through, you’re not going to struggle to think every time whether you’re doing a job for too little or even if it’s worth accepting. Consider that clients pay not just for the completed work but also the creative process, breaks and your occupational welfare.
As I wrote above, incomes in creative sectors often consist of many different sources. It’s worth calculating an hourly rate for your expertise that you use either when invoicing as a business or as an hourly wage to use when you’re asked for your salary expectations.
When you have defined your hourly rate, you can take the next step in pricing. That’s being able to use your hourly rate to calculate the price of your products, allowing you to productize new service packages.
Text: Annukka Ketola, CEO at Kallo, who has 10 years’ experience as an entrepreneur and helped numerous creative professionals develop their businesses.