How do I charge for project management?

Question

I run a design small business and I have to take on an creative resource to handle an increased workload from one of my clients. How do I calculate my project management fee?

I estimate I will spend about 25% of time on project management. So, do I add 25%? on top of the hourly rate or the total of my rate + my design resource rate? I've heard varying different methods...

Answer 1

You double your hourly rate and charge for two people. This means that all of your invoices are now double. You detail everything as you did before, but now the client has hired two. It doesn't matter if that person costs you less money, but you're taking a risk if you charge less for that other person's time.

• What happens if that person quits or is fired?
• What happens if they don't have enough skill?
• What happens if you have to work more hours to cover their learning curve?
• What happens if you have to do their work for them?

I know it can seem appealing to bring on someone junior and just adjust what you bill to account for that junior level, but that junior is going to cost you more than what you think. You're going to spend some of your own money (in the form of time) doing training and simply waiting for that person to come up to speed.

Any discount you give a client for your time is just money out of your own pocket.

Answer 2

There are different approaches, you´ll have to decide which one fits you the best (and which you can sell to your client).

1. Subcontract: Just pay your additional designer out of your own pocket and invoice to your client the agreed rate for that kind of work. It does not really matter who did it. There should be a profit out of this to pay for the added overhead and responsibility you take. I think this is the normal standard.

2. Log your managing time and invoice it separately, at an agreed rate.

for instance:

Design             20h x $50 = $1000
Project managemnt   5h x $60 =  $300

This especially if the other designer is invoicing the client himself. The rate does not have to be different, but it could make sense to do it as this kind of service may have different cots and risks attached.

3. You can also agree with your client on a fixed or percentual overhead fee like your suggestion.

In any event, you should log your work and reevaluate after some time if your pricing needs to be adjusted - as always when you do new things.