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Hourly Rate and Commission pricing

Since this community is also for dicussing artistic business transactions (and partially to mitigate a recent post pointing to a guy who has ....hmmm... not the best intentions on hiring), I dusted off an old post from my personal LJ to share with you. I think it's quite informative for someone who is/wants to be/will be self-employed.

(Originally posted back in January of 2009. I graduated in December and managed to get a great job early this year.)

One of my classes this semester (and I'm doing these backwards a bit, so the info is really more pertinent to those of my classmates who are planning to graduate this May) is called "Shop Management Practices." Basically, it's "how to run an instrument repair shop" and deals with everything from MSDS sheets to basic accounting.


On Friday we discussed the idea of figuring out what your "hourly shop rate" needs to be. In Band Instrument Repair an hourly shop rate of $40.00 is considered about average, based on location. Ahhh, but how does one figure this out?

It's a very simple basic formula: Total expenses / Hours worked = Hourly Shop Rate

Let's take a look...

First and foremost, figure out YOUR ANNUAL SALARY (as in, a reasonable salary to keep your lifestyle). Let's say $36,000 per year. That divides up quite neatly. So, per month, you need $3,000.

On a sheet of paper, list your *monthly* expenses. This includes (but is not limited to):

- salary (mentioned above)
- rent (if you have a shop, as opposed to working from home)
- utilities
- cost of supplies (not JUST art supplies, but also things like staplers, printer ink, mailing envelopes, stamps, etc. Don't be stingy with this list as your supplies are the basic core of your revolving expenses.)
- taxes (sales tax, business tax, etc. Check with your local rep. to see what applies to you)
- vehicle expenses (Gov't rate is $0.42 per mile, which is pretty accurate to include fuel, basic maintenance, etc. Calculate how many miles per month you think you'll drive that's business related, and that includes supply runs!)
- insurance (especially if you're working with expensive items)
- legal (a very good idea if you might be dealing with art theft and copyright violation)
- advertising (this includes attending cons and keeping a website, not JUST your traditional advertising mediums)
- investments and expansion (Ooh, I know I'll need to buy this really expensive airbrush if I want to start doing -insert art style here-.)

I'm sure there's more, but I honestly can't remember it all. We had an amazing checklist in class.

Okay, once you figure out your monthly expenses, look at how many hours you will devote to working. Your basic 9 to 5 job is considered 40 hours per week. Multiply that by 4 to get 160 working hours per month. Now, I'm going to pull a monthly "total expenses" number out of thin air to demonstrate. Let's say $4200.

You divide $4200 by 160 and get $26.25. THIS is what you *should* be earning per hour of work.

So we're done, right? Noooo..... How do you KNOW this is what you're earning? Let's take a look. (I have NO idea what you guys really make, so please don't kill me for my made-up numbers, okay?)

Let's say "Artguru" has her own business and primarily does commissions. For the month of January, she takes in $400 in week 1 with pre-con badge orders. Week 2 sees an additional $520 with one or two large commissions. Week 3 is the con and she does well, bringing in $1200. Week 4 dips down to a rather sad $380. "Artguru" is very good about setting work hours and averages 40 hours per week. (Again, I'm just using these numbers as an example!)

So, 400+520+1200+380 = $2500 With monthly expenses at $4200, she's not making enough to support her business. Her "shop efficiency" is at about 60% which means she's making a little less than $16 per hour. (actual / proposed or 2500 / 4200). Most shops can survive at 75-80%. 100% is theoretical... ya gotta go to the bathroom sometime!

What can we do? Well, if "Artguru" wants to support herself, she can do one of two things. She can work longer hours to make up for the lack of income, OR she can charge more on commissions and prints. If she were to work longer hours, she would have to work (theoretically) 40% more to make up the difference. That means, her 8-hour day just became an 11+ hour day. Yikes!

Might be better to charge more. How do we figure that? Well, right now she's making about $16 per hour when she needs to make $26 (yes, I pulled out the fractions, don't kill me. XD )

This is where I become hazy in my remembering.... so I'm going to *realllly* compress things. I'm also going to "dumb it down" a bit so my brain doesn't explode from math overload!

Let's take a look at commissions. "Artguru" has several levels of commission. The most popular are her con badges which she currently charges $20 for a full-color badge. On average, she can crank out six badges per work day. This means it takes about 1 hour and 20 minutes per badge on average. To keep her business afloat, she needs to charge around $34 per badge, keeping her $26/hour workrate. Larger, more time-intensive commissions will also need to be progressively more expensive. However, as she works on commission (no pun intended) and doesn't see the full amount until completion for the larger works, how does she stay afloat?

Simple. (Kind of) Keep a rotating roster of quick and time-intensive jobs so that you can balance out your payments as well as keeping your mind fresh with new material. Build this rotation into your "finish date" on your contracts so that you're not rushing to complete a HUGE job at the last minute. If it takes 50 hours to paint a large piece and you know you need to do 3 con badges a day to keep money circulating, then factor in that you can reasonably expect to put only 4 hours a working day into that large commission... meaning it would take nearly three weeks to complete.

By including your salary into the equation of expenses, you should be able to keep a reasonable supply of cash in your personal account to tide you through lean times. Mind you, your shop rate is an INTERNAL number, and is NOT the customer's business to know.

This is just a basic intro to shop practices. I have not factored in things like reputation or location, so also please bear this in mind. I hope it helps! Comments are encouraged.

Also crossposted to my personal LJ from a looong time ago.

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Artist's beware has moved!
Do NOT repost your old bewares. They are being archived.


( 40 comments — Leave a comment )
Aug. 11th, 2010 01:43 am (UTC)
This is a good post! I've added it to my LJ memories because sometimes I could really use a quick math refresher when I'm going over my price lists.
Aug. 11th, 2010 02:23 am (UTC)
Sure thing! I'm glad it's a help.
Aug. 11th, 2010 01:46 am (UTC)
Very interesting!

Might I suggest also posting this on the FulltimeFurs LJ community? People often have questions on how to price their work. This cleared up a lot of things for me, and I could imagine it helping others, too!
Aug. 11th, 2010 02:24 am (UTC)
I'm not a member of that community, but you're more than welcome to repost this as it originally appeared in my personal LJ. :-)
Aug. 11th, 2010 01:50 am (UTC)
This is pretty darn good. :)

Though I should say that this kind of logic really only applies to people who are making living income, and who are experienced. Beginners starting out really shouldn't expect a professional living wage from their commissions right off the bat.
Aug. 11th, 2010 02:01 am (UTC)
(no subject) - tyrrlin - Aug. 11th, 2010 02:27 am (UTC) - Expand
(no subject) - spiffystuff - Aug. 11th, 2010 02:41 am (UTC) - Expand
Aug. 11th, 2010 01:57 am (UTC)
Good advice! There's a lot more thought and number-crunching that goes into freelancing as your sole source of income than most people want to do.

Not so much relevant to this community, but I saw the $40/hr thing and wondered why I was going into vet tech instead of instrument repair :p.
Aug. 11th, 2010 02:30 am (UTC)
*chuckles* Ah, but that's the SHOP rate, not what the tech makes. A self-employed tech would have their salary figured into that rate, but a fair bit of that rate goes towards supplies and essentials (like store rent).

Though there are SOME techs that can demand (and get) that rate, or higher, just like there are artists who can charge whatever they want, yanno?
(no subject) - dinogrrl - Aug. 11th, 2010 02:38 am (UTC) - Expand
(no subject) - tyrrlin - Aug. 11th, 2010 02:44 am (UTC) - Expand
Aug. 11th, 2010 02:09 am (UTC)
I think also you should put in a misc for expenses, as there is on occasion those sneaky lil things that pop up and bite you in the bum. Like if you start a business here in Australia you have to obtain a ABN number and take into account our GST =\ that you have to pay to the gov when tax time rolls around.

Also a few people I know who are starting a business within the "art" industry have worked at a lose for a while before they are able to take a "wage" from the business.
Aug. 11th, 2010 02:33 am (UTC)

My post was intended more as a guideline, rather than the end-all be-all of wage determination. I did leave quite a bit out as, at the time, I had forgotten to bring home my notes, and now I can't locate my binders. >.>

So, yeah... nearly all businesses operate at a loss when they start out. It's essential to have a cushion of several months' expenses saved away to cover costs until one can earn a profit.
(no subject) - frazzled_niya - Aug. 11th, 2010 02:41 am (UTC) - Expand
(no subject) - silverfalln - Aug. 11th, 2010 02:49 am (UTC) - Expand
(no subject) - silverfalln - Aug. 11th, 2010 02:50 am (UTC) - Expand
(no subject) - tyrrlin - Aug. 12th, 2010 12:42 am (UTC) - Expand
(no subject) - silverfalln - Aug. 12th, 2010 12:57 am (UTC) - Expand
Aug. 11th, 2010 02:13 am (UTC)
Very well put and accurate, and especially helpful to those going into industry work. Now if only I could get someone to pay a fourth the hourly wage I should be charging.
Aug. 11th, 2010 02:34 am (UTC)
*chuckles* Therein lies the rub. One of the many reasons I signed up to work at an established shop rather than trying to start my own business.
Aug. 11th, 2010 02:18 am (UTC)
$40 an hour?? I am in the wrong line of work. :T Anyway, this is a nice article... I really wish I paid more attention in my professional studies class in school.

It's too bad that most commissioners probably don't think of paying for artwork at an hourly rate. It's not like you can keep track of the artist's hours. When it comes down to the numbers, I think people will go with what's cheaper and not really consider the reasons behind the prices. Sometimes I'm a little bothered by advertisements that include the reason the artist needs money... whether you need it to pay hospital bills or just to go see a movie, it shouldn't give you an edge over someone else.

I've got a lot of rhetorical questions coming up from this... I know you didn't factor in location, but does this meant that if you're living somewhere with a higher living cost (say, California), you have a right to charge higher? With any other business this makes perfect sense, but somehow with art I can see people being offended.

I also heard from a commissioner once that it makes sense to charge more if you have a degree. After all, you spent money and time on a degree, and it should factor into your prices. Any other industry would do this (and it's the reason I have a hard time finding minimum wage jobs most likely, because no one wants to pay me more for the same job just because I have a degree). But I don't think I've ever seen anyone mention it. In fact I'm under the impression that most freelance artists, particularly in the furry community, are hobbyists or self-taught with no particular qualification. What always seems to matter more is the quality of the work.

Sorry to go on about nothing like this, just thinking aloud. 8T
Aug. 11th, 2010 02:39 am (UTC)
No worries! (And like I said above, $40/hr is a shop rate, not the tech's pay)

As for keeping track of hours, when I do refurb work for another ...business... that sends us their stuff, I have to keep track of how long I worked on each instrument, as well as the specific work I performed. I use the stopwatch on my digital watch and keep a scratch/check pad next to my work area to keep a list of repairs done. It takes some extra time, but is well worth it when necessary.

And yes, a degree can mean you can ask for more compensation. ...usually. :-)
(no subject) - tigrin - Aug. 11th, 2010 03:06 am (UTC) - Expand
(no subject) - martes - Aug. 11th, 2010 03:11 am (UTC) - Expand
Aug. 11th, 2010 03:47 am (UTC)
This is made of awesome. A friend and I are setting up a little costuming business on the side (because she is AMAZING at costuming) and we've had talks about how to figure these things out, but... we really didn't have any idea what we're talking about. XD

Thanks so much for this. For real.
Aug. 12th, 2010 12:44 am (UTC)
You're quite welcome! I'm glad this post is helpful! :-)
Aug. 11th, 2010 06:08 am (UTC)
About those taxes
Put that higher up on the priority list, if one is in the US. The IRS takes a very dim view of folks who neglect to report (and pay taxes for) their incomes. They're also not too pleased with folks who do report their earnings but fail to pay the taxes owed on them... (says the woman who just paid off her taxes from 2001, 2002 and 2003, yesterday)
Aug. 12th, 2010 12:45 am (UTC)
Re: About those taxes
Oh yes. Taxes for the self-employed can be brutal. I'm not too up on my taxes since my dad works for H&R block and I get a discount.
Aug. 11th, 2010 06:10 am (UTC)
Honestly, this confuses me. D: But I'm not a math-head in the least.

I wish we didn't HAVE to factor in reputation. I'm so sick of seeing people I honestly know I have more talent than raking in the cash for low-quality crap, just because they run a webcomic or something. -_-'
Aug. 11th, 2010 06:27 am (UTC)
I wish we didn't HAVE to factor in reputation. I'm so sick of seeing people I honestly know I have more talent than raking in the cash for low-quality crap, just because they run a webcomic or something. -_-'

I hear you! PREACH IT sister. I am so sick of seeing people who draw stick figures raking in enough money to live a nice cushy lifestyle on their art alone while I am making $800/month as an EDUCATOR and struggling to get the few commissions a year that I do.
(no subject) - greenreaper - Aug. 11th, 2010 06:29 am (UTC) - Expand
Aug. 11th, 2010 06:25 am (UTC)
Bookmarking for future ref when I'm popular enough to execute such ideas. As an educator I make about $800 a month. As an artist I get maybe 1 to 10 commissions a YEAR. I cannot afford to think so high as this post yet, lol. But for the more popular artists it certainly is a helpful post and I thank you for posting!
Aug. 12th, 2010 12:32 am (UTC)
You're quite welcome, and I'm glad it's helpful! :-)
(Deleted comment)
Aug. 12th, 2010 12:34 am (UTC)
Your comment was one of the ones that spurred me to repost this here. :-)

If someone does create a wiki, they're perfectly welcome to repost this. All I ask is to get credit for typing it out as it took a LONG time to put this post together.

Aug. 12th, 2010 03:17 am (UTC)
This equation doesn't work for furry
I hope you aren't sincerely encouraging people to try to make a living off of selling art to the furry fandom, because quite frankly the demographics and market only support the outline you proposed for maybe the top 50 artists, if even that, in what is already a heavily saturated market.

I said it in another thread and I'll say it in this one, furry is primarily a sexual fetish genre whose demographic is largely in the 16-24 age range. Most are low-wage hourly workers or salaried employees in entry-level jobs, if even that. Hell, I bet the number of furries who make more than $20/hr is below a thousand. What you are proposing would easily require triple digit commission prices for something more than a simple badge (unless you can really crank out the art). And yes, I know some will howl that furry artists are not being paid enough, but look at the demographics and do the math yourself.

I mean I don't want to piss on anyone's parade, but you need to be realistic. Doing furry work is good for making some scratch on the side, but if you are going to do art for a living, you are going to have to go where the money is. The money is certainly not going to be found in an already over saturated niche fetish genre, that is for sure.
Aug. 12th, 2010 03:25 am (UTC)
Re: This equation doesn't work for furry
I want to add: I know this isn't a furry community per se, but I think we all know the reality.
Re: This equation doesn't work for furry - tyrrlin - Aug. 12th, 2010 03:48 am (UTC) - Expand
Re: This equation doesn't work for furry - cissa - Aug. 15th, 2010 09:11 pm (UTC) - Expand
Re: This equation doesn't work for furry - tyrrlin - Aug. 16th, 2010 01:51 am (UTC) - Expand
( 40 comments — Leave a comment )


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