Survey Profiles: Desktop Service Pricing

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current rates for writing, editing, graphic design, DTP, prepress, multimedia and web design and development

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Survey Profiles:
Desktop Service Pricing

by
Robert C. Brenner, MSEE, MSSM
©1997 Brenner Information Group

A tough market and changing paradigms are reflected in the average revenue and pricing of desktop service according to a survey conducted recently by research and information provider, Brenner Information Group. The intent of the survey was to develop a pricing profile of graphics design, desktop publishing, web publishing, and prepress service companies within the desktop service industry. The results of this extensive data collection effort are reported in the newest update to the Pricing Tables: Desktop Services reference book.
Developing a database of typical and average prices requires extensive research, including the assimilation of thousands of actual price points. To complete this survey, Brenner Information Group collected current pricing data from every source imaginable --- published lists, on-line Web sites, trade forums, magazines, newsletters, journals, and newspapers. Over 60,000 business owners were contacted directly and invited to participate in this comprehensive confidential survey. About 15 percent of those invited actually participated. When they returned their survey responses, many provided pricing tables of competing businesses in their area. Data was also collected through personal interviews with selected shop owners.
Part of the survey effort involved developing a profile of the typical desktop service provider. Most responses came from desktop publishing, web publishing, graphics design and prepress shops. In addition to gathering information on pricing, profile data was collected --- name, telephone, fax and modem numbers, name of phone answering service where necessary, business start date, physical location, hours of operation, company legal structure, gross revenue, services provided, number of employees (full time, part time, and freelance), typical work week, and wages and benefits. We also asked the dollar value of their typical job, and how many jobs of each category they handled in a typical month.
Then we asked for the price being charged for every aspect of desktop service including copy writing, keyboarding, scanning, file conversion, graphic design, layout, animation, morphing, color proofing, imaging, CD-ROM mastering, digital video and audio services, laser, inkjet and imageset printing, and more.
We asked what techniques owners use to generate leads and to rate each method on a scale of 1 to 5 (with 1 the most successful). These included cold calls, direct mail, printed directories, trade shows, display advertising, networking, Web site marketing, and word of mouth referrals.
Our goal is to collect, process, package, and distribute pricing information. As a side benefit, we also want to identify the profile of those businesses that seem most successful. Using statistical analysis, we study the results of each pricing survey (five now) to identify and measure relationships in various business factors and to develop a profile on the similarities and differences between shops earning $100,000 a year and those earning significantly more. Through our efforts, we identified specific factors that distinguish one level of business from another. Knowing these factors can help a business transition to a higher revenue plateau.
For participating in the survey, each respondent was provided results for the areas in which they provided input data. Studying the results of this survey provides an enlightening insight into the "real world" of the desktop service profession today. The published results can also significantly aid an owner in making better marketing and pricing decisions.
Over the past few years the distinction between traditional desktop publishing and prepress has blurred as technology pushed entry fees lower. Today, desktop publishing is integrated into many other businesses (secretarial services, graphic design, advertising, prepress, printing, publishing, etc.). And desktop publishers are also becoming Web publishers as they quickly respond to new opportunities. We adopted the term desktop service to encompass the myriad of disciplines that are merging to form the information service profession of tomorrow. The data in our survey provides a good picture of this evolving industry.
As we sifted through mountains of information, we discovered fascinating things. Although shops operate in every state, most are located in California with the next largest number working out of Florida, New York, Texas and Washington. California leads all other states by at least two-to-one. Studies by other organizations report that graphic design, multimedia and Web service businesses are locating according to similar distribution ratios.
Just as we found in the four previous surveys, there is a wide range in billing rates with the lower prices due to new entrepreneurs entering the desktop service profession without adequate business experience or training. As business knowledge and experience grows, prices typically increase.
During personal interviews with new owners, we are consistently impressed with the backgrounds of those entering the profession. We spoke with engineers, nurses, artists, writers, secretaries, former law enforcement people, and many "corporate types" who left (or were re-structured out of) old careers and joined the world of desktop service. In each case, they perceived their new business as a lower risk, lower stress alternative to their previous career. Although many miss the higher pay and benefits of their previous corporate job, none miss the stress and insecurity of that work environment. And none expressed dissatisfaction for making the change.
While enthusiasm persists among new owners, we found that many lack the business skills to make their shops successful. Many feel helpless when it comes to pricing. Thus they consistently try to undercut any known competitor. Although new shops were not qualified to participate in our survey, their growing numbers suggest that low-price competition is a phenomenon that will persist for some time. Just as in desktop publishing during the first half of this decade, Web service providers today are under-pricing each other as they fight for prime positions on the information data highway.
It's the same for keyboarding, proofing and editing. There's a whole segment of the desktop service industry that consistently under-prices the actual value of their work. These owner-operators are doing themselves and their industry a disservice. Many are barely making minimum wage after deducting expenses and taxes.
To segment the industry population, we classified companies by income --- those making under $100,000 annually (low-end shops), those earning between $100,000 and $500,000 (mid-level) and those earning $500,000 and more each year (high-end shops). Over 65% of the survey population falls into the low-end category. Seven percent declined to provide revenue data.
According to our survey, over 68% of owner-operators began their business since 1988 --- 61% started since 1990. Most conduct business as a sole proprietorship (69%). The number of C corporations declined from 10.7% in the last survey to 7% today. However S corporation membership grew to 17% of the survey population. The number of partnerships (both general and limited) are down slightly at just over seven percent.
Even more of you operate from a home office today (76%) --- up from 63.6% 18 months ago -- showing the trend toward home and mobile work places. The next most popular operating location is a rented office in a business park or building (17%).
Many shops operate with only one or two employees. The average staffing for low-end shops is 0.9 full time, 0.35 part time and 1.0 freelance. When we analyzed staffing in the high end shops, we found an average of 58.9 full time, 3.9 part time and 1.7 freelance.
The ratio of women to men owner-operators has changed with males now commanding 53% of the industry (reversing the ratio in the last survey). Almost 44% of the shops are managed and operated by women, and 3% are operated by couples. Fewer owner-operators are working alone (28%) --- down from 47%, reflecting a trend toward strategic partnerships. Yet, even by themselves, some of these independents are earning over $100,000 a year operating out of a home office or home studio.
As expected, a wide range exists in 1997 gross earnings between those dedicated to the business part time or full time --- from $1,000 a year part time to $31 million a year full time. Most of you earn less than $100,000 annually, although a growing number of shops now earn over a million dollars a year. And almost all of you expect to do even better next year.
It makes little difference where your business is located. There are shops earning over a million dollars a year in both urban and rural areas. Your income potential is primarily dependent on the services sold, the strategy in place and the pricing tactics used.
New owners often take no pay out of the business for the first several years. And a large number of shops don't provide medical or health benefits. Most of you operate full time (40-plus hours a week). But there is a growing segment who work part time (evenings and weekends) suggesting moonlighting jobs with hopes to evolve into full time businesses. We found that low-end shops typically log 40-hour weeks. high-end shop owners tend to work 50 hours a week.
Most business leads still come from word of mouth referrals, with personal networking growing in popularity. Door hangers are again the least successful method of business prospecting. We are finding most desktop service providers opening Web sites to promote and sell their services. And almost all have e-mail addresses reflecting the tsunami of change as our world goes on-line.
Many desktop service providers don't charge all that they could (or should), yet some shops operate efficiently and are highly profitable. We noted a slight shrinking of the price range for desktop publishing services as this industry segment matures, while wide gaps were found between the low and high prices for Web services.
Overall, prices for graphic design and desktop publishing are up since our last survey. The average billing rate for DTP layout went from $44 an hour in December 1995 to $53 an hour today. Web site design was not tracked in late 1995, but the current survey puts this service at $60 an hour nationally. California rates are lower than those in other areas. Hourly rates for multimedia work varied from $30 to $180 an hour, and we found consulting going for over $200 an hour. Audio services go for $80 an hour in California while the national average is over $100 an hour.
Flyer DTP jobs go for between $20 and $400 each, but the most revenue is being generated in Web and multimedia service. Six-page Web sites were priced between $270 and $1,880. And multimedia kiosk projects ranged from $7,000 to $15,500 each.
We found significant difference in how the more successful shops and the "still growing" shops approach customers. Low-end shops focus on attracting new business. High-end shops focus on retaining customers and on getting referrals from satisfied clients.
Developing a strategy with a sound basis for pricing is key to the success of a desktop service company. Smart shop owners can smooth the peaks and valleys of a business cycle with good information and intelligent pricing decisions. Pricing is both an art and a science, but information is what gives you power in business today. Knowing what others charge can make a significant difference in your strategy and tactics, for the profit you earn can be found in the price you charge. So make pricing a pro-active event and maximize your bottom line by reaching for the information that can make the difference. Then set prices to what your market will bear. <Click Here To Order>

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