The AIGA’s propaganda about spec work has generally concentrated on some sort of a Kantian categorical imperative declaring the practice unethical. It’s refreshing to see that the answers in the current discussion on their site tend toward the real argument against spec work—it is a sucker bet. Maybe we should have had this discussion at the conference three years ago in Vegas.
We’ll assume for a moment that a design project is worth $20K in your cost to get the job, design the project, and provide a reasonable profit. Since you’re fair, reasonable, and want to be competitive, you would charge $20K for the work.
Now someone asks you to do all of the (speculative) work of proposal writing PLUS a chunk of the design work. Seeking work and making proposals always involves risk—you are doing a fair amount of work without guarantee that you will ever get paid; that is built into the $20K figure. Let’s assume that marketing (including proposal writing) is half of the cost so the design itself is really worth $10K. In a normal situation you would charge $10K for the design plus another $10K to recoup your marketing costs.
What happens when you do spec design work?
If we assume that spec work doesn’t radically lower your marketing costs, you still need to charge that $10K. You also need to charge $10K if you do the design project. Let’s say that the spec part of the job is half the design. That means that you are betting $5K in value (half of the design part of your price) on getting the job.
Let’s say that there are six designers (including you) that are doing the spec work. That means that, assuming the potential client has chosen similar firms, your chance is 1:6. For even odds on a 1:6 bet you need a 6x payoff. (If I put five black marbles and a white marble in a bag and asked you to bet a dollar on reaching in and pulling out a white marble in one try, what should your payoff be if you’re successful?) Since you’ve bet $5K in value, you’d need at least a potential $30K payoff for this to be anything other than a sucker bet.
In my scenario, your price for the $20K design job needs to be $10K marketing + $30K for the payoff of the $5K bet you made + $5K for the fair value of the remainder of the work so if you take the bet on a $20K design job you need to get paid $45K for it to be an even bet.
But spec work got you the job that you wouldn’t have had anyway? Let’s assume people are calling you begging you to do spec jobs and you have all of your proposals pre-written for every sort of job so you have NO marketing costs. (Yeah. Sure.) You’d still have to be charging $35K for the $20K job. Do you think the spec’mongers are going to pay that?
Plug in your own costs. Whatever they are, if you do spec work at normal rates (and your normal rates are not an amazing complete rip-off) you’re invited over to my house Saturday night for a friendly game of chance. My retirement fund could use the help of a few suckers like you.