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Spec Work Arithmetic
By Gunnar Swanson.

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.

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ARCHIVE ID 1804 FILED UNDER Business Articles (Admin use only)
PUBLISHED ON Jan.31.2004 BY Speak Up
WITH 20 COMMENTS
Comments
hildebrant’s comment is:

I enjoyed the 'betting angle' on this age old topic.

On Feb.03.2004 at 01:49 AM
marian’s comment is:

I love this. A simple letter of explanation with this formula written in as a cost estimate would be great to submit instead of a proposal or spec work to anyone who requested it.

On Feb.03.2004 at 01:58 PM
Phil Beresford’s comment is:

I just use an imaginary wheel (ala wheel of fortune style, clicking noise and all) that I spin to randomly generate my costs. AFAIK I'm not the only designer/company using this method LOL :D

On Feb.03.2004 at 07:51 PM
Nathaniel Bolton’s comment is:

Well put. Now how do you get spec-workers to read this? Oh, I know! Post it on Craigs List. That seems to be where all the designers who like to rip themselves off hang out.

On Feb.03.2004 at 08:23 PM
Leslie’s comment is:

I also agree with the article--the fact that spec work is a sucker's bet. Besides the fact that you have a 1:6 chance of winning the contract it is doubtful that all the hard work you put into the design project you lost to a competitor would ever be useful for another paying design contract.

I also think the kind of people that would have the audacity to ask a designer to do work for free up front would try to negotiate for a lower fee than originally agreed upon once the designer "wins" the contract. And of course, because the designer has but so much work into it they feel like they can't walk away.

I have been asked to do spec work several times and have always declined for the above reasons.

On Feb.10.2004 at 08:14 PM
JonSel’s comment is:

My simple argument against spec work has always been this: you would never ask a doctor or a lawyer or a plumber to perform their services for free. Asking for spec work means that the potential client values its own business interests but does not respect others'. Now, someone might say, "Well, lawyers work for contingency fees." Yes, they do, but they have a vested interest in the outcome. If they win, they take 33% of the financial award. And they don't have four other lawyers trying the same case to see who gets the biggest jury award.

On Feb.11.2004 at 12:23 AM
graham’s comment is:

too much stuff on here at the moment founded on the assumptions that everyone works in the same way and that all jobs are the same (founded on the assumption that everyone should work in the same way/all jobs should be regulated to be the same?)

this quote from the article-'Seeking work and making proposals always involves risk—you are doing a fair amount of work without guarantee that you will ever get paid'-applies to every job. do you walk into a sushi restaurant and ask for fish and chips? bleating about entitlement, the culture of fear. that's all that seems to be driving these practice/theory threads at the moment. meanwhile, life is passing by. expectations? i expect i'll die. that's it.

you either want to do it (any job, spec or otherwise) or you don't. you say yes or no. how does one ever actually 'lose'? really? (obviously barring everything going pear-shaped).

i'm not nor did i want to be a doctor or a lawyer or a plumber. why do you want one thing to be something else?

respect is yours to give, not to expect in return.

On Feb.11.2004 at 03:49 AM
Gunnar Swanson’s comment is:

I don’t think it’s inherently disrespectful to suggest any particular business model. Song writers collect residuals. Painters work up front and then look for a customer. Clothing stores buy stuff in hope that someone will pay more later. . . Most people don’t think about how other people actually make a living and I don’t know why they should care.

I once offered a new client a choice between an hourly rate or a flat fee. He suggested the hourly rate with a cap of the flat fee. I told him that I wasn’t interested in that because I’d lose either way. He said “I wouldn’t have gone for it if I were you but it’s my job to ask.” Not only was he right (it was his job to negotiate the best deal for his company) but I’m certain that if I’d gone for his suggestion we wouldn’t have had as good of a working relationship. Why would he take advice from someone that stupid?

I’ve come to the conclusion that most graphic designers don’t understand their own business models. I’m no paragon of business planning but most graphic design businesses are, as Dubbya’s crew would say, faith-based initiatives.

I suspect that many (most?) people who say “Do this one cheap/free/on spec/whatever and we’ll have plenty of work for you later” aren’t deliberately lying. Since it is their job to negotiate the best deal for their company one has to wonder why they’d give you a big break next time (as implied by the “plenty of work for you later” part.)

On Feb.24.2004 at 12:38 PM
graham’s comment is:

"I don’t think it’s inherently disrespectful to suggest any particular business model"

not sure if this was in response to my last comment, but i was rather speaking to the sense i get that graphic designers seem to expect respect no matter what, and seem very loath to give it out. 'respect is yours (i.e. ones) to give, not expect in return' is how i feel about the idea of respect. if it wasn't in response to that, then i'll get my coat.

i've always been awestruck that anyone would actually believe the 'we'll give you big buck work later, we promise' approach; if you don't believe it, things go a lot more smoothly.

On Feb.24.2004 at 12:59 PM
kev leonard’s comment is:

spec work is a lose-loose situation any way you look at it for the designer even if you get the work. the potential client gets you to do the work on spec. if the job is awarded to you, how then do you make a profit?

also, in doing any spec, any respect you may have gained from that client--going forward--is immediately washed right down the crapper.

not to mention (because a lot of work some designer get is word of mouth) that the client will go around telling all of his client friends that YOU do work on spec. does any respectable firm need that kind of reputation? i think not.

On Feb.25.2004 at 02:38 PM
Colleen Doering’s comment is:

Great thoughts! Now if we could just get someone to stick up to one of those new, popular "contest" sites (a.k.a. spec work sites). I tried to address the fact that they were thinly vieled spec work sites in a public forum, and was ripped to shreds. I wish I didn't think that the growing number of these spec sites indicated that the writing was on the wall for our industry, and that spec work will be required for anyone who wants to compete in the future. Maybe I'm being overly pessimistic, but these sites are HUGELY popular and growing like weeds. Plus, they fight mean so no one wants to take them on.

On Apr.17.2004 at 12:30 PM
Michael Browers’s comment is:

Spec work diminishes value of the end product as well as perceived value by the client. Starting the design process after approval of a proposal increases organic and interactive experiences with the client and enhances the completed project’s effectiveness. Such a process also increases the client's stake in the final outcome by making sure they participate in the process.

On Apr.20.2004 at 08:56 PM
Linda Cooper Bowen’s comment is:

Perhaps this may be the basis for a new reality show like HGTV's "Designer's Challenge"...!

3 graphic designers would interview the prospective client, design the job and let the client choose. Simplistic as these shows may be, they are instrumental in educating clients and viewers about the process. Most people who are not designers have no idea what is involved in creating a new logo, package, web site etc.

Spec work is a dreaded prospect, humiliating, often, (as described) a losing proposition, but I have met with some of the biggest firms who admit to doing it . They say, "We never do spec work...unless we really want the project."!

On May.13.2004 at 08:49 AM
David Weinberger’s comment is:

Check this out. I am very impressed with this brave stand against spec work. Great job, GDC.

Here is the article.

On May.14.2004 at 03:03 PM
Armin’s comment is:

> The news conference was interrupted by Matthew Warburton, the president of the designers' society

Yeah, I can totally picture Matt doing that…

Lea Alcantara — proud Canadian — just sent me a related article. Bonus: image of Matt.

On May.14.2004 at 03:13 PM
Armin’s comment is:

News spreads fast in blogland — from a typophile post: submit a letter to the VANOC supporting the GDC.

On May.14.2004 at 03:31 PM
David Weinberger’s comment is:

I didn't copy Armin, I promise. Just saw it in the news.

On May.14.2004 at 04:09 PM
Joy’s comment is:

"bleating about entitlement, the culture of fear. that's all that seems to be driving these practice/theory threads at the moment. meanwhile, life is passing by."

I agree with Graham... I mean there's a lot of sentiments that can be said for being anti-spec, but sentiments are not what the world is based on. I think the more you believe that rules are based on your own sentiments and think that they should be "givens", the more you lower the bar for how much fear you can tolerate.

On May.14.2004 at 06:37 PM
JonSel’s comment is:

Check this out. I am very impressed with this brave stand against spec work. Great job, GDC.

In the article, John Furlong, the CEO of the Vancouver games committee, says, "I would like to think that this is something [designers] want to do for the country." I'd be very interested to know if he is a salaried employee of VANOC. I'd think running an Olympic organization is something he'd be "very honored" to do, and therefore be willing to forgo his customary wages. It seems like words like "prestige" and "glory" are always being waved in designers' faces when it comes to spec work. Yes, the honor is all mine, I'm sure. Do they not feel 2-3 weeks worth of time necessary to create an Olympic identity is worth being compensated? I will never understand this attitude.

On May.14.2004 at 08:35 PM
Lee Makiyama’s comment is:

I think this all stems from the fact that graphic design and corporate identity still is - with certain extent of justification - still considered to be a generic commodity by certain clients: "If you don't do it for free, then there are hordes of people willing to do it for this rate/risk." -- One can easily draw an parallel to the situation of commercial photography. Clients see the necessity of their services, which by no means equal willingness to pay. Hence, in a choice between an internationally renowned photographer A and mediocre photographer B, they tend to choose B, how little the difference in cost may be. I think everyone recognise this scenario. Sadly enough, this also applies in the choice of any consultants in design.

Having said this, I don't think you should take on the clichéd view, that clients are ignorant, too many students are graduating from design schools etc. Have you/we considered for a moment that it may be the consultants job, regardless of trade, ie your job to prove your value added for the client? Most buyers are intelligent, (overly) rational creatures - and consumers. They are not going to spend a 100K of their budget unless it's going to give them at least the same amount of gain/value back, however abstract and intangible the deliverables may be. Designers who usually are convinced of the value of their work in monetary terms, do nothing proving it to the client - in same terms.

I think this, more than anything, has created a economy where designers are price takers, ie his or her fee is what's offered.

On May.23.2004 at 11:28 AM