Andrew Hyde lives in Boulder, Colorado and travels frequently.

The Economics Of Spec Work

Jeremiah Owayg wrote a post about spec work, and in a comment I asserted that spec work leads to theft.

I’m curious if I am right about this, so let’s put the numbers out there:

$3000 for a laptop (could be cheaper, but assuming a MacBook Pro, which I am typing this on)
$1700 for Creative Suite 4
$400 for fonts, $40-$80 for additional fonts

So my ‘let’s get to step 1’ costs are $5100.  I am sure you could legally go cheaper, or more expensive (my base setup was around $8000).

If I went back to my design freelancing, it would take me a month to cover all the costs.

If I did it with spec work sites, let’s see how long it would take me:

If I did 30 projects a month (a logo a day), and was able to win an unusually large percentage of them (40%), I would get $3600 for the month.  More realistically an average spec designer will see 4%-10%, or   $360-$900, taking 14 or  6 months to pay off just the hard cost, not including rent, food, etc.

If spec was an accepted practice, the going rate for design would go down, and so would the average amount a designer can pay for software and fonts.

But that won’t lead to piracy, according to the spec work zealots.

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Comments

12 responses to “The Economics Of Spec Work”

  1. Bruce Avatar
    Bruce

    While I don't generally disagree with you about spec work, I think your economics are a bit lopsided.

    If you're a starting designer, you're probably not going totally high end for all your kit. If I want to make deliveries, I'm not starting off by going to the Mercedes dealer and getting one of their trucks. In the same light, you can get a used laptop and either academic licensing or open source comparable versions of necessary software. It might not be the prettiest or most efficient, but it'll get you there.

    Of course, I personally think most people will go for pirated versions of software and then possibly legitimize later when you can afford it… not that I'm speaking from personal experience or anything.

  2. andrewhyde Avatar
    andrewhyde

    After a certain point you were able to be paid higher, which you used to pay for the licenses.

    If spec work was standard, you would have never been able to make that jump, which is my fear.

  3. Shannon Clark Avatar
    Shannon Clark

    Seems to me that expecting to pay off your startup costs/tool costs in a month, while ideal, is not how most people would deal with it (or should in many respects).

    i.e. it is by no means impossible to plan on financing at least the computer (and perhaps the main software license) so say out of pocket costs of font packages ($500) plus a 24month or so financing on the compute and creative suite (i.e. $5000 – at a 10% interest rate that's $6000 over 24 months or about $250/mth)

    so with those numbers someone might spend $1000 on fonts and other out of pocket costs and then need to cover $250/mth to finance the rest of their equipment. So that's about one or two spec projects a month.

    Now that doesn't cover rent and other costs of life – and it does assume decent credit (though 10% interest rates isn't exactly a bargain)

    And one further wrinkle to consider – most (all?) of these costs would be tax deductions as expenses (pretty clearly so) so depending on lots of factors (legal structure you worked under etc) the net costs for you might be a bit lower.

    That's not to disagree that likely spec costs are lower in part because some portion of people don't pay for everything they probably “should” pay for (i.e. fonts and likely software licenses in many cases).

    I also wouldn't be surprised if many people use student licenses obtained while in school to start their careers (whether or not this breaks the terms of those licenses I don't kinow)

  4. lucaf Avatar
    lucaf

    “Zealots”?

    You have accused customers of spec work services to behave unethically — based on an ethical standard you felt you were entitled to set. You want to protect your ivory castle from market forces enabled by the very internet that has made your industry flourish. You want to deny market access to “competition” by people who have not had the same access to education and training you've had, who live maybe in India or Pakistan instead of Boulder.

    And the zealot would not be YOU?

  5. andrewhyde Avatar
    andrewhyde

    I was more referring to “Zellots” due to the high amount of sock puppetry going on.

    Similar, but very different.

    I'm all for globalization, but no worker should be expected to be paid for 5% of the work they do.

    Hope that made you feel warm and fuzzy.

  6. lucaf Avatar
    lucaf

    Oh, poor Andrew, you are actually defending those kids by trying to prevent them from having access to work at 5% of Boulder rates (which is probably starting to be a respectable sum of money in Lahore or Karachi), instead I accused you of trying to protect your own interests… I am SO sorry….

    Now, seriously… “Professional” designers (or whatever you call the category you are defending) are damaging their own image and standing by throwing mud at the lower end of the market. Clients (like myself) respect individual professional designers for their individual capabilities, but – I can assure you – have no respect for unionistic attempts at keeping competition out of the door. Furniture makers in North Carolina have had to retool or exit the market. Programmers have to deal with outsourcing. I fight every day with competition next door and half a world away. Why do you think you are special, and you deserve to be protected from competition leveraging different economics in other parts of the world with a new business model enabled by technology? What makes you think you can insult your clients by accusing them of unethical behavior, and get away with it?

    Like players in many other industries have already done a thousand times, you should recognize that your business model can't effectively compete in the lower end of the market. In the long term, you'll win by doing that. And in the short term, you'd gain a lot of respect.

    Peace, Andrew.

  7. lucaf Avatar
    lucaf

    Oh, poor Andrew, you are actually defending those kids by trying to prevent them from having access to work at 5% of Boulder rates (which is probably starting to be a respectable sum of money in Lahore or Karachi), instead I accused you of trying to protect your own interests… I am SO sorry….

    Now, seriously… “Professional” designers (or whatever you call the category you are defending) are damaging their own image and standing by throwing mud at the lower end of the market. Clients (like myself) respect individual professional designers for their individual capabilities, but – I can assure you – have no respect for unionistic attempts at keeping competition out of the door. Furniture makers in North Carolina have had to retool or exit the market. Programmers have to deal with outsourcing. I fight every day with competition next door and half a world away. Why do you think you are special, and you deserve to be protected from competition leveraging different economics in other parts of the world with a new business model enabled by technology? What makes you think you can insult your clients by accusing them of unethical behavior, and get away with it?

    Like players in many other industries have already done a thousand times, you should recognize that your business model can't effectively compete in the lower end of the market. In the long term, you'll win by doing that. And in the short term, you'd gain a lot of respect.

    Peace, Andrew.

  8. andrewhyde Avatar
    andrewhyde

    you are right, they should be honored for the opportunity.

    yawn.

  9. Aaron Avatar
    Aaron

    Spec work sucks. That is all.

  10. micah Avatar
    micah

    I am not a designer, so it always makes it difficult for me to argue for/against spec work. Spec work, on its surface doesnt seem that outta wack. It seems that the arguement against it is when its “crowdsourced.”

    I have never hired a desginer without looking at a portfolio or getting at least some line drawings outlining their concepts. I read Jeremiah's post, and I think his point is valid: regardless what you believe is the positive/negative behind spec work, the practice is here to stay and will continue to grow.

    All design type services commoditize over time. The effect of more people entering a space coupled with cheaper startup costs, causes supply to increase while demand tends to not keep up.

    Also, your economics are outta wack. The purchase of a laptop and software and fonts are sunk costs. It also takes into account only that you are doing nothing but spec work, which is not true with any designer or service professional. In addition, since the purchases are one-time expenses, they amortize over their lives, which can be many years.

    I also dont get the theft concept, but I figure thats your emotion, more than your reason.

    Bottom line, be a designer that is good enough to not need to accept clients that require crowdsourced spec work. Or dont.

    Cream rises to the top. Its happened in every industry, and design is probably the most frequently hit. (Gawd, I remember how expensive it was to get a website built in 2000 vs. today).

  11. gochi Avatar
    gochi

    Hi Auto Hyde Great calculation …. I like your post

  12. Jose C Davda Avatar
    Jose C Davda

    your blog is really great! 611

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