Is it worth the opportunity cost of a significantly reduced rate to take a graphic recording project that a third party contractor offers you?
The Scenario
The other day, a graphic recording colleague sent me the below email about an interesting situation. It seemed like something that more than one person might be wondering about, so I asked if I could respond as a blog post. Fortunately, she agreed! (Yay for us!)
Here’s what she wrote:
Note: Names and other details have been changed to protect the innocent. ;^)
Just got off the phone with X Consulting Group, with whom I’ve started doing work. I’ve agreed to work at a lower rate than my usual day rate, due to their recommendation that its more sellable at this lower rate to their clients. And they would take care of room set up, travel, etc. Seem like good people.
Thus far they’ve offered 3 gigs to me in 2 months, only one of which got booked. One more a possibility.
Today I asked what my mark up is to clients. He laughed nervously, and said it was up to $1000 over my day rate. ?&$$%@!
This seems like ALOT to me, but what do you all think?
Good question! She’s not the only one out there wondering about this, right? ;^)
Before we answer her question, let’s unpack it a bit more.
The opportunity cost of “yes” and “no”
Basically, our graphic recorder friend here is being asked by a third party contractor to significantly discount her professional day rate, so that the third party can offer her services on the third party company’s behalf, while charging her regular day rate (or higher) to that third party company’s clients for her services. The difference between the rate the graphic recorder charges and the rate the client pays is kept by that third party.
Not an uncommon situation, to be sure. But it does have its pros and cons.
On the one hand, were that third party’s client to hire our graphic recording friend directly, they’d probably pay the same amount (or less) for the same service. So that sucks for the graphic recorder and the client. Neither of them are getting their full value in this scenario. (The third party’s client is paying more than they could, and the graphic recorder is getting paid less than they could.)
On the other hand, our graphic recorder friend may never have that work opportunity without the access and exposure that this third party provides. Plus, the third party is taking care of all the expenses/logistics for making the project possible in the first place…which probably makes our friend’s project life easier.
And this is where opportunity cost comes in.
[blockquote source=”Investopedia”]Definition of ‘Opportunity Cost’
1. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.[/blockquote]
By saying “yes” to the work this third party provides, our graphic recorder friend is basically saying “the cost of the reduced rate on my part is worth the opportunity of getting to do this work the third party can connect me with.” And from her message, it sounds like there’s an assumption that she’ll have access to more projects at this reduced rate…as opposed to having access to fewer work opportunities at her regular rate. As her booking rate with this group so far is 33% percent (one reduced-rate project closing from the three offered), it’s not a sure thing that the reduced-rate opportunities will in fact generate the number of work opportunities anticipated.
So. Where does this leave us with this question?
The Answer
Is it worth the opportunity cost of a significantly reduced rate to take a project that a third party offers you?
It depends. (Come on, you totally saw that coming!)
To Discount…
Perhaps you’re wanting to build your portfolio and a rate cut is okay with you. Perhaps you like the third party’s team and want to collaborate with them. Perhaps your practice is a part-time thing and working with a third party makes gig logistics way easier for you. Perhaps it’s a full-time thing for you, but you don’t want to have to run a business.
If these sorts of things are in play, then the discounted rate/third party thing may make sense for you. The opportunity and benefits the third party provides you are worth the trade-off in rate you receive. Even if it’s a significant decrease.
Personally, I’ve worked once as a subcontractor to a third party on a discounted rate. I did it because I adore the person who asked me to join in on their project. I basically discounted my rate for the opportunity to play with an awesome person on a project. And it was totally worth it! (Not to mention we got to work with The Happiest Client on Earth! ;^) So for me, the decision was a passion-project one and not a financial/profit one.
…or Not to Discount
Perhaps you’re building your own practice and business identity. Perhaps you feel pretty confident about your day rate and your worth as a visual practitioner. Perhaps when you read the amount of that third party mark-up, you thought “that’s ridiculous!” Perhaps you said “yes” to the arrangement, but spent your time on the project muttering under your breath that you should never have accepted it, that it wasn’t worth it, that you’ll HAVE to say “no” next time.
Well then, guess what. You may need to pull a Nancy Reagan and Just Say No.
Working with that third party contractor may leave you feeling undervalued or under-appreciated…which leads to you not doing your best work. Even if that third-party sends you a basket of chocolates afterwards, the discounted-rate arrangement may not make sense for you.
The Takeaway
Here’s what I originally wrote back to our graphic recorder friend:
I think that X Consulting Group is getting a BARGAIN with you.
Question is, are you getting a bargain with them? Or making one?If you’re not feeling properly valued, don’t do it.
If you’re feeling properly valued for the opportunity, let go of the rate difference and have a great time on the project!
It’s really that simple. ;^)
Looking forward to seeing what you Draw Forth,
P.S. That’s my take on it at any rate…what’s yours?
Hi Jeannel, it’s been a while. Here is my point of view.
I think there are two critical points. #1 The real problem is not just money, well we all have family and costs I know, the problem is, who put his face? No matter who is behind you, the face is your! Thus your face will be coupled with the rate. A bargain clearly unbalanced toward money and not quality rarely bring to a successful outcome. Third party do not think at the product/service as a Crown Jewel, something that need to be proudly sported, the product/service supplier always feel in the deep of his heart that his work is under evaluated and, you know very well, this emotion is subtly energy consuming and, quoting Master Yoda, create a disturbance in the Force, therefore in the work supplied. Even working for free, if done as a deliberate choice and without layers between you and the final user, is better than being evaluated on a quality vs cost level with a third party shade that make that ratio not crystal clear.
#2 Here in Italy we say “cantinaro” (cantina means basement) to describe those phony professional who work at the lowest rates. They are the worst and even worse when they get hired and give a bad work very often the outcome is not “that guy is not professional” but “I tried that service and even it wasn’t so expensive it was useless”. Given that, discounting put you at the same cost level of those “cantinari” but, as your work will be good, this will reinforce the low cost/good quality ratio that will set the price in the future giving them an advantage and ruining the market. Quality has to payed, deserve to be payed otherwise is not perceived as quality.
I’m very stern on this matter, I know.
Oh, Mauro…you are just so awesome. One of these days you and I will need to hang out at a Cafe and have a long conversation! :^)
Brand is certainly a factor to consider when deciding whether or not to affiliate with a third party. You may be expected to represent the third party’s brand instead of your own…and yet at the same time your face is being associated with the work and rate, so your personal brand is also being affected. Of course, if the affiliate relationship is a positive one – and I know there are quite a few folks out there who enjoy working from someone else’s graphic recording “house” – then the association you receive may be a very positive one.
The trick is, as you mentioned, making sure that the exchange is an equitable one. One that leaves everyone feeling well-valued and one that allows all to do their best work. :^)
Hoping this finds you out of the “cantinaro” and enjoying the big blue sky,
Jeannel
I did one gig as a subcontractor; the client was a huge, well-known Silicon Valley company and I was paid my full day rate. I would, of course, love more work both from the client and/or the contractor who hired me. The challenge here, I think, is: with whom do I now have a relationship? I spent more time interacting with the contractor and very little directly with the client. This client – at least the division in this scenario – does almost all of their hiring for this sort of work through this particular contractor. So obviously it is in my best interests to maintain the relationship with the contractor. Bummer, though, that I have no opportunity for relationship with the client, especially not with other divisions.
Spot on, Eris! The client relationship in these situations is basically owned by the third party, not you. And when your time is spent more with the contractor as opposed to the client, how does that affect the quality of work you get to provide to that client? These sorts of working relationships can be a double-edged sword. Yes, you get the opportunity to work with a great client. But in a way, because of the limits on relationship, the client doesn’t get to do truly great work with you. (Which is too bad, because you’re pretty darn awesome. ;^)
Thank you for spurring this conversation, Jeannel! I’m not a graphic recorder, but am in a similar service field. Just today, I was referred to a company that may want to sub-contract my services to their clients. After reading this, I’m so much smarter 🙂 You can bet that I’ll be asking what rate they intend to charge their clients for my services! Then, I’ll weigh the Benefits verses Efforts, to decide whether or not it’s the right fit.
Yay! Glad it’s helpful, Marliese! :^)