One of the biggest and oldest debates between freelancers is whether you should charge hourly or by the project. While both sides of the debate have valid points, if you want to really go anywhere in your freelance career, you should avoid charging hourly.
Why? There are several reasons for charging by the project, and it also seems to be common among the higher end freelancers I know. So, let’s take a look at why you shouldn’t charge hourly.
If You’re Good at What You Do, You Short Yourself
My biggest problem with charging hourly is that the better you are, the more you shortchange yourself.
When I first started freelancing, I tried charging $100 an hour. Clients insisted that I was charging way too much. They would only pay $50 an hour. The problem was, I cost the same price at the end of the project as the $50 an hour freelancers because it took me half the time to do the same work.
This meant, if I charge the same amount as $50 an hour freelancer, I’d actually only make half of what he did even though I was better!
Hourly Rates Have a Ceiling
You can only charge so much when you charge hourly. Eventually, you’ll come to a point where the client says, “No way!” While project rates have a ceiling as well, it’s much higher.
For example, if you told a client you charged $400 an hour, you’d be laughed out of business. However, if you told a client you could do X for $400, he’d probably agree to it. If it only took an hour to do, you just made $400 an hour.
This does not, however, mean that you should gouge your customers. You should make sure you’re worth that $400 for that hour’s worth of work. Send them perfect work ahead of schedule and give them great service. I’ve never had a legitimate client complain about my prices, because they know I’m worth it.
Clients Like to Know Prices Up Front
Another problem with hourly prices, is that it often doesn’t make the client as comfortable. Which do you think sounds better?
- I can do this project for $150 an hour, and it I’ll take me between 10-20 hours?
- I can do this project for $700?
It’s a Win-Win
Project rates often come out cheaper for the clients in the end but also leave you with more money (since you’re not shorting yourself.) Win win!
Some Project Tips
Just because you’re not charging hourly though, doesn’t mean you need to pull your prices out of the sky. Your prices should still be based on an hourly figure, with expenses and profits built in, but you should give your client a set price.
For example, say it takes you an average of five hours to do a full site’s HTML and CSS. You really need to make $80 an hour at least and you also need to build in time for admin and a bumper in case something surprising happens in the code. Therefor, your project rate could be $550 or $600 per site.
Also realize that you’re not stuck with the project rates. Every site I do has a different price, depending on the complexity of then site, how long I think the project will take, how many features it has, and whether I think the client will be a pain. I fully believe if the client is going to be the kind that emails you 5 times a day and freak out at everything, they should have to pay for that time as well.
You’re also not stuck with the rate if the client changes the spec on you. As long as you have a well written quote, you can tell the client that that request is out of spec and costs and additional $XXX.
Do you charge hourly or by the project? Why?
Image by pasukaru76