Why You Should Never Charge Hourly

never-charge-hourlyOne 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?

Or

  • 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.

Your Ideas

Do you charge hourly or by the project? Why?

Image by pasukaru76

Comments

  1. says

    I charge projects per project but small corrections of additions I charge per hour. I think you have made good points in your article. When charging per project sometimes you win sometimes you loose. I have had projects where I would go way out of my estimated hours and projects where the opposite would happen.
    Anyways, nice article and good to see that these things are common with freelancers. We are not alone!

  2. says

    I like to charge hourly for maintenance, but try to stick with fixed amounts for new projects. I agree, clients balk less when they know exactly how much something is going to cost before hand.

  3. says

    i always charge per project, but it’s always based on an hourly figure. This way i can easily give the client an approx. total without selling myself short. It’s always based on the number of hours i think the project will need. I always reserve X hrs for unexpected changes. After that i specify an hourly rate for the hrs exceeding said amount. This way the client automatically knows that too many changes and drafts will cost extra.

    All is based on being up front, giving each project the correct price and making sure i’m not selling myself short.

  4. says

    I completely agree, and I never charge hourly.

    Here are some other reasons why:

    Why should a customer pay more if the estimate is off? Is he responsible for your poor estimating skills?

    It messes up the incentive. The best thing for both you AND your client is for you to work as efficiently as possible. With hourly billing, it is better for you if it takes longer, and better for your customer if it takes less time.

    The message you are sending your customer is bad. I wrote about that here:
    http://www.indycoding.com/default/10-04-06/What_message_are_you_sending_with_your_pricing.aspx

  5. says

    Excellent post Amber ;-)

    We charge by project for the majority of our work at SmallFuel Marketing, however there are some specific cases where I think hourly is actually the correct choice. For example:

    If there is a situation where you do not know the full extent of the project, or cannot possibly know in advance how difficult something will be, it is much less risky to charge hourly because you will avoid under-charging and getting stuck in a project that loses money.

    These situations don’t always happen, and you can set your business up to minimize them, but there are always cases where the work is good, the pay is good, but you just can’t know the scope entirely.

    Your thoughts?

    — Mason

  6. says

    I have been charging by the hour, partly because when I started I didn’t know how long it would take (including revisions etc) and partly because it takes a lot more forethought to spec out a project to quote one total project cost. Obviously that forethought can be good for other reasons, such as not getting buried in a poorly explained project, not getting stuck with impossible clients, projects not blowing out with endless tweaks. However, clients almost always want to add things or change spec and when charging by the hour it’s obvious to everyone that adding more will cost more. That said I think I will be switching to a per project pricing structure. Perhaps a more appropriate title would be ‘Why you shouldn’t charge by the hour forever’ because it seems charging per project is more suitable when you have the infrastructure and experience to support that method.

  7. says

    I can’t agree more. Charging per project is the best way to collect the money that our work worths. Especially in a web development project where efficency can double the time of work.

  8. says

    I always charge by project – except for two clients who prefer me to keep timesheets. When I submit my quote, I always state what that price includes and I say in my terms and conditions that if the scope of the project changes then this may incur an additional fee. Because if you budget for two meetings and two sets of copywriting amends and you end up with six meetings and three rounds of amends, then you’ll be out of pocket.

  9. says

    Great article. We test some client by offering them an hourly rate and just said to much. Then we dis by project works out much better. But if it’s straight production, layout, AAs then an hourly rate is the only way.

    Thanks for the read. Harris.

  10. says

    Great article and very true – there is something called ‘value based pricing’ and if you charge per hour you will never get there.

    Although saying that I am charging per project and per hour myself. I do have a few clients I do work for and charge them per hour – they are long time clients and the good thing is for them that they do not have to call me every time they need something done and ask for an estimate. They send the request, I do it and invoice them once a month. They are happy and I am happy. I think it is really helpful with the long relationship between us.

    For new clients and single projects I charge per project. When client doesn’t know me he is more happy if he knows the ballpark quote than if I tell him the hourly rate.

  11. says

    I’m curious to know how many freelancers are web designers versus programmers.

    I have been a freelance programmer for 3 years and a consultant for the 6 years before that. While every project I’ve worked on has been estimated and a project quote given, billing has always been done on an hourly basis.

    The one software project I worked on where a fixed project bid was given turned into a disaster… what the client really wanted was much much more than the quote reflected, and the company I worked for ended up giving 4 times the amount of work in the bid to the client for free.

    After that, I vowed I’d never do a fixed bid project. Software development is just too volatile to price only by the project.

  12. says

    @John Uhri: I’m a freelance programmer, and I NEVER do hourly work.

    I think a project can get away from any freelancer in any industry. And working hourly doesn’t really solve the problem – a customer who is told a project will be 40-60 hours who is faced with a bil for 120 hours will not be very happy. So it looks like the problem is solved but actually all you are doing is creating unhappy customers.

    I can tell you the following:
    - I only fixed bid development when I am comfortable about the scope. If the scope seems vague, I provide a fixed bid for a smaller design project where we define scope. Then I provide a fixed bid for the development phase.
    - I still track hours much of the time, but I use them for understanding how well I did in my estimating process, not for billing. I don’t get upset if I work a few more hours than I anticipated.
    - I work very hard and doing a good job of estimating effort. I am constantly refining my technique.
    - I develop a good partnership with my clients. They want me to be paid fairly for my services. If your customer trusts you and believes you aren’t nickle and diming them for every change, they are more willing to listen when you tell them that the scope has changed and a change order is required.

    Bottom line: the keys to making project based billing successful involve good estimating skills and a trusting relationship with the client.

    I hope that helps!

  13. says

    I’ve always thought that charging hourly vs project-based fully depends on the the circumstances of the project. And perhaps it still does, but after reading this, I’ve got nothing, brilliant post :)

  14. says

    @ John Uhri, I completely agree. Before I started freelancing I worked for a consulting firm and there were several projects that were a fixed project bid and all ended up eating a decent amount of ‘free time’. Sometimes a fixed project bid locks you in to some extent and you end up shorting yourself.

  15. says

    Great article. I charge a fixed price per project. I determine this number by estimating how many hours it’s going to take and factor in any outside costs.

  16. says

    “I can do this project for $150 an hour, and it I’ll take me between 10-20 hours?
    Or
    I can do this project for $700?”

    I’m sorry but that’s an awful example, the two aren’t even comparable because they come out to totally different amounts, $700 vs $1,500-$2,000

    That’s called misleading your readers.

    Now let’s make the example accurate: 4 hours at $150 an hour doesn’t sound any better or worse than $700. But if the project takes LONGER than 4 hours (hello IE6) then I get $150 for every extra hour I spend on it, while you’re stuck in the corner with your $700.

    Food for thought.

    • says

      It really depends. An example from my own experience. I started out working with a client hourly. The relationship was great from both sides. Over time, many of their full-time employees moved on, while I stayed in the freelance stable. Eventually, I had a lot of the content they were reusing in my files, while their project managers were starting from scratch.

      So my fees went from $700 for 20 hours ($35 per hour) to project fees of $700 for 15-20 hours (because I worked faster) to sometimes earning the same $700 for 1 hour because I could pull a document from my own files and make edits.

      I think this worked out for me because there was a clear deliverable for which I was being paid, and a natural way for me to capture efficiencies was in my control. This was a win for the client, too. They got more consistent materials than their own employees could provide. They also got, quite literally, one-hour turnaround times on projects they expected to take a week or two – for the same price.

      My takeaway: my particular strengths as a business owner – in this case, being very organized in my personal content management system – lend themselves to getting extraordinary rewards from particular types of clients. So I seek out those kinds of clients.

  17. says

    Hi.

    Working with SCRUM methodology let me to split the entire project in small working chunks and to charge a fixed price for every release.

    I agree with the client the price for every sprint during a feasibility study stage.
    This early phase is usually free and we (me and clients) define witch features will be included (at a very high level) in every release.

    During development, every new asked feature that wasn’t included in the release plan will be charged hourly.

    Then, after the project delivery, I give a 30 days free warranty period and after that I usually charge hourly.

  18. Justin Pennington says

    I do both. If the project is guaranteed (based on the client) to have scope creep than I set a fee for the outlined project but then set an hourly rate for anything additional. It keeps the un-billable scope creep down but still accomplishes the goals of this article.

  19. says

    I almost always charge by project, but I definitely base it on an hourly rate and estimated hours. The thing you need to emphasize with clients is that it’s an estimate. I have a notice on the quote that if anything changes in the project that goes beyond what is outlined, that I would create an addendum or revised project outline, with whatever new charges are necessary. Some clients are good about knowing what they want ahead of time, but some are not, and think of new stuff to add. It’s all about keeping the lines of communication open as you progress.

  20. says

    I charge on an hourly basis and I’ve had several higher-profile folks (some who charge up to $250/hr) tell me to stick to this. Any time I’ve even dabbled with fixed bid stuff I’ve ended up making a lot less than I should have. For some reason I have clients who like to make all sorts of changes in the middle of their projects. This covers my rear. I typically let them know when actual hours clocked reach 90% of the estimated amount (I still give them an up-front ballpark estimate).

    I also bill on a monthly basis so in the case of larger projects, they don’t get a big giant bill at the end. Instead they’re paying as we go along. This has helped me build a solid client base of folks who pay on time and have been conditioned to know that if they call me up with a few updates, they’ll be paying for them based on actual time and materials.

  21. says

    @Jerome You should never really spend more than an hour or so of extra work when charging by the project. If you know how long something takes you and you write a detailed quote (which never takes more than a couple of minutes) it’s almost impossible for a project to take longer than what you charged.

    @Mason I try not to send a quote until I have full details, or I send them a quote that’s overly bloated and I let the client know that if there’s anything in it out of spec, they’ll have to pay. The one or two times I tried to quote based on “It’s an easy project” and no details, I seriously ended up doing over double the hours I quoted, so I’ll never do that again.

    @kristarella It’s ok to charge hourly if you’re just starting, but once you get a feeling for how long something takes, you’ll make more money by switching to project rates. That being said, of course if the client adds on to the spec or changes the scope, you tell them you charge more for it.

    @John I’m not a web designer, I’m a developer. To me, it’s actually easier for a developer to charge by the project, because if you’re going by someone’s design, then you have a clear understanding of what needs to happen, but designers have to shoot in the dark. The client might like the first mockup, he might not. That being said, the only time I’ve ever been screwed on a project, is when I didn’t do my work up front and get a clear scope of the work.

    @Ishmael Why do you think fixed bids lock you into a price? Did you not have a clear scope of the project? Not sure why people think that just because you give the client a fixed price, you can’t change it if the client changes scope.

    @JohnONolan It’s not called misleading my readers. I assumed my readers could do math. It’s called throwing numbers out there for a point. I know 0 clients who would pay $400 an hour, but I’ve been known to quote $300-$400 for a 1 hour project. That’s the point.

    @Dave Yankowiak Most of the big timers I know charge by the project, but I’m sure it also depends on what you’re doing. That being said, of course clients will change scope on you, but just like when you’re charging hourly, you tell them it’s out of scope and charge more. Charging hourly screws yourself when you’re good at what you do. nI’d been making half of what I’m making now if I did that.

  22. says

    This is one of the best posts on rates/pricing I’ve read. I struggled to determine appropriate rates that clients wouldn’t freak out about, but charging by the project takes out that element and everyone wins.

  23. says

    This is actually a great article. I currently charge hourly, and I keep being told by co-workers and friends that I charge too little for the work I do…

    I think I might put together some rate packages, at set rates..

    Thanks for the read!

  24. Jillian Nichols says

    I couldn’t agree more. Charging hourly just doesn’t make sense. You should be rewarded for efficiency — not punished. On my invoices I break up the core areas of the creation of a website (design, development, blog integration, whatever) and charge for them separately, and then add ‘em for the total. It helps give the client a better understanding of what is all involved in the work process, too.

  25. says

    While I think it is definitely in the best interest of both the designer and the client to charge for the project (solution), my recent post ‘Why Design Can’t Be Billed by the Hour” has 85 opinions and many that disagree with me. I think one of the major issues people have with billing by the project is fear of scope creep. It is vital that the specifics around deliverables and revisions are in writing and approved before any work is started. You can see the various opinions on the subject here: http://www.idapostle.com/design/why-design-cant-be-billed-by-the-hour/

  26. says

    “I can do this project for $150 an hour, and it I’ll take me between 10-20 hours?
    Or
    I can do this project for $700?”

    Well in the first case they’d soon work out that you’re talking about $1500-3000. So does the second line refer to a different project or are you actually suggesting that people sell themselves short (contrary to the rest of your post).

    When I quote hours it’s the hours I actually think it will take, not something to bump up the cost. And my hourly rate is based on how much money I want to earn in a year plus a bit of a profit margin, so it’s actually reasonable.

    Your comment about the spec changing is also uncomfortable to me:

    “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.”

    Two things here. Firstly, you don’t want to tell the customer they’re wrong and secondly you don’t want to push a big for extra $XXX in their face for being wrong. Let them change the spec as they want. On an hourly rate it works best for both parties because they’ll get what they want and you’ll get paid for it. This is the simplest way to remain agile and everyone knows where they stand.

    I think that basically you should offer a couple of options to your customer including hourly rate and fixed price and point out the pros and cons of both. There may even be other options if you’re feeling creative (e.g. profit share).

  27. says

    Great article. I tend to charge per project, but it’s based on my hourly rate. Once I determine the hours, I factor in possible corrections, photography, etc and come up with a total which I present in an estimate before we start. So in a way, I use both hourly and fixed if that makes any sense.

  28. says

    @Steve Zelle Right, but as long as you have a written spec, you can stop scope creep in project rates.

    @Chris Brind How is telling a client that what they’re requesting isn’t in the scope of the project akin to telling them that “they’re wrong”? Any client worth dealing with will understand the basics of scope and none of the clients I’ve dealt with have ever been upset when they ask for something extra and I tell them it’s an additional amount, most of them actually expect. If you quote X amount for 3 mockups and the clients hand you 6, why should you eat those hours? You shouldn’t. And you really lose on a lot of money by charging hourly, as the better you get at your job, the less you’d make. I’d have to charge the client $200-$400 an hour to make what I’m making now by project rates.

  29. says

    Another great reason to charge by the project is this example.

    Let’s say you create a custom web app for a client and you charge them a specific price for it. Now, let’s say another client comes along 1 month after you created that custom app and asks for the exact same thing.

    Do you give it to them for free because it won’t take you any time to create it again. No way! You charge them the same price you charged the first client, or more or less depending on the value of the app.

  30. Brandy says

    Thanks for the article. Funny, I could tell it was you writing before I got to the end. As a new freelancer, this is really helpful, along with all the comments.

  31. says

    I charge both, because depending on the client, you have to charge what will be feasible for you and for your workload. I never give a flat rate for new clients; my long-standing clients that I have a relationship with are charged a flat rate because I know how they operate and therefore, I can charge them more accordingly.

  32. says

    I prefer fixed-rate. Firstly, it is convenient for both of us – me and my customer. Secondly, I feel really comfortable if I tell the price at once and I tell the exact day I will deliver the job. Then I can work in any mode I want – daytime, night, whatever; with or without breaks; going outside or spending the whole day at home – my choice.

    In my practice, when I even bid for an hourly project and propose fixed-rate giving my rate and time of delivery, Buyers switch to fixed-price and agree. No one have ever been disappointed with the quality of work or the attitude to them (Customers) – I tend to keep my word.

    Thanks for great article though, it’s always good to have all the reasons in one place :)

  33. says

    While I agree with you that charging by the hour is kind of rewarding mediocre worker, I think that JohnONolan had a point when saying that your example was misleading. There’s absolutely no way a fixed 700$ could not be better than 1500 to 3000 since it’s below the range’s minimum. Try using strictly neutral examples the next time!

  34. says

    It depends on the job. I do both – bill by the project and bill by the hour. Project estimates are for new or reworked websites, hourly is for back-end work (ie e-commerce & minor changes to an existing website). I even offer a discount for pre-paid blocks of time.

    I also charge hourly for maintenance clients if they don’t go for a monthly package. It will generally cost them more per hour, so they’ll switch to the maintenance package if they have more changes than they anticipated. This provides a consistent monthly income that gives me a little less stress than wondering when my next big project will come.

  35. says

    I’ve been charging both hourly and by a flat rate, depending on the client/project. I’ve been learning that the flat rate is much, much better.

    Great advice here, and it confirms what I’ve been slowly learning through trial and error. Mostly error :)

  36. WallMountedHDD says

    $100 an hour when you started?!?!? What were you smoking? I’m sorry, but a front-end developer who uses WordPress for most of his/her stuff is NOT worth 200k a year ([100*40]*52). $50/hr starting is equally ludicrous. You’re not an engineer working at Intel making silicon wafers or a CPA for a Fortune 500 company with an MBA. Holy crap.

    • says

      $100 per hour is NOT, NOT, NOT equivalent to $200K per year. This is one of the awful myths most of service providers fall for. I certainly did.

      It’s impossible for a solo to market OR deliver 40 hours per week, let alone market AND deliver 40 hours per week. A person who could bill 20 hours would be a smokin’ hot marketer and more productive than average.

      A person billing $100 per hour *might* be making $100K per year, minus expenses.

  37. says

    @WallMountedHDD Also, you’re assuming 40 hours a week of billable time, no freelancer is really able to get 40 hours a week, 52 weeks out of the year in billable. My hourlys range from $100-$400 an hour when I break out my project rates.

  38. says

    Depending on the size of the project, and what I’m doing (html/css, or php/jquery/mysql) I can quote accordingly. Although I always try to deliver a project based quote first but if the client needs a more consistent developer they’ll get an hourly wage.

  39. says

    Totally agreed.

    I prefer fixed-rate, although I do base the price on an hourly estimate of the project. It forces me to make a really good assessment of the project, and it reassures the client as to how much his bill is going to be. In some rare cases where the clients is being a pain and requesting too many changes, I will point him to the part of the contract that says s/he has a certain amount of changes included, before I add extra charges (which in this case billed per hour).

    As a sidenote, I would, as a client, feel that someone charging per project has a better experience with such projects compared to the one who charges per hour, thus potentially giving a better and more efficient result.

  40. says

    @wallMountedHDD – i don’t get why you are all upset – if the client is happy with the rate and happy with the work i do not see a problem. you see, that is the beauty of the system, if you are not happy there is a sea of other designers/developers out there.

    .mike

  41. says

    I will never charge hourly because in my business enviroment is not very well accepted, the clients say “you are not giving me a real price! how can I know you really work that many hour?” honestly my prices are based in the time I use to make them but is better to give a a round solid price so the client can be more certain about the payment.

  42. says

    You go, Amber (in relation to WallMountedHDD’s comment)! Besides, does it really matter what you charge as long as the client is willing to pay it and satisfied with the result?

    I generally charge on a per-project basis (with a clearly-defined project scope), but sometimes I have clients who specifically want an hourly rate, so I take my project rate, divide it by the time I estimate the project will take, and present that to them. Generally, they’re pretty happy with it. And, if the project extends beyond the length of time I originally thought it would take, then I’m just making extra money! :)

  43. Dober says

    Horrible suggestion to “never” do something. There’s always a time when hourly is the way to go, or clients who you specifically want to state that you charge hourly because they’ll stretch everything you do and turn back every 1st or 2nd revision.

    On top of that, I don’t know what you’re out there doing for $100-400 an hour, but you’re not freelancing wordpress designs thats for sure. It just doesn’t pay that. $100 if you’re lucky and the client just wants it done now, but you must be a high level programmer to net those amounts. WordPress is base level design work, barely above static HTML work.

  44. says

    Something missed by a lot of people who have never done freelance work is the logistics of running a business. The tendency is to view labor, even our own labor, as a commodity. We are not just a machines that eat money and crap out lines of code until a complete, functioning site is produced. We’ve got to keep the lights on and our internet connections up. We spend time pitching projects that never lead to billable work. A new version of WordPress comes out or a project is a good fit for something we’ve never done before and we spend a few hours with the proper documentation. That benefits the current client and future clients, so there are ethical issues in how we bill for that time. The most logical way is to bill for actual project work but figure in a mark up for all the time lost to such logistical concerns. Maybe that means we charge our clients a premium, but in the long run if we don’t account for these issues we’ll lose our ability to compete with those who do.

  45. Chris says

    great article. I charge hourly for new clients on first and sometimes second projects. After we are comfortable with each other I switch to a fixed rate.

  46. says

    @Dober Please don’t tell me what I do or don’t charge. Advanced WordPress is NOT “base level” as it takes a lot of knowledge to be able to edit and add custom functions. And my static sites are priced the same as my WordPress ones.

  47. Jillian Nichols says

    What’s with the people insulting Amber for sharing her details on the rates she charges? If people are paying it, then it’s worth it. Keep in mind that within the service of creating WordPress sites, there is a huge variety of skill levels. People who are established experts can obviously charge more than those who just picked up a WordPress book yesterday.

  48. says

    8 years ago some jobs would take me 3-4 weeks. I wasn;t able to design something fast, always made 3-4 starting designs then got stuck somewhere as inspiration would vanish. creating a design was a pain. After tens and tens of designs my skills got better. What I did in 20 days I can now do in 1. Can focus better on the tasks, can understand what’s the “trick” to make a design work for my client, I am working in the editor way faster. Should I charge now only a small portion because I work faster? This is why I like to stick to project fees instead of hourly fees. If I do have to quote an hourly figure, then I just try to guesstimate how much time I’d take to deliver the project, than, by dividing my overall rate I can give my client the hourly rate.

  49. says

    Despite some of the backlash here, what’s presented in this article IS the long lost secret of how you actually make the real money freelancing. If you think what Amber charges is outrageous and there is no way you would do it for yourself, remember that you have overhead and other expenses to consider. They add up too.

    Plus, as she says, there is no possible way you will work all billable hours available in a given timeframe because there are other aspects of your business that you have to attend to. Hourly rates therefore do hold you back.

    Great post Amber!

  50. says

    wow you people are amazing – amber has found a way to do business and it works. the client is happy and she is happy. who cares what she charges – if she delivers the project on time, it meets the clients needs, and it is on budget, another plus for charging by the job, then what is the problem?

    what you are sore because she has a successful model?

    give me a break, you guys need to re-evaluate you business model. seems like hers is working just fine.

    .mike

  51. says

    Well thought out.

    I forget where I read it but someone suggested that during your client intake process you ask how many decision makers will be involved in the process. I think this is a good gauge of how complicated the approvals are going to be on the project and in turn how much time you will spend doing admin/revisions/client education. I’ve worked this into my projects and now I tack on an extra $50-100 per decision maker.

    We all know design by committee is a nightmare so adding the extra pricing at least makes the extra hassle worth while on the financial end.

    Good article, Thanks!

  52. says

    If I’m doing a project for a direct client, then I charge by the project, however, I also do a lot of subcontracting for other design agencies for which I charge by the hour, because as I don’t have direct contact with the client, there’s no way for me to manage changes in scope, and consequently, renegotiate payment for something that comes up that doesn’t fit with the original estimate.

  53. says

    @amber I am sure the trolls with negative criticism are some anonymous clients, who would not pay a developer more than $20/hour outsourcing their work to offshore companies. Cheap is better for them.
    When you are getting fast and provide great quality $100/hour is common sense to me.

  54. says

    Charging by the project is all fine provided the the project content is well known in advance.

    I am a freelance translator and in my line of work I charge by the hour when I have to go to the client’s place to do onsite translation or interpreting for the French/German speaking visitors.

    When the client is developing an operations manual, time is short and the same has to be translated as well, he calls me to come to his place. I am handed over the sheets that have been finished and I start translating. More often than not there are last minute changes as well. In this kind of a situation there is no way a client can be clear about the full project content.

    If I am directly translating online there are computer-glitches which take up a lot of time for the client’s computer specialists to set right. Who will pay for such lost hours? Not me, thank you.

    Interpreting too does not lend itself to per project billing. You never know beforehand how long you will be required to be present.

    Regards,
    Dondu N. Raghavan
    http://raghtransint.blogspot.com/

  55. says

    @John Faulds All of my clients are agencies as well and all of them know that out of spec work by them or the client will result in additional charges. Just make sure to put that somewhere in the quote/contract :)

  56. says

    Good article Amber. The way I see it is that hourly rates should be used to calculate your project fee.

    Getting paid hourly makes sense when you are working on-site for a client. Many clients will not pay an hourly rate unless they can verify that you are working the hours that you are reporting.

    Also – I would add that many people get away with charging $30 per hour because they greatly exaggerate the amount of time they have worked. The opposite could be said of people charging $100+.

    One other thought… Freelancing isn’t just about making money. If you are lucky enough to stay busy, it is more important to work with clients that you enjoy (even if they pay less) because your quality of life will be better :)

    -Simon

  57. says

    $100/hr or more for a freelancer is very reasonable, considering they don’t get benefits such as health insurance and 401K etc. compared to people who work for a large(r) company. Some freelancers also need to pay self-employment tax on top of that.

  58. McBonio says

    I have seen some of Ambers programming first hand, custom and wordpress and she is a quality developer.

    She is totally right regarding custom wp coding it’s a million miles away from static HTML coding.

    At the end of the day Amber is sharing some of her experience with those who appreciate it, if you don’t just don’t reply!

  59. says

    Great article Amber. My clients whom I earn their trust by providing them with quality work on time, will not mind me charging for additional work (updates and such) by the hour. They trust that I will not cheat them and already know how I operate.
    I would say for first time clients I would never use hourly but for continued work with a regular client only if it involves small changes and updates then hourly is how I do it.

  60. says

    @Amber – Then why didn’t you make the point? In the specific example which I referred to, you used an example rate of $150 – a perfectly believable rate that isn’t even slightly unheard of.

  61. says

    @John because the point was the arbitrary number of hours versus a set price, not the actual price. IE 10-20 hours vs $XX.

    On a side note, $150 for dev services is actually insanely high and almost impossible for design/HTML/CSS work. But by charging project rates, you can actually make more than that easily. At least that’s been my experience and a reason I don’t do hourly, none of the agencies I freelance for would agree to thatbhourly price, because most assume a site takes 10-20 hours to do, when it takes perhaps 4-8 for me

  62. says

    This has been one of the issues that I’ve struggled with ever since I began doing freelance work. Since I have a full time job as well as my freelance business, I’m usually working dirctly with my clients and have been willing to make a lot of sacrifices such as charging hourly or offering a lower price for an entire project if I feel that it will be a creative addition to my portfolio. Personally I’ve also come to the realization that it ends up being more fruitful if I charge per project. However, I’ve also seen cases where I’ve quoted clients for an entire project and they’ve insisted they’d rather pay by the hour (probably because they’d feel they’d have more control over the project and be saving money in the grand scheme of things.) More often then not, these client ended up paying more than the original quote and the final product was something I’d end up excluding from my portfolio. In additon, I found that when I charged by the hour, I spent more time on these projects, was less sasistied and generally tended to be working with difficult clients. I’m with you on this one Amber. Even if it means I have to turn down an occisional client, I’m all about pricing by the project now.

  63. says

    Our Friend Dondu has make a good contribution, all we are thinking in HTML/CSS/Worpress development but therea ser so many types of freelancers and in that variety there are some that will be more willing to charge by the hour. Translator are a good example a friend of mine works as translator and some times charges by the hour (when translates in lectures, and that sort of events) and also he charges by word (yes by word) when he translates documents he has an standard rate that many translator use so their client know beforehand the price of the work, in my case as a designer (more general not only web but logos and print) I cannot find myself charging strictly by the hour since I offer some proposals and some times from the proposals to the final result can take a lot of work or no work at all, and to be honest there are so many thing that can change the price, if you charge $xx an hour is different to make a 10 hour work from monday morning to tuesday afternoon than from monday afternoon to tuesday morning, as I said once to a client ” if I don’t sleep this will be donne by tomorrow morning, but my lack of sleep has a price, a very high price”.
    As I said before the time is always importat to fix the price but is not the only variable, and think of this if you charge by the hour a bad client can think that if he doesn’t pay you you are only loosing time.

  64. says

    I’m fed up with people equating cheaper rates with poor quality. I have lower rates compared to US designers/developers, but I’m sure the sites I build are just as good.

  65. says

    Completely disagree, buuuuuuut… I do programming, not web/graphic design or copywriting. Even with a perfect spec (and what are the odds of getting that?), it’s often difficult to tell in advance whether a project will take 50 hours to complete or 500 hours. Or more.

    Case in point: Just yesterday, I discovered that two libraries I had intended to use together on a client’s project are fundamentally incompatible with each other. Because I’m charging hourly, I told them “Here’s what happens when I put both of them together. You can pick one to drop or I can dig into the cause of the conflict and resolve it, but that will probably take quite a while. What’s your preference?” If I was billing it fixed rate, I’d be getting paid for the 50 hours that I initially estimated for the project even if it took me more than 50 hours just to track down and resolve this one conflict, never mind actually doing the rest of the project.

    Clients in general are notorious for changing their minds and shifting project scope, and that goes double for software development. This means that I need to either spend a lot of (unpaid!) time up front on establishing an absolutely watertight spec (and then watch as they somehow find a way to expand the project scope anyhow) or charge hourly and tell them that anything and everything is in-scope, just so long as they’re paying for the time I spend on it. The latter option tends to make my life a lot easier.

    @Big Buddy: Under most contracts and under the default copyright laws of most nations, that situation would require rebuilding the custom portions of the code for the second client at the full normal rate (whether hourly or project-based) because the first client would own copyright on the code written for them as a “work made for hire”.

    Incidentally, to address such situations, I do offer clients a discount on my hourly rates for time spent working on code which will be made publicly available under a Free or Open Source Software license.

  66. says

    Great discussion and some points that I hadn’t thought about.

    I usually take a view on how to charge each project on a project by project basis. Sometimes I’ll give the client the option to choose for themselves how they would like to be billed.

    I do this by stating that I expect the project to take between such and such or so andso hours, showing the prices for each. If they would like a fixed price, it’s always the highest of that estimate, if they would like to take on some of the risk on the project they can potentially save by being charged hourly. If the project goes smoothley they will save and be happy. If the project has issues and takes longer, keeping them in the loop keeps them happy.

    So far I would say that I have about a 60 /40 split in favour of fixed prcing, with those that choose hourly tending to be larger ongoing projects who know that they are likely to involve some scope creep.

    Even small edits / updates of other tasks, I still make an estimate and give that to the client before proceeding. Often, what a client thinks will take 5 mins might actually take significantly longer. I’ve found that doing this and getting it right also helps build trust and value perception so when you do have a larger project tey are much happier to pay full whack and no expect bargain basement pricing.

    Great article, great discussion.

  67. says

    Hi Amber,

    I love the way you explain the cons in charging hourly piece by piece. I did contemplate in charging hourly rate but then, I opt against it for my freelance writing/translating gig as I do not have the discipline to follow the hours requested by the clients. And more often than not, the clients tend to think that they own their freelancers (like the one who emailed you 5 times a day) and take a lot more hour than what we have initially agreed. We have other business to attend to, right? :)

  68. says

    I usually charge hourly, and I’ve run into all of the problems listed in this post.
    Usually it seems easier to charge hourly, but I can definitely see the advantage of doing otherwise.

    I have to learn how to give estimates for the entire project rather than an hourly rate.

  69. says

    We do both. We use an hourly rate for requirements gathering, scope definition, etc. then quote a total development cost “not to be exceeded unless approved changes to scope and cost”.

  70. says

    Nice article Amber.

    I personally like to charge project rates for my copywriting or blogging services. If there is any extra costs that weren’t in scope such as more meetings, mind changing, etc I will charge a hourly rate with a minimum of one hour. Yes, some may want to do hourly or project, but the point is what works best for you and your business.

    Thanks again Amber.

  71. charmac says

    I started off with an hourly rate, however, I used that as a way to determine the overall project fee. (item X will take 3 hours to complete so at $100/hr, it’s $300) I would then present the client with a total amount and a detailed description of what they were getting for this project fee. For $1200 you will receive X, X, X and X. I would be clear that if they wanted to add to the project after this fee was approved that I would then re-jig the original invoice to include any additional items. No client has ever balked at this and all have appreciated knowing exactly what they are getting. The downside with letting clients in on the hourly rate is that then gives them the option to say “well you said it would take you 7 hours to do X and last week I hired this guy who created the same thing in 3 hours. Why does it take you 7?” Instead of “X will cost you $700″ – you then avoid the nickel and diming of hours and if it takes you 1, 2 or 5 hours, you are being paid for the quality of work you provide. That’s just my two cents anyhow.

  72. says

    I’m with Dave

    For programmers doing custom software development work fixed price contracts are a good way to get burned. Been there – done that.

    For straight forward HTML/CSS or design work it is fine to go with fixed price as long as you write up a decent spec ‘just in case’. With custom software development however, the final product never matches the spec no matter how much time is put into developing the spec up front. It’s just too complex and it makes no difference how skilled or experienced the programmer is. The programmer needs the clients input to properly define a project and that is where it all falls apart.

    Something that has always amused me is that almost every client says they ‘just need something simple’ but they have no idea of the complex coding that goes into creating their project. Because the client can describe the overall problem they are trying to solve in a few sentences they assume that the solution must therefore, also be simple.

    For custom software development the best you can do is a reasonable estimate to give the client a ballpark figure but then you need to charge by the hour, and keep in close communication with the client to ensure you deliver the best possible value for money.

    Anything else is gambling.

  73. says

    I charge per hour when projects are underspecified, or when I suspect that a client is one of those like “can-you-please-change-this-this-and-this” …

  74. says

    I charge by project, I always give a price per hour for modifications / maintenance and I have packages with annual fees like hosting / domain name administration / monitoring.

  75. says

    I’m glad to see both Rick and Dave Sherohman are programmers who understand the dangers of project-based pricing. Rick hit it on the head with the difference in application software development versus HTML and CSS. When I do a small website, I have, in fact, done it on a project basis. But those are very small and definable.

    Like @DevInterface, I have moved to a smaller iteration basis… both for code deliverables and for billing. Every two weeks I bill for the work completed, and turn over a testable version of what I have for the client to review, test and comment upon.

    For all of my project work, I estimate what I believe the work will be for the phase I am working on. Using a formula, I give the client a range of what I believe the project will need to be completed. The range is a dollar amount, and my estimates never include the hours that encompase the work.

    Each quote is specified with this: That the total amount due will reflect billable hours. This means that if I find a better way to accomplish something, my client saves money – once I found a libary that cut my development work by almost 50% and I passed that savings onto my thrilled client.

    In the case where there is more work to be done, though, this can go the other way… the client is also billed when the scope of the work changes. In no case, however, is this done without early and clear communication about what is going to happen. And the client must sign off on the change.

    Bottom line: for software projects, the smaller the project, the safer it is to price by the project.

  76. says

    Excellent article! I know exactly why I charge per project and not per hour, but I wouldn’t quite be sure how to put it down in words. Your article has made sense of how I already understand the situation, but has also added more! Thanks for this! :D

  77. says

    I am a freelance writer that charges per hour, and because I work efficiently, I often feel shortchanged. Do I ride out existing projects hourly and then surprise my clients with a change in invoicing? Or is writing web content different then developing the website

  78. says

    Amazing discussion – agree on all points that it’s def a win-win for both parties.

    Most people feel most comfortable knowing exactly how much a project is going to cost and as you learn and apply more time efficient strategies as a freelancer you actually earn “more”.

  79. says

    @Rick: I’ve been a freelance custom software programmer for over 7 years and have ALWAYS used project fees instead of hourly pricing. I agree that things often change, but that’s okay with me. If it is a simple change and caught relatively early, I often do it for my customer for free. If it is a medium sized or large change (or a small change caught late in the process), we handle it via a change order – no big deal. I’ve NEVER had a problem using this approach and vastly prefer it to hourly pricing. If you are good at estimating (I am), and develop trusting relationships with your customers (I do) it isn’t at all like gambling.

  80. says

    I am a freelance writer that charges per hour, and because I work efficiently, I often feel shortchanged. Do I ride out existing projects hourly and then surprise my clients with a change in invoicing? Or is writing web content different then developing the website

  81. says

    Reading the last comments … It looks like a web site (not web app) is more definable than a program/software in general. I think it is true and, probably, in this case charging per project is better for both the freelancer and the customer. Modification can be handled separately. In web/ria apps things are more complicated. I can give an estimate but I prefer to charge per milestone. It it were a book I’d like to charge per section. In this case the milestone is also a good time to reflect on the work done and plan next steps.

  82. says

    I’m a freelance web guy and have found all these opinions very interesting; as I have, since starting freelancing, battled with how to charge for a project.

    I think whichever way you go, project or hourly rates, I feel that you need to:

    1. Have a good spec doc, and have agreed upon what the project or phases includes. Without this, there nothing to fall back on – it’s a rocket without a guidance system.

    2. Depending on your development methodology whether waterfall or agile – agree beforehand on how to bill for those scenarios (per milestone, weekly, or monthly), when & how you’ll be communicating the project status/progress and what happens if things go over or under. You need to constantly be talking and keeping ppl in the loop.

    I think, as you do more projects, you’ll begin to see how much things cost, and be able to make your hourly rate equal your project rate in the end.

    Personally, I feel one can benefit from using both pricing options. One project / value based and one hourly rated. For instance:

    I use the Drupal CMS. It may take me 1 – 2 hours to setup the basic Drupal CMS backend with admin theme and essential modules. The value however attached to what the client is getting with that CMS is far greater than the hours I could have worked on coding it myself – so I charge a set rate for the “market related value” of that CMS in the project. Usually I estimate n hours for Design, n hours for HTML/CSS/theme and n hours for CMS backend setup etc. They can choose add on modules, and number of extra pages which had a price attached to them. Often the project spans months, so I charge hourly for work done each month.

    At the start of the project they have a site total to budget for. If they don’t have the budget for all they want, I try to shephard their expectations as to what they’ll get for that budget. Next month they can do phase two, or three. Usually, for me, it turns our cheaper than the project rate estimate – but I feel like I have been paid for my time. (because I have done the leg work on calculating a good hourly rate).

    I also believe that if the client values your time, they’ll pay you per hour for it. There is a relationship and trust involved here. Under promise and over deliver at a good rate – and the client will keep coming back to give you more work.

    Quick tip: There are three categories – Fast, Cheap and Good. The client can only choose two of those. If they want it fast and good, it won’t be cheap. If they want it cheap and good, it won’t be fast – etc.

    Just my opinion. Rock on! Keep up the good work.

  83. says

    if you take other industries such as construction, do you think main contractors charge their client by the hour? No, they have to put in a tender for the Scope of Works – this frequently runs into millions for large-scale office developments. Of course, they give factor in some elasticity to buffer any unforeseen issues. It’s the same with us developers and designers – I totally agree with Amber, it has to be a project fee and then everyone wins. No unexpected backlash and only yourself to blame if you’ve underestimated it. Don’t throw a wobbly into the equation as it just creates an air of suspicion. Scrum methodology sounds good – thanks DevInterface!

  84. Joel says

    I’m reading what Amber has written, and I would have to disagree that I should NEVER charge hourly. Like posts above mine, there are situations where hourly rates would be preferred. It would mainly depend on how much do we actually know about a ‘product’ that hasn’t been produced. If your client is clear in what they want and decides to ask you to do the work, i think per project sounds good here. However, I think that almost every multimedia project is highly custom made. I would suggest folks to give your clients an estimated cost and time frame, and charge them by the hour.

    Do read http://blueflavor.com/blog/2006/apr/25/pricing-project/ as well with an open mind, I think the writer brought out some good points too.

  85. says

    Would you rather buy a fixed-mortgage house or an adjustable mortgage?

    NO ONE likes to be surprised when it comes to money, and charging per project doesn’t mean you have to be cheap. Just calculate your hours and give an estimated, fixed price.

    I prefer this, because people don’t like to gamble when it comes to money, plain and simple.

    This doesn’t mean per hour is “always” wrong, but I think for our field, it is proper.

  86. Phyllis says

    I have given a project rate to a client, and now I feel it’s way, way under what i should be paid for all the work I have offered to do. Does anyone have ideas about what my recourse is now, and what a professional way of handling the situation might be? Thanks.

  87. Fred D. says

    Old thread, I realize, but little seems to have been said much about PROFIT! If you are not freelancing to make a profit, why not work for a wage and keep life simple?

    The right way to determine your rates is to take the sum of:

    ANNUAL SALARY + vacation pay + benefit costs + other expenses + PROFIT MARGIN

    Then divide by full time hours per year. If this is not close to the (effective) hourly rate you are billing, you are selling yourself short! Expenses should include training costs, marketing, opex, capex, and YOUR TIME spent running your business.

    Some realistic values:

    vacation pay: 6%
    benefit costs: 20 – 30%
    time spent running business: 40%
    other expenses: 10 – 20%
    PROFIT MARGIN: 7 – 15%

    I think some contributers to this thread might discover that $100 per hour is quite reasonable (for anyone interested in making a profit).

    For all the reasons stated in this article, my preference is fixed rate, by the way, so I end to quote a high end rate to clients who insist on hourly. If it scares them away, I move on.

  88. says

    I’m sorry but I CANNOT agree with this. I wholeheartedly disagree on just about every level with every point you are trying to make here. This is terrible advice, at least from my perspective. I do everything from designing websites to coding in Javascript/PHP, and high end 3D character animation/video editing. I have different hourly rates for each skill required of me.

    I will NEVER bill by project because it puts you in a situation where the client can ask for tons and tons of changes AFTER you’ve delivered 100% what they asked for. Perhaps I’m a victim of my environment here in New York, where clients want you to save the world but they don’t want to pay for it. I did a simple 3D animation for a client billed originaly at about 45 hours of work. 6 revisions later, I was paid for 78 hours.

    78! I don’t know about you, but I’d rather be paid for that time. Here is how I do it and I get a very steady stream of freelance work.

    Give a set amount of hours to the client and offer 1 free round of client approval. Which means if you set an estimate at 55 hours; even if you go over, the client gets their say with 1 round of reasonable changes. After those changes are made, which could amount to anything from 1-15 extra hours of work, I start to bill hourly.

    This is fair and it prevents scope creep. If you’ve never fallen victim to scope creep, then I’m envious of you. It means you work with honest clients. I prefer to keep my clients honest. They don’t get free work and they don’t get to change their mind whenever they want to. Setting a flat rate means you don’t value your time. Why should the client? What stops the client from turning a 2 week job into a 1 month job?

    They are much more careful with changes because they know that they are on the clock.

  89. says

    @Joseph I have NEVER had an issue with scope creep because I have an a contract that outlines what will be done in the project and what they have to pay if they want something outside of the scope. Charging hourly means a lot of lost money once you get above $100/hr because clients don’t want to pay that, even if it’s just perception. Charging by the project has allowed me to make way beyond those rates.

  90. says

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  94. says

    Wow. Very enlightening. I’ve been freelancing on and off for nearly 20 years and am vowing to never charge hourly again.

    Thank you for a compelling article. Very helpful.

  95. says

    I just explored this topic within a recent blog post that might be of some help to you or anyone else in a similar position. At my web design agency, I’ve had experience with both flat rate billing (in the early days of the company) and time-based (hourly) billing, and can attest to the pros and cons of both. But in the end, I have found that time-based billing works best for us for a number of reasons. Freelance may find themselves in a different situation, so it may not apply to everyone, but I hope it helps.

    http://blog.stationfour.com/how-to-avoid-pitfalls-of-fixed-bid-estimates/

    Thanks.

  96. says

    HI,
    One of the very good article. As per the concern some times it is very hard to define with fixed price.
    Yes that is very true 70% clients need complete budget of the project.
    I am an iphone app developer so some time clients give the idea what they want to do.but as per their one word it is a lot to create one full project.
    so at that time if we go with hourly basis then its very good because we have to show what we will provide with functionality wise and how much hours it will need to do that.

    But at the end total hours will be combine and need to give them full price of the project with some discount.
    I always doing maintenance in free of charge but after some time we have to charge that by hours.

  97. says

    I once tried charging by hours, and it went wrong. The client thought i made up hours, and refuse to pay after some time, while he drove me crazy with his ambiguous spec/requirement.

    When charging by project, both you and your client know how much it will cost him and how much you will got by the end of the project. You could also arrange for down payment and payment/delivery schedule, the client should choose which feature he want to see on the end –within that time frame and budget.

    Really is win-win solution!

  98. George says

    What is the case if you are a graphic designer, and your sole business is creating PSD’s layouts of web pages for clients.

    If you were to charge $500 for this service, but told the client it was 5 hours work billed at $100. When in fact it only took you 30 minutes?

    Is it wrong to state that it was 5 billable hours worth of work, or should this be billed as a project?

  99. says

    I agree. I’ve been struggling with this concept over the years and find that I have shortchanged myself many times. The rate per project concept is a better way to value my worth and services verses charging hourly. The hourly does often raise a brow and clients get cold feet. Thanks for this article, a nice straight forward read with some great points! ~Lisa Libutti

  100. Michael (in Peru) says

    This is NUTS. Never, ever, ever, ever, under any circumstances, charge by the project. If clients don’t like your $100/hour–tough shit. Move on.

    My number reason is that you never know how long a project will take. Granted, you can estimate very well after a few years, but still. If you work 25 hours, and your rate is $X per hour, then that’s what you should make. Period. No discussion. If you’re worth $100/hour, you’re worth $100/hour.

  101. says

    In reality, the argument can be made for both sides. We’ve done both in the past for our clients.

    If you charge hourly, you’re not undermining your value. The value is integrated into the rate you’re charging. If our developers / designers are producing high quality work at a faster rate than their colleagues or counterparts, then their value increases i.e. their hourly rate. Just because a developer feels they are worth something really doesn’t mean anything as it’s strictly about their skill set and whether a client (or agency you work for) will bite on.

    The perception aspect doesn’t necessarily apply but I do understand where it comes from. As far as an hourly ceiling, this is client dependent: if you are providing relatively accurate estimates and there’s clear communication about out-of-scope work, you will not run into this.

    Now, for fixed-rate, there are a lot of folks complaining of scope creep. You’re running your business poorly if you aren’t managing client expectations. Before a single second is spent on the project, everyone should know up front what adventure (which it, ultimately, ends up being) they will be in store for on the project. Minds do change and that’s where restrictions and out-of-scope charges take place. It’s both a better way to ensure everyone is on the same page as well as protects yourself legally.

    Effectively estimating projects is really the key because everything is based off an hourly rate system, in the end. Charging for a project on an hourly basis because it may take twice as long or billing on a 4-hour flat rate which ended up only taking 1.5 hours are essentially the same. You may get more initial revenue with the latter but realistically, you’d be stiffing the client with gouged pricing and if they’re smart enough, they’ll catch on eventually.

    Then again, maybe not ;-)

    Good luck!

  102. Michael says

    I’m a fairly a fast programmer and charge $165 per hour and this works well for my customers as having experimented with other groups they keep coming back to me. I get through about 10 hours of work a day and work weekends although I confess this is very hard work, so I have earned $600,000 each year for the last five years.

    I disagree with the article because the incentives become messed up from both the customer and contractor side if charging fixed costs for projects that are intrinsically variable. The customer is disinclined to make changes (which could be sensible upon having new information) and the contractor is negative, or at worst hostile, to large changes in the project which creates a negative relationship.

    Michael

  103. says

    I would always agree to solid pricing, as hourly just sounds bad no matter how you explain it. I’ve been in the online design business for over 15 years and Solid Price Model as I call it works!

  104. says

    Interesting point. I am in the television industry and work as a lighting cameraman. I work on a daily fee for a set amount of hours a day. What normally happens after our so called ‘day’ rate has been exhausted whether that be a 10hr day or 12, we then charge hourly into overtime. The reason why this works as a camera operator is that it becomes a kind of punishment that we have gone over the day that someone has scheduled and now its cutting into my personal time. There is always an air of grace… normally… but on a whole this works.

  105. says

    It’s been 3 years since I first commented on this post and quite a bit has changed so I feel compelled to share my experience since. When I first read this post I was freelancing on the side of a full-time job and didn’t really have the experience to be able to give the best answer but I thought I would share how things have changed since I decided to go out on my own and freelance full-time. As every project is different, I think you should use your previous experience freelancing and understanding of how long certain types of tasks normally take you to gauge your pricing structure. I’ve been freelancing for 5 years now, with only three months being a full-time freelancer. From my experience, freelancing pricing should take a plant or pivot approach. If things are going well with your existing pricing structure then stick with that until you feel that things need to change. I don’t think there is any right or wrong answer here but while I used to charge hourly, I’ve found that the following works best for me now:

    Maintenance and updates should be hourly and you should be able to provide your clients with an task by task, dollar for dollar breakdown using the time tracking system of your liking. The reason being, that you can charge quite a bit more to clients as long as they are happy and can see how your time was allocated. If it’s a repeat client, I often give them a repeat client discount to help maintain the relationship.

    For projects, I now I only charge per project. There comes a time when you can almost pinpoint exactly how much time you need to allocate to certain projects given the project scope. Depending on your experience, you can actually make much more than your (what would be) hourly fee if you quote a client based on an hourly guesstimate. The more you craft your skills, the more money you’ll be making but you also give your clients the comfort of not having to worry about project scope creep which can give them a greater peace of mind. Sure there’s the occasional project when you end up spending more time than you anticipated, however by constantly charging by the project and knowing what you are capable of, I think you’re much better off and end up making more than you would even think of charging hourly. This is at least what I’ve found works best over the years. But then again, always be aware of where you’re at and where you want to be financially. If things aren’t working, try changing your pricing structure and by all means continue to expand your skillset and find ways to be more innovative in your process.

  106. says

    I think there are a number of different issues entangled in the “hourly vs. flat fee” debate. One is scope. Yes, you’re better off with an hourly rate if the project might be 50 hours or 500 hours. I’ve found that projects that variable are a nightmare anyway – for me. How do you market for next month or six months from now if you don’t know when a current project will be done? That sounds like a scoping problem not a billing method problem.

    The other is the nature of the project itself. Is the end result going to be a single deliverable you can point to? Or is the project really a bunch of different kinds of work that necessarily happens over a span of time, with ebbing and flowing tasks and activities? Developing an entirely new branding strategy is a relatively open-ended task. Designing a logo should not be. I’ve found the problem usually occurs when the client hires someone to design a logo when they really need an entirely new branding strategy for the logo design to even begin.

  107. Sharyn Kopf says

    My biggest problem with charging by the hour is I’m not good at determining how long a project will take me. I can think of three projects where I charged a set fee, then regretted it when the project took significantly longer than I anticipated. One such editing job was tedious and time-consuming. The client paid me up-front but it took me two months longer to finish than I had planned. Which meant hours and hours of hard work for which I wasn’t paid.

    With another similar project, as soon as I realized it would take me at least twice as long as we’d originally determined, I contacted the client and, fortunately, they agreed to increase the rate. But by the time it was done, I made less than $20 an hour.

    When I’ve charged by the hour, on the other hand, I’ve never felt any regrets or that I didn’t earn what I was worth. If it’s an easy project and I finish it in an hour and get $50, that seems fair. If it’s more difficult and takes me 40 hours and I’m paid $2,000, I am more than satisfied.

    I’m still open to charging by the project but, at the moment, charging by the hour has proven more lucrative for me.

    • Ryan Domm-Thomas says

      You know Sharyn, I’ve faced that exact issue before… pricing is always a tough issue for me. Now, I usually decide on a price per hour for the work I’m being asked to complete and then give the client a “range” if you will of how long it might take. I include a disclaimer that it may take a longer or shorter amount of time but I clock those hours diligently and break down exactly what I’ve been doing during that time. This way, if I estimate 7 hours and I end up needing 11, I can show the client and say that it took longer but here are the exact reasons why.

      Thanks for visiting – have a great day!

  108. Sadie says

    How do you know exactly how much of a pain a client is going to be though before starting a project? I feel like the pain clients for me really affect my pricing for everybody, I always have a “buffer margin” of cost to absorb the cost of the client potentially wanting daily changes etc.

    Also I’m wondering if I should or shouldn’t include a project fee? It seems to take me a lot of time to communicate back and forth with clients, create and send over a quotation etc. before I even start a project. Is it reasonable to add a project fee to cover this time cost, or should those costs just be included in the “hourly creative time” to simplify things?

    • Ryan Domm-Thomas says

      Hi Sadie,

      Great questions! I think setting yourself a “buffer margin” is a fantastic idea. It allows you to adjust as needed and who hasn’t needed to do that after beginning a project, right?

      As far as a project fee goes – I’ve seen lots of freelancers who have and lots who don’t. It obviously depends on what works best for you. Personally, I think including a project fee is excellent. You are absolutely correct about the communication and quotes needed and I think that protecting your invested time is a very wise decision. Explaining it to your clients should be easy, too. They’re in business as well so they should definitely understand where you are coming from.

      I hope we’ve provided a little bit of insight for you! Thanks for reading – have a great & productive week!

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