The case for pricing your freelance and consulting work by the hour
I recently led a discussion for the Independent Writers of Chicago (IWOC), an organization of freelance writers, on “back to the basics” of running our businesses.
(Brief plug for IWOC: It’s a great learning and networking opportunity if you are a freelance writer in the Chicago area.)
During the session I learned something quite important and, at least for me, unexpected: many members routinely charge for their work by the hour rather than a flat per-project rate.
Based on all my online reading, I had assumed that almost everyone out there on the internet and around the globe only offers a project fee and that I was alone in feeling very comfortable with hourly rates.
Turns out that the IWOC membership, almost universally highly experienced with years or even decades as a freelancer, also see the benefits of hourly. However, some quote minimum and maximum fees to give the client help in budgeting and in limiting overages.
I tend to prefer by-the-project pricing when I have a rather firm idea of the time and resources a project will require. This may happen because the project is so clearly defined—500 words on how to save on household expenses—or because I’ve worked with the client several times already.
However, hourly rates are preferable when it’s difficult, if not impossible, to predict with any accuracy how long a project will take.
I am both a seller and a purchaser of freelance and consulting services. As a client, too, I prefer by-the-hour unless, again, the project is clearly defined.
Here’s how I see the benefits of hourly rates, primarily from a client perspective:
By-the-project contracts often limit rounds of revisions and deviations . . . as well they should. For me, one set of changes, such as for graphic design or website construction, is often insufficient. At the same time, paying by the hour prevents me from throwing out all sorts of ideas for testing since I have to decide which ideas are important enough for me to pay for experimentation. I get exactly as many revisions as I want to pay for without arousing resentment from the service provider.
No padding of the cost. When you bill by the project, you have to build in a bonus to cover unanticipated issues. Still, as a client I try to prevent these costs and want to benefit from this avoidance. I’ve seen freelancers and consultants online who brag that they make more money on by-the-project because they pad the fee so extravagantly. Please note: They admit—even brag—that they intentionally charge too much, far beyond what they need to charge to allow a reasonable margin for unexpected work or to justifiably charge for any “value,” however, they define it. So I call what they are doing a rip-off.
No risk of putting in more time than expected and, as a result, being underpaid.
Complaints against by-the-hour and corresponding arguments in favor of by-the-project include:
Sticker shock when prospects see the hourly rate. Not true for me as a client. As a soloprofessional myself, I am not looking for bargain-basement rates and I’m realistic about the rates I will pay. Anyway, I can also experience sticker shock when I hear the total fee for the project.
Clients may demand a detailed accounting for what was accomplished during each hour billed. It’s never happened to me nor have I done it to any of my service providers. Maybe it’s more of a problem for those who boast about how much money they make and how little time they spend doing it.
Doesn’t allow for free add-ons that “delight” the client. Actually, only by-the-hour can provide something for free. When I pay by the project, I assume that the flat fee incorporates any gifts. And I despise simple proposals that are beefed up with lots of add-on services, such as unrequested branding and such.
Originally posted 7-20-15