Hourly or Project?

One of the biggest and most nerve racking decisions a freelancer has to make is whether you will charge a client on an hourly rate, or on a per project cost.  There are pros and cons for both as well as different situations in which one is more favorable than the other.  We can find information on this on an article found on Freelancers Union titled, “Hourly Rate or Project Fee: What Makes Freelancers More Money?”

SOURCE: amazonaws.com

When should you charge an hourly rate?

1. The project is going to be ongoing and long-term:

This kind of project is one that has multiple mini-projects.  One example would be creating a whole identity for a client, which would include a logo, business card, website, among other things.  Because of how large a project of this kind would be, it is hard to judge how long it will take to complete the entire task.  By charging an hourly rate, you don’t have to create a new contract for each mini-project.

     2. The project goals and timeline are unclear:

Charging an hourly rate when you or the client are unsure of what the goals or timeline of the project are ensure that you are paid fairly.  If you charge per project, you might have to spend time in the unclear stage since your client has no incentive to speed up the process.  Charging hourly also ensure that the client focuses on what they want.

When should you charge per project?

1. You have multiple clients who you are charging differently:

When you have multiple clients, chances are you are going to be working on multiple projects on a day to day basis.  As a result, it can become hard to track how many hours you have worked on a project because you are switching from one project to another multiple times per day.  Also, when a client refers you to another company, they usually mention your hourly rate, which can cause you to be stuck with that hourly rate for other potential clients.  With a per project cost, a client can understand that the cost of a project can depend on multiple factors.

      2.   Your client has no idea what you do:

If a client doesn’t know what you do, they might think that a task is simple and should only take a short amount of time, when in fact, it might take much longer.  Having a project cost makes them look more at the whole project rather than specific smaller pieces of it.

      3.   You want to maximize your productivity:

When you have a per project cost, your income is only limited by how quickly you can finish a project.  Once you are finished with a project, you can spend the extra time looking for new clients.

      4.   Your client is on a strict budget & isn’t willing to risk extra expenses:

When you give someone who is on a strict budget an hourly rate and a projected timeline, there can be a big range of what the final cost of the project is.  By giving the client a project cost, they know what they will have to pay for the project once it is completed.

      5.   You’re fast:

Just because you are able to complete a project quickly doesn’t mean that the quality isn’t high.  But, to a client, when a project is completed quickly, they think that the value of your work is decreased because of how quickly you finished it.  By charging a per project cost, you ensure that you are still paid for the full value of your work.

Future Research:

How much does the necessary insurance cost?

What are some other good practices when setting a price?