Freelance Rates – Part 2: Hourly vs Project
April 30, 2010 by Lillie
Table of contents for Freelance Rates
- Freelance Rates – Part 1: Determining Your Worth as a Freelancer
- Freelance Rates – Part 2: Hourly vs Project
- Freelance Rates – Part 3: Setting Freelance Writing and Editing Prices
Some freelancers prefer to charge by the hour; others offer flat rates for specific projects.
There are advantages and disadvantages to both, and some jobs are better suited to one than the other—the scope of some projects can’t be easily defined, making a project fee difficult to determine. Your market may dictate how you charge. Many business clients prefer a project fee because they want to know exactly how much to budget.
Reasons to charge a flat fee:
- Both you and the client know exactly how much the project will cost.
- Many clients prefer a flat fee because they need to budget for a total amount or they fear being overcharged by a freelancer who drags out the project to generate more billable hours.
- You can earn a higher hourly rate if you are efficient and get the job done quickly.
- You don’t want clients to look at you as an employee who trades time for pay; you are running a business that charges fees for services.
Reasons to avoid charging a flat fee:
- If you under-estimate the scope of the job, you can spend a lot more time than you are being paid for.
- Some clients prefer an hourly rate because they have no idea if your project rate is reasonable.
- The work is so unstructured or indefinite that you can’t determine a fair price.
- The client takes an inordinate amount of your time in phone calls or e-mails, or the client expects more than you anticipated.
Reasons for charging an hourly rate:
- You will be paid for all the time you put into the project.
- The project is difficult to price at a flat rate because the amount of work can’t easily be determined in advance.
- Professionals, such as lawyers and accountants, charge by the hour.
- Some clients may prefer an hourly rate to help them decide if the price is reasonable when they have no understanding of what is involved in what you do.
Reasons for not charging an hourly rate:
- You must track your time and keep accurate records.
- Clients may not accept an hourly rate because they have no idea how much the total will be or they fear that freelancers will waste time in order to increase the cost.
- Your income is limited to the amount of billable hours you can work rather than the number of projects you can do.
- You will make less money if you become more efficient and can do the project in less time.
How I Charge:
For most of my regular clients, I charge an hourly rate because I work with them on an ongoing basis rather than completing finite projects. I keep a running tally in 15-minute increments and bill monthly for the accumulated time. There’s never a discussion of cost (except when I raise my prices)—the clients know they will be billed at my hourly rate for anything I do, whether they ask me to do it or I initiate it myself.
For example, if I learn of a new book promotion Web site, I e-mail by author clients and ask if they would like to be listed. Most of them will tell me to do what I think is best. I register with the site for them, submit their bios, book covers, blurbs, and anything else required, and let them know when they’re listed.
When I’m working with a self-publishing author, I may do any or all of the following: edit the book, lay out the interior, contract with a cover designer, create the back cover blurb, negotiate and contract with the printer, send advance reading copies to reviewers, get the ISBN and bar code, create a Web site with a shopping cart, write and submit a news release, register the copyright … And clients may publish more than one book, so I’m updating their Web site/blog during the same time I’m editing a new book and looking for promotional opportunities for the last book. Rather than setting a price for each step of the process, I simply keep track of the time and bill them at the end of the month.
On the other hand, if a new client just wants a resumé or a news release, I will quote a flat rate. I can turn a project like this around quickly and charge more than I would earn at an hourly rate.
For new editing clients, I do a free sample edit so the client can see if they like what I do and so I can get a feel for how much work is involved. Many of my clients are great storytellers but not-so-great writers, so it’s difficult to determine a flat rate for editing a book. However, I will give them an estimate based on the sample, with the proviso that if the rest of the book requires more work—because they sent me a sample that had been self-edited more thoroughly than the complete manuscript or because there is a major plot or other problem that shows up later, I will re-negotiate the total cost. The author knows what to expect for the total cost, but I am covered in case of unpleasant surprises.
Other Opinions:
- Do You Quote by Hourly Rate or Flat Fee?, Peter Bowerman, The Well-Fed Writer Blog
- Flat Fees vs. Hourly Rates: Do Both at Once!, Anne Bingham, Writer’s Weekly
- The Great Debate: Flat Rates vs Hourly Rates, Susan Johnston, The Urban Muse
In the next, and final, installment, I’ll go into more detail regarding how to actually set your rates.
Argh! Billable hours. They were a but of a pain.
.-= Bluestocking´s last blog ..A Thread So Thin: Is Marriage Still Relevant? =-.
Bluestocking,
But they put freelance writers who charge hourly at the same professional level as lawyers. Oh, dear, maybe we don’t want to do that.
Lillie, this is awesome. I’ve never wanted to mess around with an hourly rate – but I’ve underestimated the time I’d spend on a project more than a few times.
Thanks for sharing this. I’ve got some figurin’ to do.
Angie,
I’m glad the post was helpful. If I did individual, finite projects all the time, I wouldn’t charge hourly. However, the nature of my business means that hourly rates make sense for most of my regular clients with ongoing, indefinite work.
I also prefer having my projects in an hourly rate because most of them are long-term projects. I have already proven to my clients that every hours I’ve worked are worth what they’ve paid me.
Charisse,
If the projects are indefinite as well as long-term, hourly is about the only way to do it. However, if there is a long-term project that can be quantified, a project fee also works.
I definitely prefer flat rates for my projects. It can be difficult sometimes to figure out the fee for a new type of project, but for me, trying to keep track of every minute I work is literally impossible. I am constantly interrupted by children (which is fine, it’s why I work at home) and husband . . . so my time counts would be too imprecise to be fair to the client.
Genesis,
Keeping track of the time can be a challenge, but in the work I do it would be much more complicated to come up with a fee for each project. For some of my clients, I work on a dozen or more different things during the month, ranging in time from 15 minutes to many hours. And much of that is open-ended as I do some administrative work along with writing and editing, and I often don’t know in advance what the scope of work is. My clients just trust me to do what needs to be done and charge them fairly. If the nature of what you do allows you to quote a fee for each project—especially if all your projects are sizable—that’s great.
I like the idea of being paid project-based. Although, you cannot really determine flat-out how much time you are going to invest in a certain project, you can always get the benefit of having the freedom of time with regards to your work. Although, an hourly-based task is more lucrative.
Ron,
After you have some experience, a project fee is probably more lucrative. You can do the same project in less time, so if you charge by the hour, you’re actually charging less for the same work after you’ve done it for a while—unless you raise your prices.
This is a great article with some awesome tips.
Very useful for those freelancers who are still figuring out how much to charge. I’ve always charged a flat rate which has worked out fine for me, except when you get a client from hell lol … who’s emailing/phoning you all the time. I’ve only had one like that, so not too bad lol
I think the most important thing is to make sure to get a proper brief which both parties understand and agree upon. It can save you lots of time/money. A good brief will also make it easier for you to have satisfied clients.
.-= Marica @ Facts about Malta´s last blog ..Apr 24, Best Dive Sites in Malta: Comino Diving =-.
Marcia,
If you do individual, finite projects for which you can get a definitive brief, a project fee is ideal. However, for many of my clients, I do a little of this and little of that and a little of something else on an ongoing basis throughout the month. Defining the scope of the work is impossible, so the only way to charge is hourly.
Hi Lillie,
I may be able to shed a bit of light on this. Its true that accountants and lawyers charge by the hour, but however it isn’t so different to a flat fee.
(I work in a ‘Big Four’ accounting firm)
We look at the task in hand, we calculate how many hours it will take. We calculate this price/cost based on the chargeout rates of the different staff involved.
We then use this figure as the negotiating tool to enable us to get a good price from the client.
However, once the price has been agreed – it’s effectively a flat rate, and the number of hours we work doesn’t correlate with the revenue anymore, unless the client does something which heavily increases our hours, in which case we will attempt to charge extra to help us cover the amount of work we did.
I think this example shows that the hourly basis is a great way to examine the price of a project, because it gives you the ‘real’ return of the project per hour, which is very easy to compare with other projects and jobs. However, for the reason’s you’ve outlined above – clients want a fixed cost, so simply use your hourly rate as an estimation tool to arrive at a reasonable fee. This will involve you taking on extra risk – but the cost/benefit goes each way, you may lose out if it takes longer, but gives good incentive to be efficient and complete as soon as possible.
Kind Regards, hope you’re well Lillie.
Si – Leadership Training
.-= Si@Leadership Training´s last blog ..Leadership Courses =-.
Thanks for the detailed explanation, Si. This is a great way to calculate prices, IF you can quantify the project.
Actually much of what I do isn’t “projects”—in some ways, I function as an assistant to my clients. In a given month, I may proofread a short letter (that takes just a few minutes); work on a major project that is ongoing over several months; see a promotion opportunity, suggest it to the client, then make the arrangements for them to participate; add appearances to a Web site; edit and post blog posts; research information; … and a dozen other things. It would be very cumbersome to calculate a project fee for all the 15-minute projects, the hard-to-quantify things like research, etc.
If I were a writer who wrote articles or blog posts or an editor who edited only manuscripts or a writer/editor who worked on finite, definable projects, I would prefer to charge a project fee. But for what I do, I would spend more time calculating project fees than working.
I have proposed a monthly fee based on the average time I’ve spent for that client for the past year. However, none of them have been willing to do this because some months I may work only 4 or 5 hours and other months I may work 40 or 50 hours. They prefer to pay for the work at the time I do it, although I would be happy not having to keep such detailed time logs.
This is a nice article with great and useful tips.
You give us enlightenment for those freelancers who are still figuring out how much to charge. I’ve always charged a flat rate, regardless of the time allocated to the project, i just make sure that the job has been done greatly
Angela,
A project fee is great as long as it is fair to both you and the customer.
Only the fixed rates
vumbut,
Fixed rates are fine if they are fair to you and the client.
Hi Lillie -
I know I’ve already commented here once, but I have to tell you – you really know what you’re talking about.
I took on a new client last week, thinking my standard per-project rate was going to work. I was SO wrong.
He called and called and called, emailed repeatedly and requested things that weren’t in our contract. This morning I thought of your blog and how hourly rates can work in a writer’s favor. This gentleman would’ve been perfect for an hourly rate – but I didn’t book him that way, and now I’m stuck on the short end of the stick because this gig is not paying a fraction of what it would had I charged hourly.
I wish I’d thought of that… but thanks to you, I’ve learned and will next time. I just wanted to high-five you for your insight, that’s all.
Angie,
Sometimes you don’t know how difficult the client will be at the beginning, but if you have clues when you’re negotiating the job, you can avoid short-changing yourself by charging an hourly rate.
I prefer hourly rates, because the requirements specification are often imprecisely detached.
Michael Gutschein recently posted..Ab-in-den-Urlaub Gutscheincode
Michael,
Projects with ill-defined scopes are ideal for hourly rates.
I agree with Lillie some tasks can look so easy but once you started it you will figure how hard it can be. I think hourly rate is much better than projects.
Janice,
Yes, when the scope of work can’t be easily defined, hourly is the fairest way to charge.
Lilie,
Hourly rates is much ideal for most of freelancers, besides hourly rates can be more stress free.
Janice,
I generally charge an hourly rate because I do a wide variety of tasks for each of my clients, and it’s too complicated to figure a project rate for each thing. However, when the scope of work can be defined, I prefer a project rate because I can be rewarded for completing the job in less time than expected. As I get better and faster at a specific job, I can still make the same money by charging a set fee. However, if I charge hourly, I’ll actually make less when I work more efficiently.
I prefer project rates because sometimes i do multiple tasks while working so i can’t ask for a hourly rate.
Lucy,
It’s certainly easier not to have to keep track of every minute. However, I still keep track of all my time even when doing project rates so I can make sure I’m pricing the projects correctly.