I’ve been working as a freelancer for 11+ years, and to this date, I still switch between hourly rates and fixed pricing whenever the right situation suits me.
Whether you do hourly billing or a flat rate, it all depends on the project type you’re doing, and I’ll dive into the pros and cons of each billing type and when you should use each individual pricing structure.
Let’s get into it.
Key Takeaways
- Use hourly billing when working on ad-hoc or small tasks that are difficult to estimate.
- Use project pricing whenever you have the full scope of the project, and there is no doubt about what needs to be done.
- To ensure you stay profitable with project pricing, never solve tasks which are not part of the project requirements.
Charging Hourly Rates
Hourly billing is a popular pricing option among freelancers, ensuring you get paid for all the time you use. It’s perfect for billable hours.
So for every hour you spend, you invoice your client one hour.
On the other hand, clients don’t always like this, as they can’t predict how much it will cost them.
What I’ve experienced is starting with a fixed-price contract and then moving on to an hourly price once we’ve created some trust.
Pros And Cons Charging Hourly Rates
Hourly pricing is a great start, but it has downsides as well, so let’s get into the pros and cons of hourly billing.
Pros Of Charging Hourly Rates
Cons Of Charging Hourly Rates
When Is Charging Hourly Rates A Good Idea?
Charging hourly fits perfectly for ad-hoc tasks, small tasks that are difficult to explain or difficult to estimate as well.
Helpful tip
You can always be proactive with your client and give them an estimate of what you believe it’ll take to solve the task.
Working as a web developer, I’ve found that it’s impossible to estimate if I need to fix bugs, and hourly billing is the right solution as my pricing strategy.
Ready to improve your freelance career?
I’m sharing tips and guides every week on freelancing based on my own experience. Sign up today. 👇
Charging As A Fixed Price
Now let’s discuss fixed-price contracts; this is perfect for long-term projects.
Project pricing is often used for a development team who needs to create a certain project which contains a well-defined scope that is easy to estimate.
As a freelancer, you’ll break down each element in the project, so you can estimate each individual element and sum it all up, and define a project price as part of your pricing strategy.
Pros And Cons Charging A Fixed Price
Let’s get into some pros and cons of using a fixed price when charging for your freelance work.
Pros Charging A Fixed Price
Cons Charging A Fixed Price
When Is Charging A Fixed Price A Good Idea?
Working with potential clients and you’re discussing whether something should be on an hourly basis or a fixed price for the entire project, it depends on the description of the project.
If it’s a new thing that needs to be created and you and your client are able to define every single detail of the project, then project pricing is perfect.
Project pricing is also an opportunity for your to increase. your revenue as you, with your skillset, are able to solve specific tasks faster than your cheaper colleagues.
Just ensure you’re able to get the entire scope, and often you need to help your client with securing it.
And remember to include the hours you expect to spend on communication, depending on your level of communication.
You can communicate weekly, bi-weekly, or monthly for status, and it’s essential to keep your client in the loop.
How To Ensure Charging A Fixed Price Stays Profitable
The trap I see most freelancers, even seasoned freelancers, fall into is estimating lower than what you expect the project to take.
Helpful tip
I have a rule that once I’ve estimated every element in the project, then I sum it up and time it by pi(3.14).
So you need to remember all elements, the invisible as well, such as communication.
It’s so important to state in your contract that anything that falls out of the project description will be billed as extra hours.
I had a client once who called every single day with questions or asking for an update, and that’s entirely fine. You just need to remember to invoice the time you spend talking, as it takes your time away from other activities.
Wrap-Up: Which Is The Right Solution For You?
As a freelancer, you’ll end up using both methods. It all depends on your potential clients and what types of projects they need.
If the project is unclear or difficult to estimate, then give an estimate and then bill your hours. Doing this, your client has some sense of cost certainty as you won’t surpass your maximum of hours estimated.
Use project pricing when everything is clearly defined and there are no doubts between your client and you. And then remember to estimate all the invisible things, such as communication through email and phone.
If you want to learn more about how to write a freelance contract, then get some freelance contract templates here.
Hourly Rates vs Fixed-Pricing FAQ
What Is The Difference Between Hourly Rates And Fixed Pricing?
The difference between hourly rates and fixed pricing is that hourly rates are when you bill your client for each hour you’ve spent on a task. At the same time, fixed pricing is where you estimate an entire project and then give a fixed price on everything included.
Is It Better To Charge Hourly Or By Project?
It’s better to charge hourly when it’s ad-hoc tasks or tasks that are impossible to estimate. And by project, once you have the full project description and are able to estimate each individual aspect of the project.
What is the difference between the hourly rate and the daily rate?
The difference between the hourly rate and the daily rate is that an hourly rate is where you bill for each hour spent on a task. A day rate is where you bill for each day you’ve spent working on a specific task or project.
