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Deciding When to Use Project Pricing
By Samuel Ryan     Freelance Lessons     Comments

Billing by the hour is the most common way to make money in the freelance world, and it can be both safe and profitable. But it does have a few drawbacks. First, potential clients tend to balk at higher hourly rates, mainly because they're comparing you to other freelancers based solely on your rate (and not the talent or work that comes with that rate). Secondly, hourly rates offer little reward for the freelancer to be either fast or efficient. And as for the client, besides worrying about a freelancer who's freeloading, he will have a hard time pegging an actual cost and budget to the project. So for those reasons (and perhaps others), there are times whenproject pricing becomes a great way to make both parties happy: the client gets a fixed cost and the freelancer can earn more than he could hourly (without being compared to low-cost outsourcers).

 



So how should you go about project pricing? Consider these questions:

 

How large is the project?

 For many, maintenance work or small projects are rarely worth the effort of putting together a formal scope/contract. Besides, most clients aren't keen on making a project out of a four hour job. Furthermore, if you "project price" small pieces of work, it's easier for clients to string you along with more and more edits. Furthermore, you don't want to become known as the freelancer who does "jobs for a couple hundred dollars" -- you'd much rather have an hourly rate and larger project pricing. So if your work will only take a few hours, you can avoid unnecessary hassle by sticking with hourly pricing.

 

How well do you know the skillsets involved?

Accurately quoting a project is directly related to your knowledge of the tasks involved (or your ability to ask others concerning the tasks involved). It is a common mistake for a new freelancer to bid too low on a project with certain aspects he decides "he can figure out on his own." Take the time to properly understand what skills are necessary to finish a job -- if you feel uncomfortable with parts of it, find subcontractors. Don't be caught in projects that take you much more time than you thought because you assumed certain skills would be easy to learn.

 

Will the extra earnings (over an hourly wage) be significant enough?

 Project pricing involves extra overhead that hourly pricing does not. You need to take the time to plan out a project, communicate very specifically with the client, and carefully write out all the necessary obligations and responsibilities of both parties. Furthermore, you can be sure that the client won't be in any hurry when it comes to meetings, making edits, or streamlining certain tasks. Consider all these additional time factors into account when deciding on project pricing.

 

What type of client are you dealing with?

 Even with a carefully drawn-out contract, there can still be many gray areas in the course of a project. The client is trying to get the best work for his money and the freelancer is trying to make the best business decisions. Issues like endless edits, maintenance work, and interpretation of certain tasks can lead to one party or the other becoming frustrated. So before diving into a project, it's always wise to consider the type of client you're dealing with. Are they understanding and trusting? Or are they demanding and high maintenance? Of course, both can be profitable, but you'll have an easier time with project pricing for the former.


Community Comments
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1
Abe
If only I had read this a couple of years ago. This is what unfortunately most have to go through to learn how to be established and make a living working freelance. I just recently started using hourly. Previously I would just gauge a price for what was needed. This was usually based on my assumption of what could the client afford to pay. Most of the time I had screwed myself with more work and not much to show for. Now I am much more patient with quoting or taking money from anyone until I know it is going to be fair to the client and worth my time.

There was that period when it was tough to seperate yourself from other developers because everyone had a cousin who could make them a web page for cheap. Now that web design has matured, it is easier to differentiate between the level of skill you need in a developer and better understand what you are paying for.

Thanks for your great articles


2
Adam Bard
I've had pretty good luck quoting estimates explicitly based on the hourly rate (albeit for small projects of ~20 hours or less). The requirements should be specific, but they don't have to be as iron-shod as they might for a strictly project-priced project; they just need to be strict enough that the client understands that they're paying more - and how much more - when they request something outside of the spec.

When it comes to working on those projects, I basically continue improving it until I reach the requisite hours. I usually pad the estimate enough to allow for extra changes from particularly picky clients, and those more laid-back clients are pleasantly surprised when the project comes in a few hours under budget.

That said, I probably wouldn't recommend this for very large projects.


3
Allan
Per project pricing is the way to go.

I feel that hourly pricing only allows you to make more money if you work slow.



4
Rodrigo Mejía
In my experience, for maintanance jobs it works very well a simple hourly rate. When I first explain it to my clients they usually get a bit confused, but in practice both parties are very comfortable with it.

For larger projects I always make a project quote, but I've seen it's always good to take in consideration different quoting variables (type of client, estimated available budget, level of specialization of the project, time to complete, etc)

But in addition to all the other methods, I've found very important to always make an hour calculation, and calculate an overhead related to the total size of the project, because sometimes I tend to lower a bit my price for larger projects, and that usually represents troubles for me...


5
Tim
I have found that hourly bids for projects show the client how many hours I am estimating and how much they might spend.

That way if they start to change the scope of the project, they know they will be paying for it hourly.

If things go smooth, I take less time than originally bid and they are always happy with a smaller bill. Then they think they got a great deal but in reality, they payed for the time used, nothing less.


6
Michael
In my experience as well clients prefer a fixed price compared to a (high) hourly rate. For fixed price projects its important to manage expectations well.

1) The requirements document should cover every detail if possible.

2) Agree on the project time-frame and 'deliver on time'

3) Agree to Milestones and partial payment on those. (This lets you also get a feeling early on how well the client is holding up his obligations

4) Agree that change-requests and maintenance are handled with your hourly rate. - Communicate this early - this helps convincing the client to put extra effort into the requirements document (see 1)


7
Nout van Deijck - Blog <3.14 />
Great article!

Nout van Deijck, Blog <3.14 /> (about (web)design, typography, science and news.
=>www.noutweb.com/blog


8
John Goodsen
There is a middle ground that let's you work withing a "fixed price quote", but also let's the customer change scope along the way with the visibility of the associated cost changes.

The problem with quoting a fixed price up front is that it is hard to take into account the customer changing their mind, which they always do. So rather than stick to a fixed price quote, I prefer to use a lightweight process like XP to estimate the work in small units and then let the customer fix the budget/cost and let them vary the units of work within their budget. If they want to expand the budget then they get to do it - but it puts them into the driver's seat - and let's them introduce change and accept the cost changes incrementally. I've been doing this successfully since 1999 (we were an early adoptor of Extreme Programming).


9
Sonali Agrawal
I have always faced a situation when the client only wants to go with the Fixed and Flat rate. If I tell them about my hourly rates, they always come to the fixed rate. And now I have got the habit of only going through fixed rate practice.

Good post. Love your posts always.


10
Melek
my experience has been that if you don't gauge the client, they're fine with a project rate if it's all spelled out very clearly. i'm sure to state what is included, what is not, when approvals are due and if changes occur after something is approved, then an hourly rate for changes apply. i've had very few problems with that method.

and i think it's easier for the client to say "ok, the site will be $XX and we'll get XYZ" instead of with hourly pricing, they don't know how much they'll end up paying.

my problem with hourly pricing is that i work really fast...so i end up screwing myself if i bill hourly bc they get a great site for a third of what i could have priced it at.


11
seo services
this is always so tricky. it seems that whichever way you go, hourly or project pricing, you have to battle not to lose time, money, goodwill or any combination of these

it's not so bad in our main area but with web design, when you start to factor in the clients constantly moving goal posts, delays, unbilled support time etc it can be a real struggle to not lose ground.

oh and never do favours, youre so right about becoming known as the $200 man :)

another great post, hope you ARE managing to wake up later these days..

kev@seoibiza



12
Joomla Developer Perth
Hourly rate or project price? At the end of the day it all comes down to an hourly rate.

I generally provide a project price but it is based on an estimate of hours which is broken down in the proposal. It also includes a disclaimer that every effort will be made to deliver on budget but the project price is in no way a guarantee of price.

If you are going to provide a project price then document everything in your project plan and get it signed off. Get all the content in a content plan and signed off. Get your design signed off. Then start building it.

Tell the client the process up front so they know what to expect and when. If there is no ambiguities the project will be delivered on time and on budget.

If the client asks for changes to the content or functionality then politely ask that it be included as a second stage of development and price it separately.


13
Virginia Web Design
I've found that most of my clients prefer a project price as opposed to hourly. It actually works out to be less hassle for both parties - just be sure that both parties have a clear understanding of what is included.


14
Greg the Xgineer
Excellent article! something that we have done is to make sure that you are giving them a thorough job on the research and development (while getting paid). I feel it's way too risky to put weeks of work into a TRD/Timeline/Proposal and have them be blown away and take it offshore for a 10th of the price.

We have started to charge for this research and discovery and the deliverables that we provide for this paid service always exceeds expectations. Clients are usually so excited to see their project layed out in such detail, (now knowing the quality of our work), there is no way they can say no.

We provide TRD, logic flow, database schema, general comments and suggestions. pricing is huge and showing a customer the groundwork of their product while making a small investment in you makes them emotionally attached to you.


15
seo freelance philippines
I do agree with you that project pricing is still the best one since it will be both beneficial to the freelancer and the hiring company.

On an hourly basis, the freelancer may do the job longer than the normal time he can finish the job just to get more compensation from the hiring company.

But even if you are pricing on a per project basis, quality of work should be the most important factor.


16
Debbie
Pricing by the hour accomplishes two things for me. It forces the client to respect my time, and it forces them to think each design revision and/or request through more carefully, because they know that they are being charged for it.



17
Free concert
Nice article! I have learned the process of the project in hourly basis clearly. My thoughts *smart work is better than hard work* As a free lancer must put their effort at work faster in delivering the project at right time without error.


18
EdTech
Great points. It's often more profitable to use project based-pricing, once you know your stuff and know how long it's going to take you to complete a project, because you can have higher hourly rates built into an overall cost without your client really knowing what the hourly rate is - and thus, they don't have a chance to have sticker shock. Check out this article on Rate Negotiation: http://www.articleclick.com/Article/Rate-Negotiation-for-Independent-Consultants/1036345


19
Convert2Electric
I am a beginner in the freelancing field. Thanks to these articles, I have been blessed with the smarts to make the correct decisions when choosing a project. I have had such positive experiences so far with clients and if I continue doing my research, I think I will continue have great experiences. Thanks Samuel for putting out such helpful information on freelancing. It is truly hard to come by. I usually run across many negative myths about freelancing.


20
gomlek
I have checked both keywords and in both cases results are same and there's not any change in rankings......


21
oyunlar1
merci ilowe you


22
söve
The requirements document should cover every detail if possible


23
best websites
It's true that project pricing becomes a great way to make both parties happy: the client gets a fixed cost and the freelancer can earn more than he could hourly. But the main problem is to estimate how much time/effort this project will take


24
Arti
There was that period when it was tough to seperate yourself from other developers because everyone had a cousin who could make them a web page for cheap. Now that web design has matured, it is easier to differentiate between the level of skill you need in a developer and better understand what you are paying for.


25
Muhabbet
That way if they start to change the scope of the project, they know they will be paying for it hourly.


26
güzel sözler
That way if they start to change the scope of the project, they know they will be paying for it hourly.


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What is all this?
My name is Samuel Ryan and I make websites. Sometimes, I write about it. I disappeared from this blog for a couple years, but I'm jumping back in now -- even began using my twitter account. If you care to know more, go here.