Freelance fees: hourly or per project?

October 2, 2009 by Dean Rieck
Filed under: Freelancing 

Fees are a difficult subject for most freelancers. And one of the most difficult decisions you face is whether to charge hourly or per project. There are advocates on both sides.

In the hourly camp are those who claim that charging for the time you actually work is the only way to be sure you are fairly compensated. It’s also familiar to most freelancers who have worked this way in full-time employment situations. You quote your hourly rate, track your time, and multiply at the end of the project. Simple.

But hourly fees have a downside. Neither you nor your client know what a project will cost. This can lead to some nasty surprises and uncomfortable conversations when it’s time to invoice. Also, the better you are and the faster you work, the less you get paid, which is inherently unfair. The most important negative is that hourly fees mean you are selling your time instead of selling your expertise. This can prevent you from attaining the higher professional image you want.

Those on the other side of the issue say project fees solve these problems. You and your client both know the price tag before the work begins. The more efficiently you work, the more earning potential you have. And set fees help you to sell your expertise rather than your time. In other words, a client pays for the value of the work rather than for a chunk of your day.

But with project fees there are drawbacks as well. Without a lot of experience, you may not know what to charge, so you risk setting the fee too low, which means you will lose money on the project. You also may encounter clients who balk at the true cost of a project when they see that big number upfront. There are even clients who may inquire about your hourly rate because, regardless of the final cost, they simply want to know what you’re earning, which can cause some friction.

The answer? Apply the “Delimit Test.”

I’ll tell you how I charge in a moment. But let me give you the skinny on choosing your fee strategy. I call it the Delimit Test.

The question to ask is whether the project has well-defined boundaries or whether it’s more open-ended. If you’re not sure about the limits or boundaries of the project, use an hourly rate. If you’re reasonably sure about the limits, use a per project rate.

When I say you’re not sure about the limits of a project, I mean you don’t know how long it will take you to complete a project. You anticipate that the client could make significant changes. The objectives are unclear. You’re dealing with a project that is inherently vague, such as generating “concepts” for an advertising campaign. Or the project will stretch over a long period of time, beyond your ability to fairly estimate the work involved, such as writing a lengthy technical manual for a new product or designing a large corporate Web site from scratch.

In situations like these, an hourly fee is the way to go. You can’t “delimit” the project, so all you can do is do the work and charge for your time.

However, when you can delimit the project, a project fee is always better for both you and your client. This would be for a situation where you know about how much time you will put in, you won’t have unexpected changes, the objectives are clear, you’re working on a well-defined type of project, or the project deadline is near and clear.

Which type of fee do I use?

This should be pretty clear by now. I use a per project fee.

When I started out, I charged hourly because that was easy. But it made me feel like an employee. Clients were buying my time, not my expertise. Also, as I became more skilled, I realized that I would have to either make less money or quote larger and larger hourly fees.

So I started using project fees for different types of projects. Did I know what to charge? No. I just took my best guess. Did I guess low sometimes? Yes. But after the project, I simply adjusted the rate. Rather than worry about the one project, my strategy was to keep adjusting until I figured out where the fees should be.

Today, I have a multi-page rate card for every imaginable type of project. When a client asks my fee, I just quote from the card. Do I lose some work when the rate is too high? Yes. But my strategy on that is that I don’t care. If my fees are too high for a client, it means the client isn’t right for me.

One more thing, I also use hourly fees occasionally because some projects require it, such as consultation or on-going projects.

So how do you charge and why? And additional tips?

Related posts:

  1. 8 rules for setting your freelance copywriting fees
  2. Should you ask for freelance referral fees?
  3. Are you losing thousands in freelance fees to PayPal?

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Smart Comments

13 Comments on Freelance fees: hourly or per project?

  1. Stephen Dean on Oct 2nd, 2009 11:44 am
  2. I charge by the project too. I have an hourly rate in mind, but I keep that to myself. I estimate how long the project will take and make that my project fee. I agree, it’s less of a mess.

    Michel Fortin shared at one point he charged by the page. He’d estimate how many pages the project would take, quote that price, and if it went over he’d throw in the extra pages at no cost.
    .-= Stephen Dean’s last blog … 5 Ways To Grow Your Twitter Followers From Your Blog =-.

  3. Dean Rieck on Oct 2nd, 2009 12:13 pm
  4. I only reveal my target hourly rate if I want to scare someone or fend off a prospect I really don’t want to work with. :)

  5. Mac Bull on Oct 4th, 2009 11:09 pm
  6. Dean,

    Thanks for that post. I think you clearly outline some key points that should help beginners to pros across the board.

    I have to say I like the project fee myself too. I also like to ask the prospect what their budget is. Any business owner is going to know their business and their numbers, so I think it is great to ask them, “What’s your budget?”
    If the project seems like a breeze I may decide to take it at the lower rate. Or…if the budget/my rate don’t match up then we are done talking. I can refer them to a contact that charges lower.

    Good luck to you and your endeavors,
    Mac Bull

    [...] Freelance Fees: Hourly or Per Project? (Dean Rieck, [...]

  7. Chrystal @ Happy Mothering on Mar 1st, 2010 4:46 pm
  8. I’m still charging an hourly rate for most projects – mostly because my clients don’t always have objectives clearly laid out and I know that things could change in an instant. I do have a few things that I charge flat rates for though, mostly because I can plan for how much time they’ll take me. I tend to work very fast and much more efficiently than other writers I know, so I probably get the short end of the stick on some projects.
    .-= Chrystal @ Happy Mothering’s last blog … Life with Two Under Two: Temper Tantrums, Sleep Deprivation and Sweet Kisses =-.

  9. Dean Rieck on Mar 1st, 2010 5:51 pm
  10. Chrystal:
    That’s one of the problems with charging hourly. If you work fast, you get paid less. If you work slow, you get paid more. I suggest selling your expertise, not your time.

  11. dudley mokwele on Apr 7th, 2010 3:21 am
  12. just secured a contract for a huge haulage company to transport coal
    from the mines to the electricity generating plants. The contract is worth millions of ZAR and last for 4 year after which it can be rolled
    to whatever period . The mine’s life span is estimated to 70 years and it is in its first 5 years . Please, help.

  13. Dean Rieck on Apr 7th, 2010 10:25 am
  14. Dudley,
    Good for you. But as you can see, this is a blog about copywriting, not hauling coal.

    [...] covered project vs. hourly fees in more detail last [...]

  15. Brett Henley on Oct 12th, 2010 9:35 pm
  16. Great stuff Dean … needed a nudge in the right direction. I’ve always charged by the page, but as my expertise has grown, it’s been quite difficult to land on a price range that felt adequate.

    Now I’m working to set an hourly range and quote custom per project fees. This will allow me to build in margin for research and misc, so it’s a big help.

  17. Dean Rieck on Oct 13th, 2010 10:16 am
  18. Brett, I’ve found that flat fees generally work best when you start charging higher fees. Clients like knowing what they’re going to pay. And as you get faster, it’s more fair to you.

  19. Pamela Capraru on Oct 10th, 2011 12:52 pm
  20. I charge by the hour, because I’ve been burned on project rates when a job’s scope has expanded. I’ve learned that “scope creep” can be avoided by building in a set number of revisions (heavy first edit, second round to address queries and client input, final read) and charging by the hour or by the page for overages. As an editor with 30 years under my belt, I do see the reverse return of being faster and more efficient and therefore earning less by the hour. How does per page charging work? My primary field is magazines, and I work in designed layouts as often as I do in MSWord manuscripts, but I also do some corporate and government work. I’ve set my hourly fees at well above the magazine industry average, and I charge almost double for corporate work and higher for specialized government projects. I’d appreciate your input.

  21. Michael Ussher on Nov 16th, 2011 6:13 am
  22. Always by the hour.

    With a clearly laid out spec sheet of what I’m good at and what I’m not good at, “What the client SHOULD hire me for” along with “What they SHOULD NOT hire me for.”

    I find if I bid what I actually think it will take me plus a few extra hours for the unknowns then get the job done under this time, then the projects very often keep on going LONG after what the client had set as the specs for the project.

    Using an hourly rate allows you to “Just keep going”. I bid 43 hours for my current project and were up at over 150 hours already.

    I like it like this.