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How to charge: Fixed Fee or Hourly Rate?

How to charge: Fixed Fee or Hourly Rate?

One of the most difficult parts of being a freelancer is figuring out how to charge your clients for your hard work. Generally, clients just want to know right away how much their project is going to cost before speaking to you more in depth about their needs. Before we dig deeper here I want to set one thing straight: The most-qualified clients don’t make their decision to hire you based solely on price.

There are two popular ways that designers charge their clients. Using a fixed fee or charging by the hour.

When you use a fixed fee, you have to carefully estimate how much time you will spend and what resources you’ll need and use. For example, if you will be purchasing a WordPress template that you can then modify, you’ll want to make sure that you include the price of that theme in your quote, so that you can charge your client for it.. A flat fee can show confidence that is based on value. You just need to be extra careful and take your time when creating a flat rate for a project or feature, because if you under-estimate, you end up working longer and harder for the end result and it becomes extremely stressful and can impact your quality of work.

When using an hourly rate, you must be careful not to undercut your value. Expertise can’t be measured in hours or built into hourly rates. The problem is, it’s impossible to know exactly how a project is going to go. There is usually less client hesitation with an hourly rate because they see a low number. $35/£21/hr looks a lot more attractive than $2,000/£1200 for a feature. Another thing to be cautious about with charging an hourly fee is that people can communicate to each other what your rate was with them. If you charge $25/£15 for one client but $30/£18 for another, that raises some skepticism if they find out. Especially if you’re working heavily with referrals, which is a big part of this business. You want your client’s to trust you.

My thoughts? Do a hybrid of both. First, determine an hourly rate for your services based on your experience and skill levels. Then convert that hourly fee into a flat rate based on how long you think a project will take to complete, then give yourself a 10% buffer in time. When it’s time to present your estimate, instead of listing individual services and your rate, use “package” pricing. “Package” pricing combines your services into one solution with one price. The more you break down your fee, the higher the chances are that your client will reduce or negotiate your fees. Package pricing is simply more persuasive.

The most important part of this is your contract with the client. When you create a proposal, be very specific about the number of revisions you’re willing to complete, and what exactly the scope of your work will be. That way when a client makes a change, it can be a change request, which you can bill for additionally. Any modification to the scope or description of work is a change request. Be very strict about this.

What would you add? What do you agree and disagree with? What has worked for you and what hasn’t worked? How do you actually charge?

 

Written by Steve

Steve is a freelance web designer, technologist, educator, Adobe Certified Expert and friend from the San Francisco bay area. He is a incessant seeker of knowledge and tirelessly thinks about how he can make things better. You can learn more about him on his website, www.stevedolan.com or by following him on Twitter: @scribblesteve