6 Reasons Why You Shouldn’t Bill by the Hour and 3 Reasons Why You May Want to
One of the first things you have to decide as a new freelancer is how to charge for your freelancing work. In fact, the decisions you make about charging your clients can ultimately determine the success or failure of your freelancing business.
Aside from the question of what to charge, the next biggest decision you’ll make is how to charge your clients.
There are basically two methods that freelancers use to charge for their services:
- Project-based prices. The freelancer quotes a single dollar amount to the client for the project based on the agreed upon scope of work and deadline.
- Hourly rates. The freelancer gives the client an hourly rate that they will charge for the project. They sometimes include an estimate of how many hours the project will take.
While some freelance gurus will tell you never to quote an hourly rate to a client, I beg to differ. Charging by the project works well for most freelancers in most common freelancing situations. But there are times when the freelancer is better off charging for their work by the hour.
In this post, I’ll discuss the pros and cons of charging your clients by the hour. At the end of the post, feel free to share your thoughts and experiences.
Why You Shouldn’t Charge an Hourly Rate
There are some compelling reasons why you shouldn’t charge an hourly rate for your freelancing projects. Here are some of the most common ones:
- Hourly rates penalize efficient freelancers. As you get better at your job, you should earn more, right? As you gain experience, tasks generally become easier to do. However, if you charge by the hour you may actually earn less than a less proficient freelancer who takes more time to complete the same work.
- The client knows in advance how much the project will cost. Charging by the project rather than by the hour helps the client with budgeting. As long as they stay in scope, the client knows exactly how much the work will cost. If you charge by the hour, you may take more time to complete the project than originally planned.
- Clients are less likely to question a project-based invoice. Since they already know what the final cost of the project will be, they are less likely to question your invoice. However, if they receive an invoice based on an hourly rate, they may ask you exactly how you spent those hours.
- Project-based quotes make billing easier. Clients who receive invoices based on an hourly rate often ask you to itemize your charges. They want to know how you spent every hour on their project. Unfortunately, creating an extremely detailed invoice like this means more work for you.
- Some clients argue about high hourly rates. If you are an experienced freelancer, you may raise your hourly rate so that you receive the same pay for job that a less experienced freelancer would receive. Unfortunately, many clients don’t understand how freelancers work and will question a so-called “high” hourly rate.
- You need to accurately track your hours spent. It’s helpful to have an idea of how long a project takes regardless of how you charge your client since knowing how long a project takes will help you prepare future estimates. However, when you bill by the hour you may even have to keep a weekly time sheet.
Charging by the project is not always the answer, though.
Why You Might Want to Charge an Hourly Rate
Despite the advantages to billing by the project, there are some times when it makes more sense to charge an hourly rate. Here are several of those times:
- You are providing consulting or coaching. I always charge by the hour when I provide consulting or coaching services and most freelancers I know do the same. When you’re giving advice or answering questions it’s very difficult to predict how long a session will take.
- The scope of the project is not very well-defined. If you can’t get a clear scope of work from the client or if the client has a history of asking for lots of revisions, you are usually better off charging that client by the hour. Sometimes this happens with very large projects.
- You have been asked to work on-site. Clients who ask you to work on-site usually request that you only work on their project while you are at their location. You are also more likely to be asked to do minor tasks not related to the project while you are on-site. For those reasons, it’s often better to charge clients by the hour for time spent on-site.
Did I miss any arguments for or against charging by the hour? How do you charge for your projects?Learn how to earn $125 or more per hour as a freelancer - Free Test Drive