Freelance Pricing: A Case Study

Today I’m coming at the question of how to price freelance services from a different perspective. This time I’m the client, not the service provider.

When you freelance, you clearly aim for the sweet spot—as high a fee as possible without overpricing to the point the prospect walks.

But as the customer, I don’t share that objective.

This is the story of how I contracted with a design professional for Stand Up 8 Times, the business I launched January 1, 2009.

My designer works only by the hour and that was just fine with me.

Specifically, we agreed upon an hourly rate (a U.S.-based (not third world) rate in the higher double digits) which applied to all work. I paid a retainer at the beginning that she applied to all work until the initial deposit was depleted. This was followed by frequent invoicing at my request. (I like to receive small invoices so I’m never surprised by a large bill.)

Fortunately, she billed for time worked in small increments when that was the case rather than billing for a half-hour or even full hour when doing the smallest step along the way. I took her time records at face value—they seemed fair, even generous towards me.

Here’s why by-the-hour billing worked perfectly:

I was highly motivated to limit the amount of time required. For starters, I submitted perhaps 95% of the copy in a highly polished state and didn’t revise it. However, there were a lot of changes in terms of design, layout, names for links and web pages, etc.

Logo design in particular can devour huge amounts of time—and it did! Even though I went into this with a strong understanding of my business, target market, color preferences, etc. In other words, it could have been worse.

There was a lot of back and forth throughout the creative process. I was highly satisfied with how we worked together and the results.

If we had a flat fee arrangement, we could never have collaborated as much as we did through the creative process.
She would have had to put her foot down to achieve a fair financial return on her end.

We didn’t need to define the conclusion of the project. It started with “look” and logo and went on to include creating the website, the newsletter, the blog, business cards and getting me started on using Aweber and WordPress. Then we smoothly transitioned to website maintenance, special projects and other tasks that came up on an ongoing basis.

Anyone see any problems with this?

I don’t (and neither does she), but there seems to be a lot of criticism of this arrangement in the freelance world.

Many freelancers are opposed to pricing by the hour, claiming that it somehow commoditizes their work and doesn’t offer them the upside potential of a specified price.

What do you think? Your comments are invited.

P. S. By the way, my web designer and artist is Julie Winsberg. She is a joy to work with and I highly recommend her.

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8 responses to “Freelance Pricing: A Case Study

  1. Hi Diana. I’ve worked by the hour and by the project over the past 15 years or so of software development consulting. In general I prefer quoting by the project, but for long-term repeating customers who ask for help with tasks of varying sizes, hourly is really the only approach that makes sense. The primary reason I usually offer project pricing is because the customers want to know what it is going to cost them up front for budgeting reasons. They can’t find out down the road that the project got too expensive for them. However, with project pricing, the scope of work has to be very clearly defined, which can be tough to do with certain customers. I don’t mean to be wishy-washy here, I just don’t think there is a one size fits all solution. The best approach depends on the project and the customer.

  2. Your philosophy makes sense to me, and I’ve found that most of my editorial clients prefer hourly billing for all of the reasons you mentioned. I’m not ruling out flat-fee arrangements altogether (especially for copywriting assignments), but editorial work seems to be naturally suited to hourly payment arrangements.

  3. Hourly billing works for me, both as a freelancer and when hiring someone else, as long as everyone is honest about the hours spent.

    Even when I provide package deals, it’s still based on the number of hours of service provided.

    Your project was freer to evolve in ways that suited you best, since there is so much flexibility built into the hourly system.

    For larger projects, I still think the provider has to think in terms of how many hours (or days) the work will take when giving a lump-sum bid or estimate.

    To be honest, giving a firm lump sum cost for a project makes me a little queasy, having seen how many variables are possible even with good specifications. (I used to work on Government construction projects.)

  4. I’ve freelanced by the hour for years. It seems to be a fair method for both the client and myself. Generally my clients need an idea of what the total cost of a project will be so I list their requests and my approximate time required to complete the listed items (excluding later add ons). I submit this in the form of a written ‘estimate’. This estimate can change as the project progresses. A written ‘quote’, on the other hand, is firm as far as the hours are concerned and the scope of the work. Both are based on an hourly rate that may differ within the project, depending on the type of creative skills involved.

  5. Lisa (lablady)

    I think in most ways, an hourly wage is best for everyone concerned as is best exemplified by your working situation with Julie. I am in complete agreement. It makes life very simple. My time and effort are worth money. Why shouldn’t I get paid an hourly wage for whatever type of work I do?

    I don’t understand why people balk at paying an hourly wage to those of us freelancing. I mean, they pay a guitar teacher $20 an hour and don’t say, “no, I’m not paying hourly – I’ll pay per songs learned.” They pay a teenager $15 to mow a lawn which is $30/hr. yet if a freelance writer, editor, web designer tells them, “I charge $25/hr.” they respond with, “I’d rather not pay that way.” What other service allows the customer to decide how the service is charged!

    I told my rate to someone for proofreading and editing and they said just that, “I’d rather not pay an hourly rate…I’d like to pay a flat fee.” I can, in no way, give her a flat fee because she doesn’t even know the full extent of the project (her novel) because it is unfinished at this time. We’ll see what we work out because I’m not sure she even knows what she wants to hire someone for – could be more of a coaching/motivational type of service she’s seeking. We’re communicating as I ‘speak’.

    I do agree that in some cases, a flat fee is probably more practical if the company has to budget but then you have to be very clear in your contract what that fee covers and if there are any changes, the price will adjust accordingly.

    And, seriously, if you calculate a flat fee on a single project (versus an ongoing one), you DO calculate (and charge) your hourly wage; it just sounds like a flat fee to the client. That’s the key, isn’t it? Appeasing the client without shortchanging yourself. Ok, I’m rambling. One of those days. Great article, Diana! 🙂

  6. In the situation you describe, a retainer plus an hourly rate makes sense since it was a highly creative process with lots of changes and adjustments as the work progressed.

    But in situations where the work is “regular” and “set” it definitely pays to name a project rate: As you get better and more experienced at doing something, you can usually do it faster and better. But unless you charge a high hourly rate, which can “shock” customers, or you adjust your rate frequently, which regular and long-term customers tend not to like, you’re actually losing money because you’re earning less (i.e. billing fewer hours) the better you get! This is the ultimate paradox because as “employees” become more valuable to a company their pay goes up not down. In such a situation, the freelancer’s “reward” is an increased need for new customers to compensate for the hours they can no longer bill because they are good at what they do!

    In such cases, project billing makes sense. The trick is to find the right balance so that new customers don’t pay too much for ” start-up” costs but long-term customers don’t get a “free ride” at the freelancer’s expense. Knowledge and experience, and the value of the work to the customer, are worth something too, and I think these factors often get short shrift in hourly billing.

  7. Michele, Lisa, Terry, Marti, Janet and James,

    Thank you so much for your comments. You did a wonderful job of expanding upon the pros and cons of various pricing approaches and your implementation of these approaches. How to price freelance and consulting work is a subject of endless fascination!

    -d

  8. I think your point makes a lot of sense. But I don’t charge by the hour because I work about three times faster than most copywriters, and I doubt that anyone would really pay me $250 an hour, even if the project took only 10 hours instead of 30.

    I don’t aim for some “sweet spot” just before the prospect walks.

    I figure out how long I think the project will take and what I think it will require, then I quote for my time *and effort.* I put out a lot of effort, over a shorter period of time, and that’s worth money.

    I’m not out to “get the most” out of a client. I’m trying to build relationships with clients who appreciate the quality I provide.

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