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Freelancers: Why You Should Stop Charging By The Hour

One of the biggest breakthroughs I experienced early in my freelance career was the realization that I needed to charge per project, not by the hour. Simply put, charging by the hour hurts the most talented people because they happen to be good and work faster.

Besides, clients love a quicker turnaround and ultimately want a great end product. So, along with the fact that charging by the hour undervalues the expertise and efficiency of freelancers, here are some other reasons why moving away from hourly rates might be beneficial for you:

Charging based on the value of the service provided rather than time spent allows freelancers to capture the true worth of their expertise. Clients pay for the outcome and the value they receive, not for the time it takes to accomplish the task.

With experience, freelancers often become more efficient at what they do. Charging by the hour may penalize them for being efficient, as they can accomplish tasks more quickly due to their expertise.

Hourly rates don’t necessarily align the incentives of the freelancer with the client. Charging for value encourages freelancers to focus on delivering high-quality outcomes that satisfy the client’s needs.

Project-based pricing can potentially increase earnings. If a freelancer can deliver high value in a shorter amount of time, they might be able to take on more projects and increase their overall income.

However, it’s important to note that the transition from hourly rates to project (or value)-based pricing requires clear communication, accurately understanding the client’s needs, scoping projects effectively, and sometimes requires a track record of delivering value. It might not be suitable for all types of freelance work or in all client relationships, but it should be a model to consider in your future.

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  1. Great insight, Phil.

    I once asked my friend and consultant Olan Hendrix why he didn’t charge expenses on a consulting job, and just priced by the job or day as the case was. His answer was that charging expenses put the decision of what rental car to drive and what hotel to stay in in the client’s hands. They could certainly question the expense more directly. By charging a flat rate, he was able to completely control that himself. Another nuance to a job-based price as opposed to an hourly price.

    1. Agree that it’s never a good idea to put the client in control of making travel arrangements. A red-eye flight may be cheaper, but if that means you’re showing up unable to perform the next day due to lack of sleep or flight delays, it ends up actually costing more in the long run. I typically write into proposal terms that we handle travel arrangements for our team, bill everything at cost, & submit receipts. They know how many trips are needed and for how many people before signing on.

      Combining outside expenses (like travel) with fees for services rendered also makes it difficult for clients to know what they’re actually paying for, as many professional service organizations will pad the budget a bit in this area to compensate for expenses related to cancelled trips, last minute flights, etc., which punishes clients that are responsible/plan ahead by paying for unnecessary fees. It may seem cleaner on the front, but is actually a disservice for both the client and service provider in the end.

  2. Charging by the hour also punishes those that are experienced/fast. A potential client may see a high hourly rate and think it sounds crazy, but if it takes a lesser experienced person 5x as long or creates a lesser quality product, which is actually more expensive?

    If a potential client isn’t willing to trust you have their best interests at heart when managing travel expenses, they’re probably not going to trust you to solve their problem either. It’s a huge red flag.

  3. Hourly billing hurts EVERY business, but especially creative ones. It also hurts the organization that hires because it changes the focus away from outcomes toward efficiency. Now, whenever more work is needed both parties become gun-shy because every interaction is considered billable. They disincentivize themselves from working together because it becomes even more costly to scope out new work and the work itself has been gutted of its value. It creates a lose-lose situation. This problem gets exacerbated by non-profit organizations who don’t have enough money or don’t get fully agreed-upon budgets to begin with. The only businesses that profit from hourly billing are high end law firms that operate within a potential windfall.

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