Hourly Rates, Project Fees, or Conversation?

There is a discussion heating up over at the Creative Freelancer Conference LinkedIn Group started by this question:

Which method do you use to charge clients? Is it based on projects, by the hour or on retainer?

Creatives are commenting on both sides – some for project-based fees and some for hourly pricing.

I agree with the line of argument that supports project-based fees instead of hourly rates, which is addressed extensively in "The Designer's Guide to Marketing & Pricing." But I think pricing goes far beyond project-based fees.

In my book in progress, "The Creative Professional's Guide to Money: How to think about it, how to talk about it and what to do about it" (for Spring 2011), here's one of the ideas I'm working with:

The most important element in your price is not necessarily how you present it. It's the perceived value of your services to your client or prospect, and that you cannot determine without talking to them. Sure, you can give a price based on what you need to earn or what the job is worth to you. But if that number, whether it's an hourly rate or a project fee, doesn’t fit with what your client has in mind, the conversation won’t go further.

The operative word here is "conversation." It is through conversation that you will find the overlap between the fees that fairly compensate you and what your client is willing to pay, rather than simply setting prices for your work in a vacuum. That’s why, underneath it all, dealing with money as a creative is in large part about relating to other people. And if you have a problem with that, you'll have a problem with the money part.

What do you think? Comment here or over on the CFC LinkedIn Group. Not a member? Join here.

2 thoughts on “Hourly Rates, Project Fees, or Conversation?

  1. Ben Rollman

    I have a rate sheet that hasn’t changed in years. It’s a guideline for what I initially tell a client. More often then not, what they need doesn’t fit my rate sheet so I let them know up front what I charge normally (based on that) and then try to work with them on how to fit it to their need. But having a set rate sheet helps you negotiate by knowing you can go to a certain point and if they fight back any more you can excuse yourself from the project.
    I also include extra time as hourly. So a flat rate per project until I think it has met the goals they wanted, then everything after that is an hourly charge. The charge isn’t steep but I give the client a heads up that revisions back and forth take up a lot of time and it’s in their best interest to make sure I have all the info I need up front. I’ve had clients pay more in hourly charges than the original project cost because they weren’t up front about what they wanted. And that’s their loss, I’ll take their money if they aren’t paying attention. But I’m more than happy to get it done in one shot and move on. Revisions are soul draining and not worth the added cost. But that’s why we charge extra.

  2. IdApostle

    I think it’s a better idea and more appropriate for clients to understand they are paying for a solution and not for the time associated. A designers’ job is to solve problems. One of these problems is helping clients understand the creative process, and, in turn, the value behind design.
    This is an excerpt from my article “Why Design Can’t be Billed by the Hour”. Along with the article, there are 70 opinions left in the form of comments by designers on the subject of billing. Very interesting.