Why Hourly Rates Don’t Work

Yes, the title is exactly what I meant to write.

Why hourly rates don’t work.

A potential client writes and says, “I may have some projects coming up and I’m wondering what your hourly rate is?” I respond by telling her my hourly rate. She responds and says, “Well that may be too high for these assignments, but I’ll keep you in mind.” So I write back and add, “perhaps it would be best if I wrote you flat fee estimates, because it’s always better if I’m bidding on the work to be done.”

clock imageThe reason I’m sharing this exchange is because I may charge more per hour than what she was looking for, but I also may work 3 times as fast as someone at a cheaper rate. The only time I ever use hourly rates is on maintenance. All projects are flat fee estimates. This is so both the client and I know exactly what to expect and there are no surprises. Even in the estimate it outlines exactly what is included (designs, rounds, pages, programming, etc.) It also says, if we go beyond this assignment, a new fee for additional work is negotiated.

If I were to charge by the hour and was billing a client based on how much time I spend perfecting things, it would never work in the client’s advantage.

In this particular case we’re discussing service-based business to business projects.

From this point on, I will not respond with my hourly rate, but only ask for the project specifics, so I can write an accurate estimate based on reality. And business owners should be asking for the same.

4 thoughts on “Why Hourly Rates Don’t Work

  1. John Crittenden

    Yes, this is the only way to go. When I do copywriting — http://justtherightwords.com — I only do project quotes. I know I'm only going to be billing for actual intensive, focused work. I'm going to be doing the hand holding and research, if needed, for free, and it's best if I admit it to myself upfront. The client gets one figure, and doesn't have to worry that I'm running up the hours. I get one time frame to shoot for, which helps focus. We're not taxi drivers, or lawyers, so why charge by the minute.

  2. Jackson Lane West

    Great blog Susan!

    I deal in value based, flat design fees. This saves my client from worrying about going over budget and helps me to predetermine my income. Most people don’t realize how many hours we work that are not billable. I teach this in my http://www.InclinedToDesign.biz training program. I also never disclose my hourly fee to my clients. The “cookie cutter” approach to billing has proven ineffective for me. Clients want to pay for the result not a process.

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