Charging Per Hour or Per Package?
WHAT RATE IS BEST FOR YOU AND BEST FOR THE CLIENT? WHAT ARE THE BENEFITS?
When doing a quotation for a client, the bottom line should be the bottom line without the if’s and but’s in the price. The client wants to budget for the overall cost of the product or service you will supply.
Charging an hourly rate is incredibly common in the world of freelancers and it’s a pretty straight-forward way of charging. I’lI charge $X per hour and you either think that’s reasonable and agree to pay it or you don’t and you find someone who charges less. The down side is the unknown quantity. Many professional services like lawyers and accountants will charge you per hour. But how long will the project take? This method allows the greatest flexibility but can have draw backs if the client is not fully aware of the possible time involved. They may preserve the project to be simple however if the complexity is not explained or the process outlined to them, will they truly appreciate the time involved?
There are a few other different drawbacks to charging an hourly rate. First of all, if you’re preparing quotations for your clients, they might be upset if the project ends up taking more time and therefore costing more than the original quote. It’s important to ensure your clients understand that your proposals are estimates, and that if additional work and time is required, you’ll charge them more. There always needs to be a little clause to include unforeseen expenses or restrict the quote to allow only XX hours to complete.
Clients may look at your hourly rate and the hourly rate of another similar business and go with the one who’s rate is lower, even though the overall project price might end up the same. They often don’t take into account the added value one business offers over another. Also when charged per hour, that is all you can expect to achieve.
When you charge for the overall project, rather than just an hourly rate, it is generally based on pricing on one of two things: either it is based on the amount of time the project will take (in effect, an hourly rate) as in previous similar projects or on what the market will bear. Often this method is the more favourable as the client knows the total outlay for the project and if you are efficient in the work, you should be able to achieve a higher hourly rate for the work.
There are pros and cons to both methods, though a lot of it depends on the clientele and your reputation. If the price is the only aspect that steers your client’s decision to engage with your services, then you will be regarded as ‘cheap’ and run the chance of being stuck in the bottom of the pit on reputation.
Businesses who charge less than what a client thinks a project is worth often lose out anyway, as the client will view their work as deficient in some way and choose a higher-priced company going by the old adage, “you get what you pay for” and the expectation of a higher quality job. You also don’t want to deter your client from being able to contact you for further consultation for fear of further charges blowing out their budget, this needs to be explained in preliminary consultation and fees revealed.
If you charge based on what the market will bear, then you’re probably going to have happier clients. If people feel they got a good value, then they’ll be happy with your work. They don’t care that it only took you a week’s worth of work and you got paid $10,000, as long as they get their $10,000 of value out of it and the expected outcomes were achieved or exceeded.
The best practice is to ensure the quotation is very clear on what is included and what is not included, the option of further works at $XX per hour, further changes beyond acceptable limits will be charged out at $XX per change or per hour, and there is a time limit on accepting the quote so you don’t get caught out if they take 6 months to accept your quote.
I guess it all comes down to how confident you are on the work you are going to undertake, then charging per project with an optional clause for extra charges if outside that quotation otherwise charging per hour for the unknown would be best. Either way, the client needs to be kept informed and on the same agenda.
Most of my social media and E-marketing projects are charged per project unless a client has unique and specific requirements. How do you prefer to charge your clients and what’s your experience?