Should You Charge by the Hour, or by the Project?
By Sherril Steele-Carlin
Setting rates for what you do isn't a new dilemma. How do you estimate how long a job will take? How do you decide the rate to charge, and if it should be hourly, or by the project? These are problems that all professionals wrestle with on a daily basis.
By the Hour
Charging by the hour is the simplest way to charge for your services. Keep track of the hours you've worked on a project, and bill your hourly rate. Many employers will want a detailed breakdown of those hours, so they know they are getting their money's worth. However, there are times when charging by the hour is really your best option.
If the project is small, won't last very long, and is very specific in the results, then charging by the hour is probably your best option. It's also a good option when you're unclear about the real scope of a project. What if you bid a flat fee, and then the project mushrooms into something that takes you twice as long?
If you're unsure about just what the project may entail, then bidding by the hour is your best bet. Don't forget that charging by the hour can sometimes surprise a client. They might question your rate, or wonder why a job took so long.
When you charge by the hour, it's a good idea to keep your client informed of your progress, and keep a detailed record of the hours you worked to back up your charges.
By the Project
Charging by the project is the best option when the project is long-term, clearly defined, or is only one specific service. For example, if you are providing an article for a web site, charging by the hour would be difficult. Do you charge for the time it takes you to research the article, or only the time it takes you to write it? Should the client pay for your research time, when you can use the knowledge again and write a different article for a different market?
Charging by the project is a better idea in situations like these. The client knows what to expect up front, and you have an idea in your head of how long it should take you to complete the project. Most clients prefer to pay by the project, because then they know their costs right up front. That makes sense, but sometimes bidding on a project basis just isn't viable for you, or the project.
How Do I Set Rates?
First of all, decide what your hourly rate will be. For an excellent discussion of how various businesses set their rates see the How to Set Rates link below. Only you know your experience in the field, your monetary needs, and your expertise for each individual project. Use all these criteria to set a rate that is fair to you and fair to your client.
To set a rate for a project, you need to accurately assess the project. Decide what the project entails, what problems you need to solve, and how long you think it will take to do a thorough job. Don't forget to add in some time for unseen problems! No project ever goes exactly according to plan. You need to remember that when bidding.
Let your client know that you'll finish the project, no matter what it takes. So, setting rates and bidding on projects takes some understanding and assessment. You need to understand and assess projects, and understand and assess your needs and talents. There is no perfect answer, bidding an hourly rate or by project really depends on you, and the project. Just keep on bidding, and those projects will come your way!
