I freelanced for a couple years, and that was how I always did it. The contract spelled out exactly what functionality was included, and that was priced on its own. I often did projects where it was assumed that the completion of one contract would immediately start a new one, but that new one was also similarly defined and priced. This enabled iterative building out of a system while giving the client the ability to judge value of each piece. I usually focused on systems that I could define a good ROI for (replacements for existing systems with high maintenance costs or requiring lots of man-hours to operate, etc) because it's pretty easy to sell almost anything to a business if you can show them that within 2 years it will have paid for itself.