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Re:5 reasons why hourly rate is better than fixed price by marcomassaro on Wednesday July 10, 2013 @09:30AM (#6019319)
Good article but it fails to address two huge issues with hourly pricing and why I don't price by the hour.

1) Something that use to take me 10 hours to design may now take me 2 hours. Should I discount the knowledge and skill it took to learn that? I'd be earning a fraction of what someone else gets because I'm more efficient.

Raise my hourly rate you may say? You can really only go so high with your hourly rate until clients will look at you funny. $100, $125, $150, $200 - anything above that as a freelancer and you'll have problems landing clients.

2) Hourly rates also limit how much you can bill - there are only so many hours and days in the year. I prefer fixed pricing as well as calculating in variables to increase the price. So if I can tell a client takes long to respond or give feedback, I add on 10%. If there are 3 or 4 people who are giving feedback, I add 5% - etc.

Re:5 reasons why hourly rate is better than fixed price by MetaCosm on Wednesday July 10, 2013 @01:11PM (#6021213)
1) Nonsense, you raise your rate as you prove yourself, as someone who bills at $185+ -- clients aren't idiots. They understand that if you can do it in 1/5th the time and cost 3x the money, they are still saving money. Clients can do basic math. The only time you need to worry is if you can't prove your skill (bad references or new to market).

2) No professional ever uses the phrase "hourly" -- it is always T&M (Time and Materials). Most professionals with enough experience work in 'standard days' or 'standard weeks' on longer contracts. Last contract I did was billed at 7700 a week, no hourly accounting.

... some of what you mention (variable bill adaptation) is tricky as hell, and on FFP (Firm Fixed Price) contacts, it can be outright illegal without clients signatures at every change point. This is a reason home renovators always have change request forms with them.

~ Beyond all that, FFP puts you at odds with your client, you want to fuck them by charging as much as you can and working as little as you can -- they want to bleed you for as many hours as they can while keeping you bound to the initial contract. Nothing like starting a contract as sworn enemies.

Re:5 reasons why hourly rate is better than fixed price by grzaks on Wednesday July 10, 2013 @09:55AM (#6019507)
Exactly. I was just going to raise the same issue as #1.

From freelancer/agency point of view: why are we supposed to charge less only because we have skills to do things faster?

From client point of view: what's their motivation to do things as fast as they can? I'm paying them for each and every hour anyway so why would they rush?

Re:5 reasons why hourly rate is better than fixed price by emp_ on Wednesday July 10, 2013 @10:28AM (#6019832)
Agree wholeheartedly, I wrote something similar in a comment above, but the title of OP made me cringe really hard. If you are in an ocean of samesies it might be worth to fight in hour prices, but if your fixed price / competitor hour is cheaper, with you making 10 times more, DO NOT LIMIT YOURSELF.
Re:5 reasons why hourly rate is better than fixed price by iktorn on Wednesday July 10, 2013 @10:30AM (#6019859)
1) That is a big problem. Really hard to convince people you are more than 3x as good as the 3x cheaper alternative. But than again lawyers manage to do it. Why would web developers not figure it out? ;)

2) Yes. It does not scale in a way "startup people" are used to. It's just part of the deal :(

Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Wednesday July 10, 2013 @10:14AM (#6019711)
This is exactly why you might want to consider moving to weekly billing. Bill for a weeks work, as long as the deliverables come in does it matter if the week was only a few hours long?

You can either charge a lot per week, or less per week and still fit in more clients

However there is still a lot or marketing to do

Re:5 reasons why hourly rate is better than fixed price by marcomassaro on Wednesday July 10, 2013 @10:21AM (#6019771)
So are you essentially telling the client that you are billing them for the week - which means you are dedicated to their project for the week?
Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Wednesday July 10, 2013 @10:48AM (#6020038)
no, you are saying that next week I will work on the deliverables we agreed for the week. And I will deliver them. And they will bring you this much benefit.

If I need to go and hire two guys and work nights to do it, I lose. But I only lose a limited amount.

SO, I guess I really am saying work fixed bids of one week projects.

Re:5 reasons why hourly rate is better than fixed price by marcomassaro on Wednesday July 10, 2013 @10:55AM (#6020106)
So if you finish them in one day - you don't send them to the client until Friday?

I imagine if you did them in a day or two the client would be asking why they paid for a week of work and if they can use the rest of the time somewhere else

Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Wednesday July 10, 2013 @11:37AM (#6020431)
Why not keep them till the scheduled Friday meeting?

The client is expecting it Friday, probably does not have time to talk to you on Tuesday afternoon.

Its not lying, its not cheating, its saying I will build X and doing it in a professional manner.

Re:5 reasons why hourly rate is better than fixed price by porker on Wednesday July 10, 2013 @12:03PM (#6020645)
Are you sure?

> Bill for a weeks work, as long as the deliverables come in does it matter if the week was only a few hours long?

"Hello Mr Client, this job will take a week to do, so I need to bill you for a week of my time". 4 hours + 1 meeting on Friday, job done.

That sounds like lying and cheating to me. Which is a nuisance, as I'd like to do it.

Re:5 reasons why hourly rate is better than fixed price by MetaCosm on Wednesday July 10, 2013 @01:16PM (#6021265)
It is lying and cheating, and it is illegal.

Generally 'standard weeks' are done under the assumption that you will work at least 40 hours on the project (often more, I average 44). The concept is that the project is significantly more than 40 hours, and accounting for every moment is overhead that doesn't serve anyone. Client doesn't care and it simply wastes your time to do it.

Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Wednesday July 10, 2013 @02:24PM (#6021814)
Its not lying and cheating nor illegal to say "I will build you a purple widget for your website, you can have it by Friday. The widget will cost you 1000 bucks"

Get away from selling your time please. Sell something else, sell a feature, sell a widget, sell a service. As a "bum on seat" I have charged by the hour, the day, the week or even a month. And each an every time I was expected to, contracted to do 8 hours a day, 5 days a week.

I was an employee.

I could not supply them a simple single product, custom built for them because I had to wade through meetings and politics and inertia and everything else we all know and love. They were too disorganised, too chaotic, too out of control to know what they wanted at a level below "months of work from dozens of people", and so the ride continued.

This is where the Internet is opening up new opportunities - because now it is dismantling (read automating) traditional marketing and even management. One guy can reach a global audience with good SEO, and one group of people can do away with 80% of industrial world management (including geo-co-location). And all that will dismantle the chaotic crazy world of contractors selling their time inside corporations who need software but are not able to deal with the implications.

The contracting world will look very different in ten years. It will look a lot like what patio11 is selling.

So, stop selling your time - instead sell a packet of something, for about the price of a week of your time, to do something that will take about a week of your time.

It looks a lot like selling a week of your time, except that

* it does not say so in the contract

* it is something you can and will automate.

Selling a product is 80%+ automated and 20% custom.

Selling a productised-consult is 20% automated and 80% custom.

The more that 80% dives down, the more profit you make in your "week". However the more it looks like a product, the less you can charge :-)

Do I care that my accountant only spends an hour looking over an annual return he got by pressing a button, yet charges a grand? No, because I make up for it on chats over coffee and the knowledge that he would catch the horror of a mistake and fix it. No horror, good for him. However that week he did tackle a horror for someone. Next time it will be me.

Re:5 reasons why hourly rate is better than fixed price by bdunn on Wednesday July 10, 2013 @02:53PM (#6021971)
As he said, he's selling a fixed bid project that is scheduled for a week.

The client he's looking to work with is looking for results, not how long he spends sitting in front of an IDE.

Re:5 reasons why hourly rate is better than fixed price by porker on Wednesday July 10, 2013 @05:10PM (#6022850)
Brennan, I respectfully disagree. He said:

"This is exactly why you might want to consider moving to weekly billing. Bill for a weeks work, as long as the deliverables come in does it matter if the week was only a few hours long?"

What you sond to be advocating is fixed-price bidding/value-added pricing; but that's not the same as the OP.

If he'd said: "This is exactly why you might want to consider moving to billing on value. Bill based on what it's worth to them, as long as the deliverables come in does it matter if it only took a few hours?" I'd have had no qualms.

Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Thursday July 11, 2013 @04:38AM (#6025050)
I reserve the right to mis-speak. Especially if I clarify in later posts ;-)
Re:5 reasons why hourly rate is better than fixed price by porker on Thursday July 11, 2013 @06:16AM (#6025258)
Mis-speak accepted :)
Re:5 reasons why hourly rate is better than fixed price by lifeisstillgood on Thursday July 11, 2013 @08:48AM (#6025688)
https://www.youtube.com/watch?v=EkqrI3IibYI

I took my inspiration from this man.

Re:5 reasons why hourly rate is better than fixed price by bdunn on Thursday July 11, 2013 @09:28PM (#6030313)
Gotcha. I misread. He misspoke. And yes, life is still good :-)
Re:5 reasons why hourly rate is better than fixed price by LanceH on Wednesday July 10, 2013 @10:12AM (#6019672)
I agree...but. You probably only ever get to fixed pricing (successfully) once you've learned to value your hours, which you probably learned by years of selling them.
Re:5 reasons why hourly rate is better than fixed price by marcomassaro on Wednesday July 10, 2013 @10:22AM (#6019786)
Of course - been at it for 8 years and have learned a lot. It also depends on what the market can handle.
Re:5 reasons why hourly rate is better than fixed price by j45 on Wednesday July 10, 2013 @11:11AM (#6020235)
Design is billable work. Just because we can build a shed without a blueprint doesn't mean we should attempt anything on/in a house that's major.