If there’s one thing I’ve ever regretted while freelancing, it’s having been suckered into fixed bids – or to put it plainly: projects where the client has a vague idea of what they want built, and wants you to read their mind and tell them exactly how long and how much it will cost.
Of course, it’s never clearly spelled out like that when contract negotiations are happening. You pretend you know exactly what your new client means by “messaging feature”, and your client thinks they have any clue how that feature will work. After all, you want to win the contract and for the client to sign on the dotted line.
But then things get real, and that messaging feature turns into a can of worms you could never expect. And because you’re on the hook for building that feature at a fixed cost, your client’s going to reshape that feature until it satisfies whatever is floating around in their head at that minute. The more hours you work, the less profitable that feature is.
I’ve heard a lot of excuses about why flat project fees are superior. They include:
- It’s hard for clients to appreciate the value they’re receiving for your hourly fee.
- It’s hard to justify raising your rates.
- You don’t need to track your time anymore!
The underlying idea in those excuses are that your clients don’t respect you as a professional, and you don’t respect yourself. The first is countered by simply communicating with your client what you’re getting done. The second’s the easiest: Supply and demand. Your time (the supply) is limited; if more people want to work with you, you raise your rates. Last, if you’re not tracking your time, even if you’re working with a flat fee, you’re not being accountable to yourself and your client.
How I get my clients to pay hourly
Would you ever walk into a custom furniture store, ask the price of a custom made bed, and put up with “Hmm… Well, we’ll see how long it takes. I’m not sure. But we’re going to charge $100 an hour and we’ll send you an invoice when it’s done.”
Clients, like the rest of us, budget their money, and it’s important to respect that. When you charge hourly, you run the risk of going over – or under – project budget (usually over, because scope always gets added.) It’s your job to get into your client’s head as much as possible, and to attempt to comprehend exactly what they need built. Assumptions are fatal. Don’t ever assume that you know what the “messaging feature” is!
Before I give you the stump speech on winning an hourly contract, here are a few concepts you must master:
- In a previous post, I discussed a few ways to create better estimates. The last takeaway is most important: For any decently sized project (read: over a week of full-time work), charge for an estimate. You’re a midwife of other people’s ideas. You take vague concepts that are floating around your clients’ heads and bring them to life. This will create a strong list of deliverables, and will also be granular enough that you should be able to put together a decent time estimate.
- Split the estimate into must-haves and want-to-haves. Prioritize accordingly. This will ensure that everything that needs to be in place will be there before the budget burns out.
- Commit to staying in constant communication. Sure, Client Portal helps this happen, but good ol’ fashioned email works just as well. You need to ensure that value is being constantly correlated to the amount of time you work.
- Explain to your client that dreaming up a project is like gazing into a crystal ball. The reality is as the project evolves, the scope will inevitably expand or contract around certain features, and because you’re charging hourly and burning budget, you’ll be able to steer quickly towards what the business needs dictate.
Finally, when you get pushback when explaining your hourly rate, here’s your line: “I understand your concerns. I do. But I’ve worked on a lot of projects and can tell you with certainty that what you’re wanting to be built will change over time. An hourly rate will keep me from pushing back each time you ask for a small change or to go towards a new direction – which believe me, you will. I want to see your product succeed, and you need to trust me to make that happen, because otherwise this will be built based on what you want today, instead of what you need tomorrow.” And then list off some of the concepts above: You’ll constantly clue in your client about what you’re working on and what it’s costing, and serve as a consultant, helping them deliver the best product for their buck.
I still don’t win them all, but my success rate has gone up substantially since I started focusing on why hourly is better for them, and not just me. And I no longer have had to lose money for the time I’ve worked, which is just plain stupid.