Pricing your services

Should Freelancers Bill By The Hour?

By Brennan Dunn

Most of us bill by the hour. In fact, a quick database query of Planscope shows that 81% of my customers bill hourly.

Billing for your time is foolproof. Your clients can inflate their projects as much as they’d like and you’re protected. In fact, more stuff to do = more money for you, so you’re actually rewarded for scope creep.

But if you bill by the hour, you’ll eventually get your first disgruntled client who doesn’t like that “Meeting” showed up as a line item on an invoice. Or you start realizing that you’re losing money because you’re getting better and faster at what you do. And there’s all those pesky time logs you need to remember to add.

Value-pricing your time

When a dream project falls into your lap — build this, and your client will make at least $100k, it becomes trivial to put a price on it: just pick a number between $1 and the potential a project has to yield your client.

But many of us work with unknowns. Either the client doesn’t have it all figured out, we don’t know enough to be on the same wavelength as our clients, or the project is subject to rapidly changing currents.

And so we bill for our time, and most of us default to hourly.

But your time is a commodity. It’s however long you’re focusing on your client, whether you’re sitting at a computer or a conference table. Your time has nothing to do with the value that your client ends up getting from you.

Why I bill by the week

So if you’re going to bill for your time, widen the interval. I recommend billing by the week.

When you bill by the week, you’re obfuscating what goes into that week — the phone calls, the project management, the wireframing, the emails, and your time spent in front of a code editor — from your clients.

The focus is away from who, when, and where and singularly focused on what got done.

A common misconception is that weekly billing implies 40 hours of client work. Not true. Your weekly product is a consistent amount of value produced, and the scope of that value is negotiated each week. When talking with prospective clients, shift the focus around from renting your time to the weekly deliverables. Focus less on the time, and more on the results.

Here’s how you can go about structuring an engagement that you bill weekly:

Each Friday, schedule a planning and review meeting. Show off and demo the you produced the week before, emphasizing how this value relates to the client’s business goals. And plan what you’ll be working on next week, utilizing the time you’re talking with your client in realtime to hammer out the details.

The purpose of this meeting is to correlate the value you just produced with the price your client paid you, and to map out a similar exchange of value for the next week.

Also, I wouldn’t trap yourself into thinking that whatever you plan for the week is set in stone. Whenever I explain this to people, a common misconception is that you’re just selling a fixed cost for some work that you’ve estimated to take a week. Instead, you’re making your best guess for what you’ll be able to accomplish that week — but like hiking up the coast of California, that’s an uncertainty, even when you’re talking about 5 days instead of 50 days.

If you bill by the hour or day, I hope this helps you better understand how you can sell more than just your time. If this hasn’t, my inbox is always open to you for a pro-bono consult 🙂