With the new year and with new company budgets in place for 2009 I have been asked to do a lot of estimates for new clients. This raised an important question for me: Should I estimate incoming projects hourly basis or a project basis?
It is important for me to be sensitive to a client's budget, especially with the volatile nature of the current economy. On the contrary, it is also very important to me to deliver quality work that is unique with an efficient turnaround, so my estimates are based fairly on those standards.
An article on The Freelance Switch, a feed that I follow regularly, outlines the advantages and disadvantages. As one person commented, "It seems that most clients don't really care how much time it takes to complete a given project, the bottom line is the total cost and the quality of the finished project."
I was also interested in finding out what the average hourly rate designers were charging for their time. So I created a poll via Poll Daddy. See the results here. And please include your vote if you have not yet already.
Please share your experience with me. I am interested in hearing what designers or clients have to say.
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8 comments:
I'm always hesitant to quote a job on a project basis because that kind of arrangement has no inherent "brakes" on needless client revisions. If you don't value your time by the hour, or come up with some way to build into the contract some sort of limits, certain clients will abuse you.
It's really easy, especially at the start of freelancing to look at every job as essential and cut your fee to land the job. We justify this by fooling ourselves into thinking we need the portfolio piece, or this client will lead to more work, etc...
The truth is that most clients that aren't comfortable paying you full, fair price for the work you are doing for them will lead neither to good work that you're proud of, or steady work. (Not steady work that you're going to think "wow...I love freelancing!" At any rate).
I always estimate on project basis. This, in my experience, keeps the client much happier during the project development. If you estimate hourly, and during development the client continually brainstorms and comes up with new ideas (as should happen), you will have to continually give the client a cost on each item that you discuss. This makes the development process much less enjoyable for the client. They don't want to be given new costs every step of the way.
I estimate on a project basis, requiring 50% up front and final 50% due upon completion. Within the contract, you should have constraints etc so that the client cannot run wild with what they want. You need to spec out very clearly what you are providing in this estimate and project.
The nice thing about doing it this way is that you can always build a bit of cushion into your estimate, and then when the inevitable happens, and the clients asks for additional things that are not really in the spec doc, you can sometimes do them quickly for them, without charging them. The client has a better experience and enjoys working with you because you will be saying "yes, we can do that" more often than "well, that's not included in the contract, but for $500, we can do it."
I estimate on a project basis as well, based on my hourly rate. At this point, I've done enough jobs that I know what specific tasks are involved and how much time those tasks should take. And I've found clients are much more comfortable with a set amount (even if it's a large amount) than an hourly rate - charging by the hour feels open-ended and they have no idea of the true cost of the project or how long it's going to take. Businesses have budgets too. :)
My contract is also very explicit - it outlines exactly what is included in the price, down to the number of revisions and what constitutes a "revision" - and clients are made fully aware that should the scope deviate at all it will affect both the cost and timeline of the project. I also collect 50% up front and have a "kill fee" so someone can't work with me for weeks and then decide they don't want to do the project anymore with me getting compensated.
If a client haggles on price (they can afford it, but they don't want to pay it - different from clients who are truly strapped), it's usually a red flag that they're also going to haggle throughout the process - I don't lower the prices much for these types of clients and consider the extra price an "annoyance fee" if they end up signing me.
I have some clients on a daily/hourly rate and some I bill per project.
If I had it my way every client would be on a daily or hourly rate, but often it just doesn't work that way. From my experience working the other side of the fence (buying in design), I know I always wanted a clear picture of exactly how much I was spending BEFORE I gave the go-ahead. I worry a little that if I tried to push clients onto daily rates then I may inadvertently push them away.
I give a project quote that's based on my hourly rate and is sensitive to the project budget, as many people have noted. I also collect 50% up front, then 25% on design approval and 25% upon completion. Since I primarily work in web, I charge an hourly rate for maintenance if needed, but if the client wants a new design somewhere along the line, I start over with a new project quote.
The thing that's a bit uncomfortable about hourly rates is when you've had a client for a long time and need to raise your rate (in my case, I raised when I graduated college and when I moved to NYC, which has a higher cost of living). I've never had a client deny my (modest) raise in hourly rate, but it's an uncomfortable conversation to have.
Wow, a lot of really great comments. I think I will be able to take something valuable away from each of these comments and apply it to my daily estimating process and new freelance business. Thanks, guys!
This totally depends on the project requirement whether it is to be done hourly or on project basis.
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