If you provide copy, design, consultation, or any kind of service to advertisers, you already know how difficult it is to deal with pricing.
One of the hardest decisions to make is whether to charge by the hour or to charge a fixed rate.
This is just one of many issues I’ve been thinking about lately after reading Steve Slaunwhite’s definitive book on the subject, Pricing Your Writing Services. It’s written from the professional writer’s perspective, but the principles apply to graphic designers, Web professionals, consultants, and many other service providers as well.
The short answer to this quandary is that it’s better to charged a fixed rate in most cases. Why? Well, that requires a longer answer.
Quoting hourly prices seems more natural when you’re starting out. That’s because we’re all used to the hourly concept. People are often paid hourly. And it’s an easy answer to the question “What do you charge?” But hourly rates present problems for professional level service providers.
First, clients tend to dislike hourly rates. If you quote $75 per hour, a prospect might think you’re charging too much if he or she earns less.
Second, hourly rates are inherently unfair. They’re unfair to you because the better and faster you get at providing your service, the less money you’ll make. They’re unfair to clients because if you don’t know what you’re doing or have a bad day, the client has to pay for it.
Third, both you and the client will be looking at the clock all the time. The client will want you to hurry while you’ll want to slow down.
The fixed rate or project rate solves all these problems. There is a set fee for a given piece of work, so you and your client know what money is involved. Your client can’t make a head-to-head comparison of what you earn vs. what he or she earns. It’s more fair all around. And everyone can forget about the clock and focus on doing good work.
Are there any circumstances where hourly rates are called for? Yes.
If the scope of the project is unclear or if the project is open-ended, hourly is the only way to go. Sometimes a client may ask for it, though in the ad and marketing business this is rare. And hourly rates make sense if you offer add-on services such as consulting.
In my experience, fixed fees are also a lot simpler to quote. Over the years, I’ve built up a fee schedule for dozens of projects. So when someone asks what I charge for something, I just consult my schedule.
One more thing. A fixed fee helps you avoid difficult situations with your client. Service pricing in this business is all over the lot, from ultra cheap to astonishingly expensive. If you’re designing a brochure and your client assumes it will cost around $500, sending an invoice for $2,500 is going to cause a problem.
Pricing is a hugely important and complex issue. What I’ve covered doesn’t begin to scratch the surface.
If you want to know more, I highly recommend Pricing Your Writing Services regardless what services you offer. I consider Steve the guru of pricing and his book covers this subject clearly and in great detail.