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Ask DN: Fixed vs Hourly Price

almost 5 years ago from , front end developer

I've been in the industry for about 3 years now and still get to situations where I end up working much more than I initially planned. Everything would be OK if those projects wouldn't have a fixed price.

Most of the time I'm just too optimistic and when i think something would take 1 hour it takes 3 for example.

I even came up with formulas like: (my estimation in hours + (initial estimation in hours / 3 ) (for bug fixing)) * 2)

But it still fails. Most of the time I undercharge.

How do you do it? How to convince a client to work with a hourly rate instead of fixed?

4 comments

  • Art VandelayArt Vandelay, almost 5 years ago

    Hourly rates don't usually end really well. It's not often that a client will agree to one price then be given an invoice for another when it takes you longer (as you've stated thats happened regardless of pricing strategy).

    Fixed pricing is fine (even better when mixed with value) if you can appropriately estimate how much time something will take you to deliver.

    I charge usually a fixed rate but always track my time. This way, I know (or have data) how long a 2-5 page site will take vs an entire application. It'll help me figure out how much time I should allocate.

    That helps a lot but doesn't get around the idea of spending more time than originally intended. Personally I'm on the fence here too. My rule of thumb as of late is this:

    1. If its a client's choice to be late, it costs them more money.
    2. If it's my choice to be late, I eat the extra time.

    EX 1: Client is late on feedback, which pushes our agreed schedule/delivery date. Client would like to do another round of prototypes which push out our schedule/delivery date. In these instances, make it really clear we out of scope/schedule and it'll cost more.

    EX 2: Something happens, whether its family emergency or life gets in the way and I have to push out the deadline. Then I do not charge the client more for my mismanagement of time.

    The unfortunate part though is that fixed pricing doesn't really set strict "constraints" on what is or isn't out of scope within a project. Often times we (generally speaking) rely on time to be that constraint. But if you charge with fixed or value based pricing and then refer to time, you're immediately changing to pricing structure mentally from fixed/value to time.

    This is getting long but last thing, just track your time. Figure out where you land when it takes you to make things (hopefully you can group by some category of projects or deliverables) and then you'll get a better way of figuring out how much to price. Also - as you keep going, you'll get faster. So that project that originally took 40 hours will take 20 but you'll still charge the same price.

    1 point
  • Derick Anies, almost 5 years ago

    You should read this book by Dan Mall (https://abookapart.com/products/pricing-design)

    It took me an hour to read and changed the way I charge for designs. I use to think I charged enough (hourly and fixed), but after reading this book, I realized I was undervaluing my time/skill set.

    1 point
  • James LaneJames Lane, almost 5 years ago

    Try and work out as best you can how many hours it's going to take. Also take into account how much your client can afford.

    Once you've done this, give them a quote a little higher than you think it might cost.

    If they agree, happy days, if they don't agree, you've got a little wiggle-room to negotiate.

    0 points