Going from Hourly Rate to Project-Based Billing

Many designers start out charging an hourly rate. This can raise some challenges.
Clients often have a difficult time perceiving the value they receive for the rate per hour they are charged.
  • How do you justify an increase in your rates?
  • Tracking time takes time that clients don't want to pay for.
Another option is to move clients away from an hourly rate to a project fee. The benefits of charging a flat fee for a project include:
  • Clients perceive a higher value received for their money
  • An increased project fee is easier for clients to accept
  • No more time tracking means you have more time to work for clients = more pay
How can you move a client from an hourly rate to a project rate? What if they object? Is it really better?
Let's use a real-life example to show how this can be done to the mutual benefit of both you and your client. For the sake of the example, I'll call this client "Cindy."
Cindy and her designer have been working together for nearly five years. Cindy had her designer do a variety of small projects [i.e. holiday design, seasonal redesign, room refresh]. Originally, her designer charged an hourly rate for all these tasks. The designer had to track her time, down to the minute, and send in a monthly accounting showing how she used the time. She'd then bill Cindy for the hours.
After some time, the designer realized she could get more done if she didn't have to track every minute of her time. Through experience on previous projects, she had also come to realize the time it took to get each task done and that she could get them done more efficiently if she charged by project rather than by the hour.
She then proposed a change to Cindy in how she would bill for services. Instead of hourly, she would now charge a flat rate for each small project. This would free up the designer's time since she no longer had to track her hours. Cindy, the client, would know exactly what it would cost her to get these projects done and she'd know exactly what she was getting in return. It allowed Cindy to create a budget and never wonder if her designer was running over hours.
This worked well for both Cindy and her designer. About a year later the designer proposed a rate increase for smaller services. She gave Cindy 60-days notice so there were no surprises.
Tips for moving a client from an hourly rate to a project fee:
  • Create an addendum to your existing contract outlining your proposed change
  • Give your client 60-days notice so there are no surprises
  • Be reasonable and flexible
Caveat: Never execute a rate change in the middle of a project.

By Sue Canfield
Image from StockSource
For nearly 30 years Sue Canfield, Chief Virtual Officer, has helped small business owners with administrative tasks. She co-authored the book, The Commonsense Virtual Assistant - Becoming an Entrepreneur, Not an Employee, to help virtual assistants understand what it takes to be a business owner. Learn more about their book and coaching services at http://chiefvirtualofficer.com/.



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