[brasmusen]

All of my current client projects are hourly. I typically give them an estimate so they have a ball park figure and then bill hourly and update them as the project progresses. This seems to work out really well.

The only downside that I see so far is that as you get better as what you do you tend to get quicker as well, which in an hourly arrangement means you make less. You can always raise your rates as your experience grows but for previous clients it can be hard to explain.

[huherto]

We have different hourly fees for time and materials (T&M) and fixed price (FP). We want the customer to lean on the T&M side.

[tstegart]

If you get quicker, doesn't that give you time for more projects?

[sokoloff]

Sure it does, but if you're working hourly, you're still making the same total $, working the same hours, just over more projects.

For me, while I do love coding, my side projects truly are a means to an end ($$ to put in a home theater, or take a trip, or do whatever else I want to do).

Hidden in your question is the kernel of why fixed-bid is better when your skills (in terms of lower hours-expended for a finished-system) are better than your competition, and you can sell it.

Now, all that said, I'm wrapping up a fixed-bid (~$25K) side project where scope creep is killing me on my (effective) hourly rate. It's still fun; I'm learning a lot about things I don't do in my "day job" and I'm almost certainly going to get more work from this client if I want it, but I made the mistake of bidding fixed-price with some assumptions about the scope that were ludicrously off. (My fault, not the client's, and I'm eating it. If the work weren't fun, it would be an extremely bitter taste...)

I'm still in favor of the fixed-bid (as it makes the sales job much easier), but watch scope creep.

One last important point: if you are bidding fixed because you are a great coder and a poor salesman, your lack of sales/negotiation skills may be an issue when the client thinks something was in scope and you think it's out of scope. If this is a possibility, figure out your strategy ahead of time, or you'll end up doing the feature "for free".