[cweagans]

> Hourly (time and materials) seems the most common, but customers will still ask you estimate for tasks. If the task gets big you will feel tempted to make up a number that feels right and multiply by the hourly rate. That turns it into a big fixed-fee project.

Well okay, but don’t do that? Estimates are estimates, not commitments. You can make it clear that it’s an estimate, that you’ll stay in constant communication re: status/progress, and that costs/timeline could change, and then charge strictly time and materials. If the estimate changes, it changes. Clients who understand this model are my best clients. Clients who view estimates as an unbreakable agreement are my worst. That’s the single biggest differentiating factor between them. It’s usually an indicator that they generally understand software as a practice, and not an outsourced service in the same bucket as lawn care or something.

[gregjor]

Some clients do understand estimates and the nature of software development. A tech firm or a software outsourcing firm, for example, will have more experience and understanding. Other customers not in the software business probably won't understand that, and they expect binding estimates because that's what they get from their other vendors. I tend to work with companies that make money, depend on technology, but aren't in the tech/software sector. A trucking company or a law office, a medical school, for example. Their idea of how binding an estimate is will differ from how a web marketing agency interprets an estimate.

Sure, don't do that. And yes, stay in constant communication with the customer. If you can estimate at all then you can break the tasks down to make the estimates even more realistic and achievable.