[lordnacho]

I don't get why people are so keen on the per-hour model. This puts a lot of pressure on you to be fully productive and count hours like a lawyer. It also makes you think you're losing money when you're not billing, and the customer likewise feels the time/money pressure.

I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks, based on having done something similar before. And that's a quite leisurely x weeks, where I'm not really feeling any uncertainty about any part of the project (ie I know what APIs will be used, business logic seems simple, research is done already). At the same time setting a leisurely schedule also means if there is something unexpected, you can spend a bit more time solving it. Or take a break when you're ahead.

Regarding the customers, being choosy appears to be very important. Anyone who mentions outsourcing to (somewhere cheap) is politely moved on. Anyone who doesn't grasp what they're after (a social network, with an iOS and Android app, and videos, and ...) is quoted a longer timeframe. Customers also need to be made aware of the importance of feedback, as in the agile model. That way they always get what they asked for, and you don't waste time on what didn't come to mind.

[mcintyre1994]

In Patrick (Patio11)'s blog with his consultancy rates [0] he switched very early from hourly payments to weekly - that seems like a really nice tradeoff. You're not counting hours, if the scope changes you can adjust pretty fluidly, and you're not having to go chasing gigs all the time.

[0] http://www.kalzumeus.com/2015/05/01/talking-about-money/ If you haven't read this, it's fantastic

[maratd]

> I don't get why people are so keen on the per-hour model.

How many years have you been doing this? It doesn't sound like you've been at this for too long.

> I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks

This works fine for a client who wants a very concrete x, y, or z.

There's a problem with this sort of client. They only want x, y, or z and after you give it to them, well, you're done.

If you have that sort of client and you're charging by the hour, you're an idiot. Quote them a fixed price at something like 500 per hour for what you estimate the work will take. They'll go for it, you make bank.

At some point in your freelancing career you're going to start feeling jealous. Of the "normal" guy. They guy who wakes up every morning knowing he has a full day of work and is working for the same person he worked for yesterday. He knows what to expect, how things operate, etc. Everything is stable.

Stability is an illusion, but it's a nice one.

At this point, you're going to start looking for clients who don't want x, y, or z. You're going to look for clients who need x. And some more x. Then some more x. They keep needing x and there's no end.

These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.

It's alluring to you, because you get a ton of work, all the time and you're still billing twice what you'd get working a regular job, and you still get to work from home, set your own hours, specify your own tooling, etc.

At some point, you'll get tired of this and decide you want to be the middle man. You start getting your own clients, hiring other guys to do the work ... and guess what? You're going to pay them by the hour. Because that's how you maximize your profit.

Now, I know there are one-man armies out there who have their own clients, bill fixed price, do all the work themselves and are always busy. I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time. At some point, you'll have the desire to "outsource" the marketing portion of the equation and that's when you'll start billing by the hour.

[pbowyer]

> These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.

My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly. They don't want risk; they want you to take the risk for their project specification ('cause they've already quoted the client, so you'd better cost less than they quoted...)

What kind of middle men are these who pay per hour?

Or are you talking about contracting, not freelancing?

[radio4fan]

> My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly

Mine too, and I've been at this game for 16 years.

In fact, my usual experience is agencies coming to me with no design or functional specs (even back-of-an-envelope stuff) and wanting a price.

The only time I ever charge by the hour is for maintenance programming.

[maratd]

> Or are you talking about contracting, not freelancing?

Those things mean different things to different people and there's a lot of gray in between the two. I can add another word to make things even murkier. Consultant.

But in the end, yes, I am.

As a freelancer, if you're charging by the hour, you're either making a horrible mistake or you're really contracting and don't have a choice in the matter.

That was kind of my point and also that it's not necessarily a bad thing.

[peteretep]

Yep.

Getting to a point where risk and cost of change are client problems is ideal, because they are no longer willing to waste your time or nitpick. I charge a daily rate, rather than hourly, but same principle.

[EugeneOZ]

Looks like you have big experience in this field :) In addition to your collection, my usual style of work: I almost don't spend time to "marketing myself", I rarely switch clients (usually clients prefer to work with me full-time and even more), I use per-hour rate (because 100% of clients I had chance to work with, didn't know full set of features they need, and most of the time goes exactly to additional features). I'm learning new things constantly, listening podcasts, watching video tutorials, reading blogs, trying out new things in practice - it's not a luxury but necessity, otherwise soon you will meet more skilled competitors :) My price for stable (by freelancing measures) income is lack of "jackpot projects ", when you can make few thousands for week and relax rest of the month. I don't have free time, I feel exhausted often. I don't work over 40 hours limit to have time for family. My family very happy when I finally can spend few hours with them :)

[learc83]

I have a question. Where did you find these middlemen you were talking about?

> I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time.

That's me right now. Any tips on making the switch?

[maratd]

I like having my foot in both doors. I work some of my time with an agency and the rest with my own clients. This gives me the stability/constancy I want, but also allows me to pursue my own clients (and to charge them a ton more, knowing I have the agency to fall back on, if I need to).

> Any tips on making the switch?

Yeah, find an outfit that's a good fit. Make sure they're flexible, understand the industry, and that there's no personality conflicts. You should have a very easy, comfortable relationship.

> Where did you find these middlemen you were talking about?

They're all over the place, looking for you. You just need to be found or you can find them. There's a ton of them. Probably quite a few on this thread. Make yourself easy to contact. You'll bump into them eventually or you can actively look for them by researching some larger projects in your niche. Larger projects require multiple people and that brings the agencies out, since they're able to bring multiple people onto a project pretty quickly and effectively.

[pjbrunet]

"They're all over the place, looking for you. You just need to be found or you can find them."

Expanding your network on LinkedIn can help.

[dbg31415]

Hourly is good because it allows for the client to change the scope mid-project. And they will always change the scope mid-project. You have to have a way to either charge for everything possible up-front (which usually means building in padding that will price you out of the bid), or have a way to easily charge for the scope changes that they request.

[leepowers]

> I don't get why people are so keen on the per-hour model.

There's not going to be one correct answer to this question - per-hour rate or total project cost. And regardless of which one is best an hourly rate is still a useful productivity metric.

With the hourly model you're protected as a freelancer. Regardless of the number of revisions, if the project takes 10 hours or 100 hours, you will get paid. (Though if the hours required are going to increase 10-fold you'd better communicate that to the client.)

I have several clients who prefer the hourly rate model. Which is fine by me. It helps me hit my weekly/monthly/quarterly goals. Also, we both save on the administrative headaches of having to spec out, estimate and approve every single change. And as a freelancer anything that reduces my non-billable work is a big plus.

The downside for me: the client gains any increase in my productivity. If I increase my productivity per hour by 25% it takes me less time and I make less money. But the client still receives the same amount of value from my work, and pays less for it. And since most skilled workers become more skilled and more prolific over time this productivity transfer almost always occurs.

Fixed cost projects can be more lucrative since I pocket any productivity gains. Imagine I've secured a $2000 fixed-cost project. If I can knock it out in five hours, I've secured an effective rate of $400/hr. The downside, of course, is if my productivity lags - say I spend 100 hours on the project - then my effective rate plummets to $20/hr.

Every fixed-cost project should be measured hourly. Even a big-ticket project will suck if you work yourself into a minimum wage to complete it. I use the hourly metric to determine productivity. When this metric starts to drop during a fixed-cost project, that's when I reach out to the client to figure out a budget increase.

So - which one is better? Hourly or fixed-cost? Most of the time it doesn't really matter. If I'm working a fixed-cost project and my productivity metric falls, I ask for more money. If I'm working an hourly project and it's going to take more time implement revisions, I'll tell the client and get approval. Regardless of the project type if the scope changes you're going to need to ask for more money/hours.

BUT - if the project is in a domain I have deep knowledge in, and I can be relatively assured of a fixed scope (with only minor changes), I will go fixed-cost every time. I want to capture my productivity and maximize my profit from it.

[rietta]

That can be the goal. In my last experiment with this short of going to pure fixed bid, we had a client running an Excel spreadsheets to figure out exactly what they were paying for hour, for each developer even. We finally just gave up and switched them to a pre-paid hourly rate per developer on the followup projects. Some other clients are happy with a retainer that gets them a certain level of work without sweating the hours.

It may just be a shortcoming of the approach that my company tried; we're open for trying again as none of us like clocking time like lawyers.

[s73v3r]

Per hour guarantees that you're going to get paid for all your work. Fixed-price often makes clients think they can squeeze in a bunch of changes for no cost. While there are things that can mitigate this, like contracts, statements of work, and communication, it still can lead to a bigger headache than necessary.