Should I pay hourly or by project?

Whether we like it or not, one of the biggest factors that almost always comes into play when hiring a freelancer or agency is price. There are a few different ways you could potentially be charged for your project, and I want to discuss the two most common - Hourly and Project-based. 

Neither option is wrong or right. A lot of times it comes down to the business owner and how they prefer to work. I only work project-based for multiple reasons, but I also understand there are some benefits for hourly charging, so let’s look at both options. 

Hourly Pricing

Pros

You pay for work getting done

It’s simple to look at a task list and have someone checking items off the list. You are only being billed for the effort put in, so you know time has been spent on specific tasks and you know exactly what your money got you.

Flexibility in work load

You are able to hire someone as needed. Employing them to adjust hours based on the scope or scale of the project at the moment.

Transparency

When you are billed for a set of hours, the freelancer or agency should be able to tell you exactly what those hours were spent doing. You should also be able to see the work completed during that time. This also helps with clear communication about work still needing to be done.

Cons

Uncertainty in total cost

Unless you know exactly how long a task will take (which you can’t because everyone work a little differently), there will never be complete knowledge of the cost until the final bill comes through. It can be very challenging to estimate total expenses accurately. 

Inefficiency is rewarded

The longer a job takes means the more the freelancer or agency makes. I’m not saying people will lie on a project, but there’s a chance the person you’ve hired may spend more time than needed on a certain thing, either consciously or unconsciously, simply because they are getting paid for their time. Not to get the job done as quickly as possible. Financial interests rarely align between both parties when paying hourly.

Project Pricing

Pros

Clear budget

When an entire project is priced upfront, you know exactly what you will pay. There won’t be any surprises in additional hours, or being charged for unintended or unneeded work. This predictability is nice as you can know how it the project will impact your overall budget. 

Control of the scope

When a you receive a project-based price, you know exactly what the end deliverables will be. You’ll have clarity as to what is or isn’t included, what you are and aren’t paying for. You can know with confidence you won’t get “dinged” for some additional random task that would add up in hourly billing.

Value focus

Everything points to one aspect - was the value delivered. There is never a question of whether or not time was spent wisely or correctly, because ultimately all you care about is did you receive what you were supposed to. You are paying more for the end result, not just the work being done. 

Cons

Risk of overpricing

Every now and then you get a quote back that is more than the value of the service that will be provided. This is where it’s valuable to understand the scope of the project and how much a project like this generally costs. There will almost always be someone who can do it cheaper hourly. But remember you get what you pay for.

Lack of flexibility

If the scope of the project is clearly lined out in the agreement, then any work beyond the scope could bring in additional costs and longer timelines. This is why it’s incredibly important to have absolute clarity on both sides of the agreement about what is or is not included in the final price. 

Don’t settle for “good”

I only do project-based pricing because I’ve found it to be the most beneficial for both sides. Hourly pricing leads to clients settling for good work because they don’t want to pay for the hours to make it great. It can also lead to distrust about if time is being spent in the best way possible.

Project-based pricing enables you to get what you want without feeling like I’m just racking up hours on you. A lot of creativity can be limited when charging by the hour because clients just want to get the job done as quickly as possible so they pay as little as possible.

Always remember, the success of your project is never based on how little you spend. Success is based on if the project produces the end result you desire.