Moving From Time-Based to Project-Based Pricing

When you are first starting out in your business, it’s difficult to know how much to charge for your services. While I recommend that new service providers bill hourly in the beginning (read my article on which pricing model is best for you), eventually you will want to move over to project or fee-based pricing.

Depending on your business, clients may hire you for a one-time project such as creating a website, or they may hire you for an ongoing basis, such as bookkeeping or social media management. Charging clients by the project or with a recurring monthly fee is advantageous for several reasons. Project or fee-based pricing is easier for both you and your client, you don’t waste time tracking time, and you are able to provide better client service.

Achieving Your Revenue Goals is Easier

Project or fee-based pricing makes it easier for you to set and achieve your revenue goals. If you know that in order to pay yourself, cover your expenses, and set money aside for future savings you need to bring in a certain amount of revenue each month or each year, you can then work backwards to figure out how many clients you need.

For example, suppose you need to generate $10,000 per month in your business, and you charge each client $1000 per month for your services. You now know you need to have 10 clients per month to stay on target. This is much easier than trying to figure out how many clients you need each month when you are billing hourly. Some clients may take 5 hours of your time, some may take 10, some may take 3. Trying to narrow that down to a set number of clients each month could get confusing and frustrating.

Your Clients Know What To Expect

Project or fee-based pricing is also easier for your clients. They can budget for your services, and they know exactly what to expect. They tell you what services they need from you, and you give them a flat rate. Website design is a perfect example. Your client needs a website created, and you as the designer give them a flat fee. They know they will get a website and they know how much it will cost. In contrast, if a website designer were to give an hourly rate, the client (and oftentimes the designer) may have no idea how long it will really take. You might discover it is easy to go over budget, or they are not satisfied with the final product because you had to cut corners in order to stay within their budget.

Tracking Time Isn’t Necessary (But Still Recommended)

Project or fee-based pricing also means you don’t have to track your time (though I still recommend that you do). At least you don’t need to do this for your client in order to get paid. While there are still many in professional services who do charge based on hourly rates, such as accountants and attorneys, there are some in these professions moving away from this pricing model and retaining clients on a monthly or annual basis for a set fee.

You Can Provide Better Client Service

Finally, project or fee-based pricing allows you to provide better client service. Consider the situation when you bill hourly; your client gives you an hourly budget, and you know you can’t go over that budget or you will be losing money. Your billing is also directly related to your time, so in order to meet your revenue goals for the month, you can’t afford to give time away for free. This creates pressure on your part to give less than your best. You are also more likely to take on more clients than you can optimally serve at one time because you need to be billing for every hour you can.

However, with project or fee-based pricing, your work isn’t directly connected to time, so you can provide your clients with excellent service, without compromising your revenue. You are billing clients not only based on an estimate of how much time a project will take, but also on the value of what you provide. Since this type of billing is not directly related to time, you can take on less clients, and therefore give your clients more attention and a quality of service that makes them feel like they are your only client.


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5-Step Pricing Guide

This 5-step guide is designed to help you increase your rates, strategically and thoughtfully, so that you can be successful at implementing them with current clients, and future clients as well.