Fixed price design or hourly rate: Which is more practical for freelancers?

I’m sure you know the situation. A potential customer is very interested in your service. Finally, he asks you to make an offer. The problem: You have not yet implemented such a project. That means you have no idea how much time you have to invest in the implementation. The customer expects a binding fixed price design. You would rather charge by time spent to avoid unpaid extra hours. What now?

The conflict

In many cases the points of view of the business partners are fundamentally different. As a freelancer, you naturally want to make sure that your time is remunerated accordingly. Now let’s put ourselves in the customer’s position for a moment. He has a legitimate interest in keeping his expenses under control. Expenditures in unknown amounts are an absolute no-go due to customer demand. If you still decide to bill by time spent, the disadvantages would clearly lie with the customer. A fixed price is particularly disadvantageous if you calculate the project expenditure too low.

Why a fixed price design is better

In my freelance job I calculate in most cases with customer-friendly fixed prices. I have the following reasons for this:

  • The costs of my service are exactly calculable for the customer. This promotes customer satisfaction.
  • No discussions when issuing the invoice. Fixed prices avoid discrepancies. This saves me a lot of stress, trouble and time.
  • When calculating a fixed price, I automatically think about the type and scope of the project. I set myself a time frame for project implementation. This usually leads to a more disciplined implementation. It also helps me to better assess future projects.

The dark side of the fixed price

I know very well that fixed prices can also have considerable disadvantages for freelancers. Some customers tend to take advantage of the fixed price mentioned above. I was already sitting in front of my computer in a rage, did what felt like 1,000 corrections and provided services that were actually not defined. What do you do for customer satisfaction? If the customer had paid according to time spent, the price would have been at least twice as high. I swore to myself: “Never again fixed prices! “.

At some point I realized that unfair payment is only conditionally related to the chosen calculation method. Much more decisive are a well thought-out service description at the beginning of the project and the attitude of the customer. If the customer tries to squeeze the minimum price out of you, he will find reasons to negotiate you down, even with a fixed price.

The role of the customer

Over the years, I have repeatedly separated from customers who haggle over every euro. Certainly I try to make the prices fair from the customer’s point of view as well. However, a fierce fight for smaller Euro amounts is a bad prerequisite for a long-term trusting relationship among each other. A good business relationship requires that you understand the situation of your customer and that the customer can put himself in your position as a freelancer.

Conclusion

For almost all offers I name fixed prices. This gives the customer a leap of faith from my side. This advance of trust can lead to a very positive and long lasting business relationship. Since this kind of business relationship is the basis for a successful freelance activity, we as freelancers are well advised to give this leap of faith and to calculate fixed prices that are binding for the customer. But this is only my opinion. What do you think about it?

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