7 Reasons You Shouldn't Charge by the Hour

February 25th, 2008 in Business & Process

by: Matthew Griffin

A week ago, I posted an article entitled . It included a brief explanation of why I avoid charging clients by the hour. I've since realized that this explanation was inadequate. After spending way too much time explaining and clarifying in the comments section, I decided to expand the topic into a separate post. So if you would like a deeper look into the melee of hourly billing, you've come to the right place. Here are seven reasons I avoid hourly billing like the plague.

1. It's time consuming

Constantly starting and stopping timers is an annoying and time-consuming practice—it's completely counter-productive. Also, heaven forbid you forget to start the timer or forget about the time altogether. Then you'll end up with a compounded time-consuming mess. Flat-rate billing circumvents this problem completely.

2. It makes clients nervous

You would be surprised how much more comfortable your clients will be if they know exactly how much they are going to spend. Open-ended hourly billing, even accompanied by a ballpark figure, makes buyers nervous. Flat-rate billing makes them feel secure even if they know they'll most likely end up spending more.

3. It encourages lower productivity

When you're getting paid by the hour, there's no incentive to work faster or smarter. In fact, the slower you work, the more you get paid. Flat-rate billing encourages you to work efficiently.

4. It lends itself to tedious website update work

Some may feel differently about this, but I hate doing updates on ugly sites I didn't design. Charging by the hour lends itself to this kind of work. I want to spend my time designing new sites and helping my long-time clients. Flat-rate billing will help you do more of what you like to do.

5. It doesn't stop feature creep

One common misconception about hourly billing is that it puts an end to feature creep. In reality, all it does is frustrate the client. I their mind, every time they ask for something that should have been included in your original time estimate, they're being hit with unfair additional charges. Start with a flat rate with plenty of padding for feature creep, and this will rarely happen.

6. It severely cripples billing potential

Imagine giving an $3,000 estimate for a very basic website. Let's say you've been designing websites for awhile and you're getting pretty fast—you know it will take you about ten full hours of work to get the project finished. Billing by the hour, puts your rate at $300 per hour. It sounds outrageous when you put it in those terms. They have no idea how much work and effort it's taken to hone your skills to their current level. That same site may have taken you fifty hours when you first started designing websites. Flat-rate billing allows you to charge what your services are really worth.

7. It encourages clients to abuse you

When you charge by the hour clients tend to argue and grumble about every little charge  because they can see every little charge on the invoice. When clients feel that you're cheating them by not working fast enough, they can get really grumpy. Flat-rate billing keeps everybody happy.

I've had great success with flat-rate billing and will continue to stand by it. It's not just a little better than hourly billing; it's night and day. If you manage flat-rate billing correctly as prescribed in my , you'll never look back. That's not to say it will solve every billing problem you've ever had, but it sure will solve a lot of them.

UPDATED 11/12/2009



Posted By: Ben Coleman on 02/25/08

I always used to bill by hour, but your point about improved work efficiency really hit the nail on the head. I work so much faster than previously - from experience, and reusing old code - that I found I was spending more time on the quotes than on the actual website! When hourly billing it's actually very hard to ensure you have recorded all the time you will be spending: starting your computer, programs, fighting a CSS problem etc. Save yourself a headache and go flat rate!

Posted By: NoName on 02/25/08

Be sure, it wouldn't work in Israel. Only per hour.

Posted By: Allen Harkleroad on 02/25/08

I will have to agree on flat rate and telling or quoting a client an absolute price. Even though we display hourly rates, we do provide hard quotes that we stick to. We get a lot of word of mouth advertising because of it.

Posted By: Matthew Grffin on 02/25/08

Great comments, everyone. Thanks for the input.

Posted By: Max on 02/25/08

Yes, but what if the client starts asking for the moon? "Do this, no do that, what if... let me see.... make it and then we decide" Flat rate really makes the client abusive, in my experience.

Posted By: Matthew Grffin on 02/25/08

Max, sometimes you have to tell the client it's going to cost more. Billing by the hour won't change the fact that you underestimated the project and it's going to cost more. So since it's unavoidable, you might as well tell them just once and tack on another flat rate.

Posted By: Mike Rundle on 02/25/08

Another problem with charging by the hour (on creative work) is that it may only take me 2 hours to put a design together in Photoshop but it took many years of experience in order to know exactly what to do in those 2 hours. Also, with creative work, I could be thinking about a design off and on for awhile before I sit down and actually put some pixels together. Do I bill for the 20 minutes I thought about the design before falling asleep? Or my ideas while in the shower? Or while driving? Creative work can't be billed hourly, it just doesn't make sense.

Posted By: Matthew Griffin on 02/25/08

It's an honor to have you here, Mike. Your're right on the money. Creative work never really stops. How can you possibly time it accurately?

Posted By: Adam Risser on 02/25/08

On average, I totally agree with this, as long as you are the type of person who is not afraid to say "It's going to cost more" if your initial spec is changed. However, I do believe that there are situations when an hourly rate makes more sense. A couple of times I have had to fix someone else's mess and found it much better to tell them that the job will have to be charged hourly than to try and pull a number out of the sky and hope the project comes close to it. (Though it sounds like you don't do much of this type of work. Maybe this is only for developers?).

Posted By: Jorge Diaz Tambley on 02/25/08

When I began working as a consultant, my friend advice me to charge this way: a.- What they want is clear: flat rate b.- What they want is fuzzy: hourly rate So far so good Regards

Posted By: Danny de Wit on 02/25/08

You are absolutely right. I have been preaching this for a couple of years now. Everybody wins eventually in this scenario. It's simple when you want investment in projects, you can't put all the risk at the client side cause then they can't commit to the project. BTW What works well too is agile within fixed budget. But you'll have to start following my blog for that story. This window is too small ;)

Posted By: Rob W on 02/25/08

I think this relies heavily on the type of project. I'm chiefly a developer (not a graphic designer), which already slants things towards "difficult to estimate", plus I've worked on lot of projects that are variously: * doing things we're not sure are possible with the given technology, or working with unclear specs * reimplementing large existing codebases that are not entirely understood ...and a fixed-price that safely accounted for the risk involved would make an impossible price, whereas with hourly development and lots of client communication, they can keep track of the progress of the project and even decide to cut various features early if necessary (and we all avoid the deathmarch). The important thing either way is to define your goals very clearly -- even if you're a designer, you'd better not fix your price but have an open clause like "we'll keep adjusting the design until you're happy", particularly when you have multiple people at the client company making decisions.... It's also always good to make your milestones still valuable, but as small as possible. If you're doing site design, then development of a complex site, you should have one priced "project" for the design, a separate one for a minimal but functional site, and (depending on scale) separate projects for each section of functionality. Then if a slew of new requirements comes out of one mini-project (as it often does!) you can rework the specs and quote for subsequent mini-projects accordingly.

Posted By: orangeguru on 02/25/08

Why deprive yourself of this way of billing clients. Sometimes you sell yourself on a budget for a project, sometimes you charge by the hour. Whatever is best for you, the client and suits the project.

Posted By: dezynboy on 02/26/08

In my experience, it all boils down to accurately defining the project up front, explaining how much the entire project will cost given your understanding of it, and sticking to your estimate. Should the scope of the project change based on your definition, then you communicate to the client that his/her requests are beyond the scope of the project and that you would be happy to pursue them, but you will need to work up an addendum to the agreement outlining the difference in price. By defining the project in writing and having client sign it, you are assuring they understand the expectations and anything beyond what is outlined is subject to additional charges. It has worked for me for over 10 years in a graphic design & web design capacity. Thanks for the article Matthew. This is great information. We could go on an entirely new tangent and talk about internal chargebacks and how they do in-house design departments a disservice, but I will not digress. Keep up the good work.

Posted By: Jermayn on 02/26/08

True very true! I think per hour should only be used for small one off jobs like fixing some code or something.

Posted By: Lee Jorgensen on 02/26/08

I tend to use quote a fixed price based on an hour by hour breakdown for both repair and maintenance and full site jobs. This means that the client gets a realistic idea of the amount of time that's being put into their site but also get a fixed price. The project is scoped in the proposal document and any extra work beyond this is charged per hour. If I underquote based on a miscalculation of the time it will take me it's my own stupid fault!

Posted By: Sean Byrne on 02/26/08

We mix it here as well,my gut feeling is clients do prefer flat billing and it tends to generate more creativity and get more business in the long run.

Posted By: Paul Flebotte on 02/26/08

I agree, the only time you should be quoting hourly is for updates. I have been quoting project prices for years and feel that it benefits both the client and the developer. Additionally, if you write up a scope document (spec sheet) defining all the functionality that will you be building for the site, a navigation spreadsheet that defines the menu structure and then have the client sign off on both documents, you'll cover your own ass. Any left brain ideas (or something the client forgot about) late in the game will be out of scope and therefore not covered in the signed agreement. You will then be in a position to tell the client that the functionality you are requesting is out of scope and needs to be quoted. This eliminates any surprises and if you are up front with client about this before they sign the agreement, you have already eliminated any thoughts of the creeper. oh yeah, you should always get signoff on homepage and interior comps/designs as well. Just in case the client wants to change the template(s)...cover your ass whenever you can!!!!

Posted By: Krystyn Heide on 02/27/08

@Max: "Yes, but what if the client starts asking for the moon?" I'm with Matthew here, don't let clients throw you under the bus because they think you'll stay within the agreed upon cost. Times like these is when I find great value in the words "outside the scope of the project."

Posted By: Matthew Grffin on 02/27/08

Thanks, Krystyn. By the way, I love the design on your site.

Posted By: Deron Sizemore on 02/28/08

Good points there. I think you've just changed my mind about hourly billing. I usually just develop my own personal ideas and sites, but occasionally do some work for clients on the side and have always billed by the hour. You make some very strong points to go against the hourly way of doing business. I agree with Paul in that hourly rates could still be used for such things as updates, but even then, as he says in his comment, you simply could have a stipulation that states anything extra outside of the agreed upon terms will be quoted separately.

Posted By: Demetrius Pinder on 02/28/08

I charge per project (or flat) as well Hourly billing is a total pain in the ass and just not worth it. Plus, as a business owner and consumer, I know I love it when I know what I am paying.

Posted By: Website Promotion on 02/29/08

Not charging by the hour is the easiest way to give yourself a raise. The more experience you get the more money you can earn. Great list!

Posted By: mac on 03/01/08

I first started do web base job by billing per project. But sometimes i do get offer for pay by hour. I only accept it if its a update daily works. Some people charge by the hour because its like a motivation to them to do the work,if the offer is good.

Posted By: meryl on 03/01/08

It also wouldn't work for ongoing client engagements where it's almost like working for the client as a regular employee. It would be more time consuming to quote every little project the client gives you. But I agree that freelancers should quote a flat fee for projects and then quote again if the client wants to add more to scope.

Posted By: Dennison Uy on 03/07/08

Excellent post. I agree with all your points. Billing by the hour not only puts a lot of stress on the client, it puts pressure on the the developer as well. This is especially true if your client is technically knowledgeable, or if someone in their organization is. Also, billing by the hour means spending extra effort when doing billing.

Posted By: Michael Thayer on 03/22/08

Not offering hourly billing will lose you a lot of business. Clients know that you're building in a "buffer" of time to protect yourself from surprises (mostly client changes, client foot dragging with content, etc.) Just like your competition. There are always unknowns and scope creep with a large percentage of projects. Fairness to both parties dictates that you offer a choice between fixed and hourly with good explanations of the benefits and drawbacks of both. It's easy to explain options and you'll be seen as more in sync with the client's needs. My experience is that after giving a fixed bid and an hourly option, along with the explanations of both, the client always chooses hourly AND usually ends up spending more money with me as I build trust with them through transparency. It also makes them feel more in control and they are usually responsible enough to make decisions for additional work or technology (or not) and pay accordingly. Reap the rewards of building trust and of delivering meaningful and obvious value by allowing your client to feel more like a partner in the process than just another customer. Peace, success, and happiness to ya.

Posted By: Michael Thayer on 03/22/08

One point about your Reason #6. $3000 does sound outrageous for a very basic website...because it IS. Regardless of the client having no idea on how much time and energy learning your craft, you're entering "Freakanomics" territory with control of information for maximum profit. Analogy: A young (independent) auto mechanic just learning the real-world reality of fixing cars for people learns very quickly that he can't charge $80 hr x 6 ($480 plus parts) to replace a headlight assembly just because he realizes that he doesn't have the correct wrench and has to go to the parts dealer to get one. Then he learns that there's a special way to use that wrench. And after the new headlight doesn't work when installed, he makes a few calls and finally finds out that you have to replace the special fuse as well. We are all continuously learning our craft without charging the client every dime it costs us to learn. The same applies to charging $3000 for a very basic site. Why does the client have to bear the brunt of their ignorance your particular type of salesmanship? You are in a position of trust and able to save them a lot of money because you're an expert now. The client will thank you and appreciate that you didn't take advantage of them (as you could have). Your honesty about the site cost will also generate referrals instead of animosity. When the client's friend or colleague points out that they got hosed by you for their very basic site, the client may not tell you but they'll probably tell others about it (or just never trust you again). Be an expert that uses transparent billing and work practices. You'll build a better practice and sleep better. "Hose not, want not." Peace, success, and happiness to ya.

Posted By: Paul Burani, Clicksharp Marketing on 03/24/08

Here's another reason to avoid it -- commoditization! You end up giving the prospect a number which can easily be compared to other bidders, placing undue emphasis on the rate and distracting from any value added.

Posted By: Matthew Grffin on 03/24/08

Thank for the comment Paul. You too, Micheal. Your argument is well thought out and I give you credit for that. I just happen to disagree with about everything you said. That's okay, though. If hourly billing is working for you, go for it.

Posted By: John on 03/24/08

Excellent article. As both an experienced designer and one who has hired vendors I highly recommend this approach. Matthew, thank you for laying it down so clearly. I could not agree more.

Posted By: nope on 04/15/08

my company charges by the hour and i worry we are failing badly. i have pushed and pushed for fixed rate billing so we can get the job done well and not worry about saving precious minutes and undo stress on my design team, but my boss will not listen. we go over our hourly estimate on almost every project and then we get "frowned upon" for going over budget. thanks for your article, matthew..you are completely right and i agree wholeheartedly with you.

Posted By: Matthew Grffin on 04/15/08

Thanks, nope. It's difficult when you see an obvious defect like that, and you can't do anything about it.

Posted By: seo services, mowglitech on 05/07/08

I'm totally agree with your points that you mentioned. And while I work for client when they hire me for hours, I always observes the quality and work won't come up professionally.

Posted By: Fight Videos on 05/13/08

A flat rate is easier as it is flexible and no one gets the pressure that the job is done by hours and the clock is ticking 'tick tock' 'tick tock'

Posted By: Patrick Marr, Rhode Island Web Design on 05/14/08

I completely agree. We almost always go for fixed rate billing. If a client is adamant about hourly billing we'll work with them. But only if they sign an agreement indicating that there is a 20% cushion on any estimate provided. This generally helps cover scope changes.

Posted By: Fatsgone, easydiet on 05/16/08

Yeah. I agree too. It's just like a car park. Clients will feel more comfortable with a fix rate billing. :D

Posted By: space code on 05/21/08

I prefer flat rate billing. It makes things easier for both the client and the designer. Clients can be rather picky when it comes to paying by the hour

Posted By: Duncan Macdonald on 08/27/08

I agree somewhat. I generally charge a flat-rate which includes, for example, one round of amends. Anything beyond that rate will be charged by the hour. It's fair to say that an experienced designer should be able to correctly cost a job, but I don't think it's fair on the client to leave "padding" for excess, because it's not like you'll remove said padding if the job comes in under the time. You're totally right though, flat-rate works, and it does make clients feel a lot more comfortable.

Posted By: Matthew Grffin on 08/27/08

Thanks for the comment, Duncan.

Posted By: Gazikent on 11/11/08

Thanks for the comment

Posted By: Dave on 12/13/08

This really is the perfect way to do it, and can be very helpful moving from a small design agency with contracts to a medium sized agency with employees. If you have a flat rate you charge your clients, plus your contracts have flat rates, everyone knows what to expect and is happy with project flow. This results in a smooth and steady operation until you begin to bring your contractors on full time.

Posted By: Matthew Grffin on 12/15/08

Thanks, Dave.

Posted By: yerel seçimler on 02/03/09


Posted By: Al Boulley on 02/28/09

Good advice, Matthew. My business gives its quotes in terms of hour estimates, and then states what I feel is a competitive hourly rate ($65). Unfortunately, seems like alot of "my" potential clients out there think that rate is "expensive". If a project looks to be 25-40 hours, should I be saying (based on above stated rate) it will cost $1600-2600 - or should I try to be specific by saying $2000 and leave it at that? My issue with finding clients tends to be with their thinking a good website is a $500 expense that can be built by the cheapest bidder.

Posted By: Matthew Grffin on 03/02/09

Actually, Al, I would recommend telling them $2600 and leaving it at that. By doing this you will ensure that you won't lose money and your client will feel more secure in the set price. Essentially, you're taking out the risk factor for the client. A price range will usually scare a potential client.

Posted By: Ashley on 04/15/09

Matthew, do you offer maintenance on the sites you design? Do you charge hourly or a flat rate? Tracking hourly charging is driving me a bit bonkers at the moment, and I'm wondering if a flat monthly fee would work -- but there would certainly times when clients need hours of work beyond what the fee is set up for.

Posted By: Matthew Grffin on 04/16/09

Ashley, I usually charge a flat monthly hosting fee that covers minor changes. Anything above and beyond that, I charge hourly. Unless, of course it's a larger add-on and then I quote it at a flat rate.

Posted By: Web Design Web Development Company on 04/22/09

But the flat fee is calculated on the man-hour. The man-hour depends on the requirements of the project. If we promise to deliver the project for USD 1200 for 100 man hours to a client and if it takes 108 man-hours, we never charge extra $$ for extra 8 man-hours.

Posted By: Arturo on 05/27/09

This is 100% foolproof. I always bill by flat fee. I add some "buffer" for possible overages. When a client starts to ask for more and more, I just pipe up and say, "I'll have to charge an extra $xx" again padding a little in case. I find my overall income level has increased as I work more efficiently. If you keep a collection of code snippets, you can easily double or even triple what you'd normally charge per hour. If I quote a flat rate, and everything go's smoothly, and I end up finished earlier than expected, I have on occasion, billed *slightly less* than my quote, I'll tell them I was able to "save" them a few bucks... Just a little, and the client ends up being extremely happy and thinks I am looking after them. Just my experience...

Posted By: Jake on 07/13/09

I agree with the flat rate to an extent. However in my experience lately, (perhaps it's the BS economy we live in right now) clients have been very abusive to the scope lately. I quote for XX amount of hours, give them a flat rate and from there they run with it and add everything under the sun not initially discussed, then play it off as if it was part of the "revision". Then in the end, my proposed project for XX amount of hours has ended up in XXX amount of hours. Not cool and wasted income for me. I guess I'll have to beef it up and bit and do what others mentioned in stating if any changes or additional items fall outside of the scope, it will cost more. Plus add a revision limit. Simple as that.

Posted By: Rick Lecoat on 07/17/09

I've been looking at this issue for a whie now as I revise my terms, conditions and pricing methods. My currently favoured solution: Flat rate with a strict limit on revisions (2 or 3) and a strictly defined scope in the initial proposal that the client signs their name to at the outset. Anything that exceeds the number of revisions or changes the scope is billed at an hourly or daily rate, with the client being kept fully informed. Oh, and 50% up front, of course.

Posted By: Dixie Vogel on 07/26/09

Interesting discussion. I do both. On projects, I quote flat rates, but I determine those rates by breaking down each aspect of the project, estimating my time, adding the inevitiable additional padding for unexpected issues, and multiplying by an hourly rate. I avoid feature creep by specifying clear deliverables with the quote to be agreed upon first. When there is a significant issue that arises, if it's my fault, I eat the time. If it's not, I'll renegotiate the fees with the client. This actually increased my income as I had a tendency to undercharge on some things. By breaking the project down this way, I ended up charging more fairly and consistently. For one-off or more simple tasks, I may also do straight hourly. But I normally give the client a range beforehand and will stick to that unless something exceptional comes up. Again, if that happens, I discuss it with the client before additional charges are incurred. Whichever someone goes with, I believe clear communication with the client is key.

Posted By: Alexandre de Oliveira on 08/19/09

Hourly rates needs a more extensive administration of your processes. It will make you work more and be more expensive. To add an additional thought: Let's say that today, it takes 40hr to get a project done, and it costs $2600. In the future, you will be a more experienced designer, then it will take you 20hr the same project. You will bill your client $2600, because you are now twice as experienced as before. That's a nice way of measuring your experience. I tend to budget my project the same throughout the time, except that everytime I can do it faster. If now I get $65/hr, tomorrow, being a 2x experienced professional, I will be getting $130/hr AND it GIVES me margin for discounts that my competitors theorically can't give.

Posted By: Kevin on 08/27/09

As far as the client is concerned, they can't know for sure how many hours you are doing. The best way is to estimate how many hours a project might require and charge a flat fee using that method. That way the client knows how much they are paying straight out. This gives them piece of mind.

Posted By: Martin on 12/09/09

I ask for a flat fee but always explain how I arrive at it: Example. Once optimized software upgrades and installs on 90 pcs in one office. Savings were: 1 hour per month per PC at $50 per hour (30 for IT guy and 20 for lost productivity) * 12 months * 90 PCs. I suggested 40% and got 15K for a week of work and a few K in software. They were happy because on top of the savings I gave them they laid off another IT guy. OOps, sorry.

Posted By: Gary on 01/13/10

Hi Mathew I have been design web sites since 1998 and have had a few customers that, changed my billing and contract methods. When I first began, I quoted a customer for $600 for a web site (graphics designer) I think this was the prob., he was a graphics designer knew nothing about web site programming but was very picky. After the site was roughly done, all of a sudden he says, hey can I do an animation of my logo (not discussed) Well I guess so (10 hrs later) done. Then hey can I do this animation. NO. NO. I need more money. He paid extra but it made me make a work outline to go with the contract. Put everything you will do in writing, then if customer aske for more. Sorry not in work outline,it will cost more. I never had that problem again, but even now I run into fussy, cheap customers who make me work my tail off for a low cost web site. I just have to awkward say, sorry we are done with the design changes. We have to finish.

Posted By: Taylor Aldridge on 04/12/10

As a designer that started working painting houses, waiting tables and hauling garbage I find that hourly billing does a much more insidious thing. Something I have yet to read any any article. It demeans our craft, what we do. This notion that what we do is measurable in time is insulting. We are artists, creatives, imaginers. We take the intangible notions, the ideas of another human-being who can barely articulate what is in their mind and we make it real, visual, in words that do or say exactly what needs to be said or seen. WE ARE NOT BLUE COLLAR ASSEMBLY LINE WORKERS!!! We are creators. What is "Got Milk" worth or "Just do it!" ? The 15 minutes it took to come up with or the 10s of millions of dollars it generated. Why does Brad Pitt get 20 Million a movie? Did he spend the most time on the set? NO! He brought the most value to ticket sales. The choice we have is not so much about flat rate vs hourly, but about showing a client what you bring to the table, or how you can effect his bottom line. I recently did a brochure for a friend. He is a single father of three and self employed. We got to talking one day about this and what it could mean to him. (He billed by the hour) he didn't believe me. I did a brochure for him and charged him $60 for the stock photos I used, he was aghast at the expense. (and he still had to pay to print it.) I told him if I had charged him hourly it would have been over a grand, but if I charged him what it was worth it would have been closer to $10K. He laughed at me. Two weeks later I get a call. He tells me everyone is blown away by the brochure and he has happily had to print more. He then told me that the first brochure he handed out brought him over $2K and got him invited to speak to a group of realtors. That brought him $12K and he has only given out 24 of them. Within the 6 months and a reprint he has cleared his previous years gross. He told me it probably was worth the $10K. (of course he never paid me any extra :) ) How many hours did it take me to create the brochure? He was so taken with $$$ results (the value) my friend never asked how long it took and we should never what a client to think of us in those terms.

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