Freelancer Custom Quoting: How to Quote per Project by Secretly Charging per Hour

Freelancer Custom Quoting: How to Quote per Project by Secretly Charging per Hour

As a freelancer, one of the things you’re faced with figuring out is whether you’re going to charge by the hour, or by the project. There are two sides to the discussion and both sides will make valid points for the decision to charge one way or the other. But, what if I told you that you didn’t have to choose?

Freelancer Secret Custom Quoting
Image credit: Ben Zweig

What if you can charge people for the project, while quoting secretly by the hour? Would you want to do it? Would it benefit you in the long run? That is the issue we will discuss in this article. There are both pros and cons to either method you choose.

The Benefit of Charging Per Hour

Charging by the hour ensures that you will not face the problem of a scope creep because you get paid for how much time you put into the project regardless of the changes. This is especially beneficial if the projects you’re working on are not set in stone in terms of the process and the details of the project.

The Benefit of Charging Per Project

Quoting your clients per project allows you to pad the prices a little to cover any possible scope creep you might encounter with the project. Clients favor this method of cost quotation because they feel safe and do not need to worry about any additional hidden costs they have to deal with later on. They know right from the start how much to budget for the project and what they can expect to receive at the end of the project.

The result is a tie between the two methods. However, fret not; you do not have to choose between the two. You can quote your clients based on the project while still charging by the hour. If we’ve got your attention, read on.

The Best of Both Worlds

It really isn’t hard to have the best of both worlds when it comes to providing quotations that will satisfy you and the client. Outlined below are some key points to take note as to how to get the best of both worlds. So pay close attention and soon you’ll be able to enjoy the benefits of both per-project quotations and charging by the hour.

Having Best of Both Worlds
Image credit: danimal42

Step 1. Estimate the Hours Needed For the Project

Do a rough estimate as to how long the project might take you to complete based on your previous experiences. This will allow you to quote the client a total sum for the project while taking to account the number of hours you will take to finish it and quoting the project at an estimated per hour rate. On average, based on my past experiences, it takes about 15 hours for me to finish designing and coding a WordPress theme. If you’re new to the type of project you’ve been asked to give a quotation for, ask fellow freelancers for advice regarding the number of hours you might take to finish the job.

Step 2. Set an Hourly Rate

Once you’ve figured out approximately how many hours you’ll take to complete the project, you can decide on an hourly rate for that particular project. For example, if you decide to charge $50 for each hour you spend working on the project, and the project will take you approximately 12 hours to complete, the total base sum you start with is $600. However, that’s not the end of it. You have to take into consideration scope creep and the additional costs that might surface while working on the project.

Calculating In the Head
Image credit: troutfactory

Step 3. Work In Extra Costs

Work out the additional costs you might incur based on what the clients expects from the project. If you need to buy stock images for the site, you need to add those costs into your base quotation. If you are building a WordPress site off a pre-existing WordPress theme that costs money to download, you need to factor these costs in as well. If you need to purchase any fonts for the project, these are more costs you need to consider. Add all these extra costs to the $600 basic sum you’ve calculated based on the estimated number of hours of labor you will have to put in for the project, and you have a proper estimate as to how much you should charge your client.

Calculate the Extra Cost
Image credit: stuartpilbrow

Step 4. The Emergency Reserve

Give yourself room for unforeseen circumstances; quote above the sum you’ve worked out as a proper estimate. Although some people pad their quote by 30-40%, the reasonable rule of thumb is to take 10-15% of the full estimate you’ve calculated in the first three steps and add that amount into your final quotation. Remember to inform your client that any work requested for but not stipulated in your contract is subject to additional costs.

Is it unethical to Price Pad? This is a much debated issue that is not as sinister as it seems. Of course there are people who have every intention of making big profits with the price pad. However, the real aim of the price pad is to work as an emergency reserve you dip into only if your original estimation is off the mark. If you up your quote by 10% (cost: $1,000 + pad: $100) and you complete the project ahead of schedule, or if there was no scope creep, you can offer your client a discount. This will kill two birds with one stone. You will have built good working relationships with your clients by making them happy with your service and efficiency while still being able to maintain your ethics.

Pick the Best Fit

Everyone has a preferred method of giving quotes to clients. The most important thing is to be comfortable with the methods of working out quotes to clients. If you prefer to charge by the hour, by all means do so. If you prefer to quote per project, don’t hesitate to do it that way. We hope that you can benefit from the ideas in this article and consider applying the steps we’ve mentioned here the next time you have to present a quote to a client. Find out what works best for you.

Weighing Your Options
Image credit: Matt DeWitt Photography

Discuss with Us

Are you already using the steps we’ve mentioned in this article when calculating your quotes? Feel free to join in the discussion regarding the ethics of price padding, or to promote either one of the methods of quoting clients with us.

Aidan Huang is a web enthusiast and ingenious blogger who loves all things design, interesting and technology. He is the editor-in-chief at Onextrapixel and have founded several other interesting blogs. Do keep in touch with him on Facebook and follow him on Twitter.

Comments

    • paul,
    • April 2, 2010
    / Reply

    15 hours to design and code a wordpress theme is very impressive. I’d be interested to learn about your process. Do you use templates, frameworks,…

    1. / Reply

      Hey Paul, yeah, I have a couple set wordpress frameworks I’ve built for myself which greatly cut down on time. That, mixed with some premade photoshop actions that set up my work environment, all folders/layers, ect seems to save me a lot of time.

      1. / Reply

        wow that’s a really pro way for making wordpress theme, I am new at wordpress and that tip is great for when I go further down the road ^^

    • Marion O.,
    • April 2, 2010
    / Reply

    Thanks for these suggestions Mike.

    I’m starting my career in web development/design and I also want to start doing some moonlighting work. You’ve given me some ideas on how to quote customers and what to take into consideration.

    Some projects I will under-price what I normally see being charged for the same project. I only do this if the customer has a personal relationship with me and I’ve never done a project like it. I see it as a “pay me to learn” opportunity.

    • Bill,
    • April 2, 2010
    / Reply

    I feel the title of your article was misleading. How is calculating a quote for a project based upon hours it will take to complete a secret? How else would you do it? In the end, charging by the hour is different that providing a flat quote, because when you charge a client an hourly rate, that client assumes the risk of not knowing what the final bill will be. On the other hand, quoting a firm price means that you, the designer assumes the risk that if you under calculated the hours the job will take you will won’t get properly compensated. I’ve worked Botha ways, and whether I do one it the other usually is based on hue the client wants to work the arrangement.

    1. / Reply

      Hey Bill, for the clients who know you’re quoting per project, the calculations on the back end are your own. The padding is also something I’m sure most pay-per-hour freelancers don’t tell their clients up front. After you’ve done 20 or so sites/blogs, you’re usually within a ballpark of how long a project will take, time wise, so it’s easy to price quote a full project and not per hour.

  1. / Reply

    Nice article!

    Unless I’m working on-site with a client I always charge by the project – and as Bill said the only real way to quote for the project as a whole is to calculate the time taken plus expenses.

    Rather than ‘padding’ the quote I tend pad the hourly rate, which gives the client a realistic estimate of the time which the project will take and still makes me enough cash to earn a decent living, an accomodate for minor scope creep.

    So for your example of a 12 hour project at $50 I would instead charge the client for 12 hours at $55. Having said that if I have a client who i know wil create extra work during the project or request multiple revisions I will add a few hours to compensate for this :)

    1. / Reply

      Hey Chris. Good idea on the price padding per hour. I may have to try that one out sometime.

  2. / Reply

    @paul I think it probably is project dependent. I only recently start working with WordPress but from what I can tell it is possible to create a basic theme (with less functionality and fewer templates) in a shorter amount of time. If you’re creating a theme for a specific client with one specific goal in mind then there are plenty of things you could leave out that you would have included had it been a theme intended for resale (on sites such as ThemeForest) where the theme needs to be more robust.

    @Bill I’d have to agree with you here. All my per-project estimates are based on an hourly rate and the time I think it will take to complete plus extra costs. Not sure how else one would come up with a project estimate.

  3. / Reply

    I don’t want to offend the anyone, but the first picture looks so weird. lol

    I hate when I have to give quote for a complicated project. It always end up costing more money and 75% of clients don’t agree with it. For now on, I will start charging 10% more just in case.

    thanks for the article

      • pamper,
      • April 3, 2010
      / Reply

      @”I don’t want to offend the anyone, but the first picture looks so weird. lol”
      You are right, Its gayish

    1. / Reply

      It’s like the mini-me pinky in the mouth pose :-P

      And yeah, padding a bit is a good thing. I know most people won’t say it, but it is. And as always, if you feel like you got things done without needing the price pad, tell the client you’re taking X amount of dollars off at the end of the project since they were “so cool” or something like that :)

  4. / Reply

    The best of both worlds is: You bid it as a project with a Memorandum of Understanding with the client that your hourly rate is (x) and if they go over the estimate and the set amount of revisions, hourly charges start at that time. Payment needed before sending final files includes these extra hours (documented of course).

  5. / Reply

    I have found that there is really very little difference between charging by project or by the hour. As soon as I tell the client my hourly rate, the next question is invariably, how long will it take? So, whether I like to recognize it or not, the client has a price in their mind. Deviating substantially from the estimate of hours, is very difficult. With either method, pricing is a challenge!

    When I put together a price for a project, I typically sit (with my web editor open) and estimate how many hours it will take to do all the various components of the project, on an item by item basis. Then I assess the project in terms of complexity. I also consider the client: have they been involved in a web project before; how much back and forth will there be; do they have a clear picture of what they want to do.

    Then I take the first estimate of hours and multiply that number by 2 to 3 (based on above), and then apply my hourly rate to that number to get a final cost.
    Why? … because I track the number of hours I work on all projects (fixed price or hourly) and I know my initial estimate is not realistic. I have had projects with over 1,000 emails exchanged … for myself, sitting in front of the web editor thinking about how many hours I need, I tend to “forget” about the amount of time for communicating, so I need that multiplier factor to be anywhere in the ball park! I don’t know if I would call that padding ….. more like being realistic!

    • Bill Snebold,
    • April 3, 2010
    / Reply

    Brian… If you’re telling a client that a project will cost x amount but if it takes longer you will start charging them an hourly rate of x/hr, then you might as well just say you don’t bid on a per project basis, you only work by the hour. The point getting a bid from a client’s point of view is to be able to budget their costs. If you tell them it’s going to be $5000 to design their website, then it’s only fair that you provide that service within certain parameters that are set forth in a contract at the start of the project. Certain parameters might include number of pages, number of revisions, etc. If halfway through the project the client says they forgot to tell you that they also need 4 additional pages designed, then it’s time to let them know that it doesn’t fall within the original scope and you will need to give them a revised quote.

    Arina seems to have a similar method to how I go about pricing a project. And I agree with her idea about padding. It’s all a judgment call based on various factors, and how much hand-holding you have to do with the client is one.

    Basically, the difference of hourly or per project is based on how you’re being hired. If you’re freelancing for a agency, then they are hiring your talent/skills for a period of time. And then you just charge a daily or hourly rate. Other than that, it’s per project.

    • Christian Benjamin,
    • April 3, 2010
    / Reply

    I follow the lead that most of you guys have set – I always calculate the hours that the project will take to finish and multiply x my hourly rate – thus providing the client with a set price. (I always include stock photos, fonts, revisions and even CMS training in the proposal, as well as outsource cost – keep the client in the know with their pocketbooks!)

  6. / Reply

    I don’t exactly understand what you mean by secret… isn’t this the way everybody already estimates a project’s costs?

    It’s not a secret if everybody knows ;)

    And please, tell me how you code a wp theme in 15 hours ;)

    1. / Reply

      Most people I’ve talked to don’t seem to think of the per hour rates they’d like to make when quoting a project price. They just think “ok, this project, it will cost X amount of dollars” so it’s a secret to some ;)

      And for the WP theme in 15 hours, I’ve got a couple frameworks I’ve built up for myself. One I used to use a lot, before coding a new one specifically for my own use, is the Guerrilla theme on http://www.giantthemes.com/themes

  7. / Reply

    But i found fixed price project is more profitable, suppose i’m working on a project cost $150 and that takes 3 hours so its $50 per hour but if u charge that much i bet u cant get the project :)

  8. / Reply

    Hi,

    I would prefer to go for hourly based when scope is not clear and its a vast project.

    Fixed price is good when specifications are clear and project is small.

    Thanks for sharing. Got lot of information to consider before quoting clients.

    Good day.

  9. / Reply

    Yes quoting per project is not that hard, by doing what you said.
    It becomes difficult when you do this for a project with new technology, or some additional feture you’ve never done. Then it’s really difficult to estimate how much time it will take.
    I have quite a few experience in programming (a bit more than 10 years), and yet i sometimes still can’t figure out exactly (up to 10% of deviation), how much time some new project will take me. Well it really depends on the size of the project.
    But my advice would be:
    For example if you project takes 100hours add about 10% of reserve resulting in 110 hours. But if your project takes 200hours add 20% ending in 240 hours not 220%. if project is fairly simple and you did it numerous times leave it at 240 hours, if it’s really complex and you did it only once or never before in this technology add another 10% or so of reserve ending in 264 hours. And so on, you get the picture…

  10. / Reply

    I have always found it difficult to quote a client, esp as most of them ask for a quote before the specifics are briefed…

    Also, to be honest I’ve never really considered charging by the hour as well as per project…not something that had crossed my mind before!

    but saying that, i think its definitely a good idea! – esp for those additional costs due to scope creep!

    Glad i read this article…its given me good direction!!

    good read! :)

    1. / Reply

      Thanks for the comment Krishna, I am glad it helped you out.

  11. / Reply

    Excellent article. I usually charge per project , charging per hour seems bit difficult. This article really helps, a lil bit of extra charge overseeing the extra hurdles we have to get pass , is going to help. :)

  12. / Reply

    At every company I’ve worked at (including working for myself) it’s always come down to an hourly rate – the only difference is whether the client sees the breakdown or not. I usually break it down per task – design, dev, seo, ppc etc.

    Although now I’m trying to move to a daily rate to try and reach some sort of middle ground where a client can hire me on an ad hoc basis and not see numbers like £40/hour (seems large to them) as opposed to £250(ish) a day, which seems much more reasonable.

    It’s tricky though to work out numbers which are fair but at the same time don’t put me out of business.

    As for contingency padding, I usually add 5-10% depending on the size of the project (not always easy when the budget is tight) but I also try to get concrete specifications nailed down so that scope creep won’t become an issue.

    E.g. if a client wants an extra feature on their blog and it’s not in the spec, then the whole blog task gets re-quoted.

  13. / Reply

    Hi,

    Thank you for describing your methods. However I don’t share them. First three are okay, but you break no new ground here. I suppose there are thousands of people who charge per hour and name the total quote for project to their clients. I do the same. What is more I provide my clients with quotes for each part of work, so they see how much they need to pay and what for I receive their money.

    I may argue with you about the forth step “Emergency Reserve”. I think it’s a daylight robbery. Why should a client pay for a job that will be hardly done. We are talking not about $1 – $2, we are talking about 30% – 40% of the cost! If you want to build strong and reliable relationship with your clients for a long term you shouldn’t cheat them and extort money.

    If you don’t want to underrate your work try to discuss all requirements, functionality and other details on the project with your client and compose a specification, which can be included into agreement. Thus you don’t need to worry about unpaid extra work and client can see clearly what he pays for.

    • Patrice,
    • April 16, 2010
    / Reply

    It seems i have a different way to charge than a lot of you (see last sentence). I deal with many different kinds of clients, mostly portfolio’s for architects or other types of designers and then I also deal with many University Websites.

    What i have come to find is that Universities use grant money to design websites, therefore providing them with a quote that is in a higher range 6-10k is easily acceptable for them and as a result they get a great website. One issue that I often struggle with is that as you evolve and become a better web designer, your efficiency increases tremendously, you start to reuse the same code, the same CMS, same modules… now if you charge on an hourly basis, efficiency works against you. I say this because telling someone that your time cost between 125-150 per hour, their jaws might drop open and will be tempted to go to someone else. In that case, I often quote 50$/hr, and even then, Institutions will often have a cap of 25$ as to what they are allowed to pay a webdesigner. So in a way, its a lie to quote a lower number but it is how it kind of has to happen. I’ll often say that i have a minimum fee of 6000, in which case then i am working as a consultant with high fees which generally places me in a good standings. otherwise we have to say i am charging 25$ an hour and change the hours around.

    Now on the other spectrum are portfolio sites, I often work with people who are starting up design businesses and are tough on funds or artists who simply don’t have a lot of money. Although i generally don’t make much money from these, This is where web design becomes fun. There is nothing better than working with designers, and creating presentations for beautiful work. These are sites that are often done in flash with much more attention to detail and end up taking a lot longer and I end up making a lot less money on these. For these I will charge starting around 3000 (ideally, but its sometimes 2000) and do them with hopes of hitting bigger clients where money is less of an issue. The balance I get between Portfolio sites which I love doing and University which i do because its a job keeps me smiling as I do my job which i think is the most important.

    To put it bluntly, I assess the situation and pull a number out of my ass. Works every time.

  14. / Reply

    I have an effective system some of you may want to emulate for billing. I’ve developed pricing guides for all the work I do, broken down by category (print/web/etc.) and subcategory (Eccomerce/wordpress theme/etc.) These prices are based on past experiences, so they are fairlyt accurate in predicting the amount of time a particular project may take. In addition, I also quote them an hourly rate, which will start once the project goes over the alloted time for the base price.

    This does three things: Firstly, seeing the price guides give the client peace of mind, they know they’re not being taking advantage of, because pricing standardized and right in front of their face. It also is convenient for the “drop-of-a-hat” quoting many clients tend to demand during initial meetings. Lastly, it’s a deterrent against limitless revisions/changes. The client is aware that if they go over the time limit, they’ll begin paying the hourly rate for my services, this helps to keep the project under control, and saves the client and me from painful minutia.

    In my opinion, this is truly the best of both worlds, because the initial fixed cost can be large enough to cover any internal costs/expenses awhen you pad a bit, and should the project run over, the hourly rate will cover these costs.

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