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Charging by the Project, or Hourly: How Do I Decide?

As a business owner, you have the freedom to decide how you charge your clients -- including rates and whether they're an on an hourly or per-project basis. But getting to that conclusion can be a confusing and frustrating ride. We share some tips on how to navigate this portion of your decision making.

Home businesses often start with a passion for the work—and an outside-my-comfort-zone feeling when it comes to deciding how to actually charge for this work. Along with deciding how much to charge, new service providers have to decide how to charge—by the project, or hourly? The answer will depend a lot on what you do, but here's what you need to consider first.

What do my clients expect?

Some industries have expectations—your hairdresser probably doesn't charge you by the hour. Consider how other service providers in your industry work. If it's a pretty even spread, ask what your particular clients might expect.

Will I be working distracted?

Distractions are often part of the territory when working from home—make sure you're not charging for the ten minutes you spent breaking up a sibling squabble or putting the clothes in the dryer. If you work only during nap times or while someone else is helping with the little ones, you can charge by the hour. If you're frequently distracted or work in short bursts, it's a good idea to charge by the project instead—otherwise you may end up losing work to other providers who can do the work in half the time.

Does my work have specific parameters?

To charge by the project, you have to have very specific parameters, or guidelines, as to what that one project includes. For example, as a freelance writer, I charge by the project for an article using a word count guideline. But my editing work that involves outreach, emails, public relations work and a handful of other odd tasks, I charge by the hour because there's simply no way to define what one project would include.

What are the pros and cons to working on a per-project basis?

When you work per-project, your customers are probably much more comfortable, knowing exactly what they will be getting for the price, whereas hourly work has more variation. But there's a few perks for the service provider, as well. It's easy to conservatively estimate how much time a project will take and then complete a project quickly to earn above your hourly goal. As you gain more experience, you'll probably also be able to complete projects faster. The biggest downside is that unforeseen snafus can mean you spend a lot more time than anticipated on the project and still get paid the same amount.

What are the pros and cons to working on an hourly basis?

While per-project clients know exactly what they'll be paying, for some type of work hourly payment is easier to manage, especially when the work includes a lot of little projects. The service provider knows that their amount of effort is equal to the amount of pay they'll receive. The downside is that the benefits to project-based work, like completing a project in less time than anticipated, don't apply here. If you become faster as you gain more experience, you'll be paid less.

Choosing whether to charge by the hour or by the project is a tough choice to make. There's no one-size-fits-all answer, but choosing becomes a bit easier when you determine what the client expects, know what the distractions are, and know the pros and cons. In fact, some businesses (like mine) offer both hourly and per-project rates, based on the type of project or the client's preferences.

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