Hourly or Project: That’s Not the Question

by Dec 9, 2015Models for Business and Career

A Google search for “hourly vs project writer” yields 475,000 results. Each method has its fans. The debate has been covered exhaustively. Many experienced writers end up at, “It depends on the project,” and cite their typical arrangement and its common exceptions. Everyone agrees: If you charge by the project, you must have a sense of the underlying hourly rate. You don’t want to work for minimum wage. If you charge by the hour, you must have a way to determine if the total fee for any given project will be worth your time. One hundred dollars an hour may be a great rate, but, realistically, you cannot sell, deliver, and administer dozens of separate hundred-dollar writing projects per month. One popular tool is the “hourly rate calculator.” You can find many examples on line. My complaint about those calculators is that they perpetuate the faulty frame that leads writers to charge too little and ultimately harms the quality of their body of work. The typical calculator offers a formula something like this: Start with the amount of money you make on your job, say $25 per hour. Assume that you will bill some portion of that time and spend the rest of your time on marketing, bookkeeping, etc. Add in your business and personal expenses, from health insurance to internet connection to tax preparation. Subtract hours you plan to use for vacation, sick leave, and continuing education. There is a big problem with this method and the mindset that spawned it: The hourly rate you charge must be a price, not a wage. Freelancers who come from salaried jobs often confuse the business revenue with the owner’s personal income. In essence, you-the-business and you-the-owner are separate; the money you pay yourself for working is a business expense. Think of it like so:
  • Overhead expenses: Internet, phone, paper, postage, software, home office, business license
  • Direct expenses: travel to a client site, rent to host a client focus group
  • Labor expenses (may be direct or indirect): proofreader, virtual assistant, IT consultant, YOU
Profit is the difference between the money you collect (revenue) and the cost to deliver. Your personal income is equivalent to your pay for labor plus your profit. To earn what you want, you do not need to convince clients “what you are worth.” You also don’t need to bolster your self-esteem and convince yourself of “what you deserve”! The task before you is to define service offerings for which:
  • the price the market will bear exceeds the cost to deliver
  • you have (or can develop) the capacity to deliver — both time and skill
  • you have (or can attract) a large enough customer base willing and able to pay your prices
  • the total work you bill adds up to the revenue you need
Get the offerings right, and the right pricing method won’t be so hard; ideally, your price will reflect both good compensation for you and good value for your clients. Your prices, profits, and personal income can increase with the value you can demonstrate. This is not a pricing problem. It’s a business modeling and positioning problem. Writers new to self-employment, nervous about approaching big clients or selling more than “writing skills,” commonly rely on one particular type of high-maintenance client. (I know I used to!) You may  feel comfortable with these clients because they treat you the way you are used to being treated by a relaxed sort of boss. Often they are entrepreneurs who are unaccustomed to collaborating with vendors. These clients might be better served by a part-time employee or virtual assistant than by a freelance writer. They really want a dedicated person standing ready to take small assignments for them, but they are nervous about committing to meeting a payroll. In some cases, the prospective client just can’t afford what they want in the form they are convinced they need. In other cases, you will find the person is too disorganized to delegate efficiently to employees or vendors. Some clients might benefit from purchasing canned content but believe that only custom work can meet their quality standards. (You might eventually create additional revenue streams around those services or cultivate a network of providers to whom you can refer. Just don’t let these clients weigh down your freelance writing practice! Serve a lot of these clients and you train yourself to crank out high-volume, low-quality work.) Conclusion: Set aside the hourly vs project question. Stop thinking like an employee for hire who negotiates based on “level.” Figure out what business purpose you can serve by the kind(s) of writing you do. Design service offerings that fit the purpose. Calculate what it will cost to deliver each service, including labor costs. Test, research, and evaluate the market. Target clients who can afford you. Then, price accordingly.
Barbara Ruth Saunders is a writer, editor, and writing coach.