No more "Invoice Shock"

One of the hardest decisions to make is whether to charge by the hour or to charge a fixed rate.

The short answer to this quandary is that it’s better to charged a fixed rate in most cases. Why? Well, that requires a longer answer.

Hourly rates are inherently unfair to both parties. They’re unfair to you because the better and faster you get at providing your service, the less money you’ll make. They’re unfair to clients because if you don’t know what you’re doing or have a bad day, the client has to pay for it.

The fixed rate or project rate solves these problems. There is a set fee for a given piece of work, so you and your client know what money is involved. It’s more fair all around. And everyone can forget about the clock and focus on doing good work.

Are there any circumstances where hourly rates are called for? Yes.

If the scope of the project is unclear or if the project is open-ended, hourly is the only way to go. 

In my experience, fixed fees are also a lot simpler to quote.  So when someone asks what I charge for something, I just consult my schedule.

One more thing. A fixed fee helps you avoid difficult situations with your client. Service pricing in this business is all over the place, from ultra cheap to astonishingly expensive. If you’re designing a web site and your client assumes it will cost around $1,500, sending an invoice for $7,500 is going to cause a problem.

How does one arrive at a fair price?  The cost in dollars can be easily determined by what national service providers charge for any given service. Best Buy's Geek Squad has set what they call a "competitive rate". This is probably ths best market price indicator.

If you match the market rate why should the client choose your company? We need to look at value as well as the actual dollar amount. In my case, for the same fee my clients are getting a Microsoft Certified Systems Engineer that also holds a Comptia A+ repair technician credential with over 20 years experience in the field.

Pricing is a hugely important and complex issue. What I’ve covered doesn’t begin to scratch the surface.