Hourly vs Fixed cost contract

[eea6afa8]

I am looking to hire two freelancers via Upwork but I am unsure about the contract type I should select. The services I am going to get from them relate to Market Analysis and Logo Design.

Please advise.

[prestonhunter · Accepted solution]

Pravin:

Market Analysis and Logo Design are quite different types of work.

Maybe you should use an hourly contract for Market Analysis and a fixed-price contract for logo design.

That is what makes sense to me, and doing this would also give you experience with both types of contracts.

Both contract models are available to you.

The fixed-price contract is a considerably more complex contract model. It requires wisdom and thought from both the client and the freelancer.

The hourly contract is considerably more flexible and simple.

Some clients are interested in using the fixed-price contract model in order to control costs and obtain a specific deliverable for a price that they know ahead of time.

Some clients prefer to use hourly contracts in order to obtain a higher-quality result.

[bobafett999]

Pravin:  No matter what you decide, just remember that you will get what you pay for.  On Upwork you will find great freelancers who will give you great value for your money.  At the same time there are some scammers as well.  Also, evaluate your risk reward equation.  There is always a risk hiring unknown people on internet - things could go south.  Upwork is not a vending machine where you plop coins and get your favorite flavor sugar water fix.  If that happens are you willing to eat the loss?

[prestonhunter]

For newer clients, the hourly contract model is much simpler. It is especially suitable when budget/cost is not a major consideration.

With an hourly contract, you can evaluate the work being done by a freelancer frequently.

If you hire multiple freelancers to do the same project, you can carefully evaluate their work and quickly close the contracts on the ones whose work you don't value. Continue working only with the best ones.

[silw]

Charging per hour and not value-based is one of the biggest economic mistakes you can make, to you AND the client.

A freelancer that works fast and efficient, delivering results quickly, is worth more than someone that works super slow and needs weeks or months.
Yet, the freelancer that works faster earns less on the same job, than the one who is super slow, while the client has to pay more, for a service that forces him to get into production later.
slower = more value?
That makes absolutely no sense, for none of you.

Especially on logo design, it makes a vast difference who you are creating the logo for. Is it a little hairdresser in your tiny village, using the new identity on his brochure and his shop, or is it a million-dollar company investing big sums to re-design all of their materials based on your design? Needless to say that the value of your logo differs enormously in both cases.

The only circumstance where I can agree that an hourly based payment makes sense is on additional revisions when the actual job is done.
If your client wants to have dozens of revisions you can basically go into "I don't care" mode by getting paid for every revision he thinks is necessary.
If those type of clients are fun to work with and should be your clients is a different question.

[prestonhunter]

Aron:

That is precisely why a client who his watching their budget and wants to get the most value for their dollar should hire many freelancers and evaluate them based on the value they provide to their project.

The freelancers who provide the most impressive value for a given dollar amount spend... those are the ones you want to continue working with.

This principle applies whether you are hiring using fixed-price OR hourly contracts.

A slower freelancer is not necessarily a bad value.

If "Freelancer A" charges $20/hour and produces the desired result in 5 hours, the cost to the client is $100.

If "Freelancer B" charges $100/hour and produces the desired result in 1 hour, the cost to the client is $100.

Both freelancers produced equivalent results for the same cost, but one is slower than the other.

[silw]

Yeah I totally agree that there should be some testing before someone gets hired, at least if it's a bigger project. 

Many times that get's skipped by refferals, and the actual pitch-presentation is the "testing" to check who looks the best.

Of course that's not how Upwork works, so if I'd run a bigger project, I'd hire 5-10 freelancers to test them.

That initial investment can save thousands of dollars on the long run.

But I disagree that.. "

If "Freelancer A" charges $20/hour and produces the desired result in 5 hours, the cost to the client is $100. 

If "Freelancer B" charges $100/hour and produces the desired result in 1 hour, the cost to the client is $100."

..this is true.

The Freelancer B enables the project to go into production 5 times faster than the slow Freelancer, which means the company can get into making money with the new identity/whatever quicker.  On 4 hours it doesn't make too much of a difference of course. Stacking up over the duration of the process that can easily get into the weeks or months freelancer B is saving time for that company. Depending on the project that can save them enormous amounts.

[prestonhunter]

re: "Yeah I totally agree that there should be some testing before someone gets hired, at least if it's a bigger project."

Respectfully, I am definitely not talking about testing freelancers before hiring them.

I am talking about evaluating the work they do after hiring them.

An important key to success for a client is to hire people, evaluate their work, and be willing to stop working with those whose work does not measure up.

Testing "before hiring" is a waste of time and in most cases would be prohibited under Upwork ToS.

[silw]

"testing" means a small part of the project with normal rates.

i am not really talking about upwork specifically, since I am judging it to be more of a semi-professional platform.

[prestonhunter]

re: "testing" means a small part of the project with normal rates.

This is always a sensible approach.

[prestonhunter]

Aron:

Very good point about the relative value of the freelancers - one slower, one faster, but whose work product ultimately costs the same.

A better example would be something along these lines:

- slower freelancer produces the desired result for $100

- faster freelancer produces the desired result for $200

Because the slower freelancer has a lower rate...

So if you're counting costs, then the faster freelancer is twice as expensive for the same resulting product.

Then some project might still want the faster, more expensive freelancer. Some might want the slower, less expensive freelancer.

What makes sense for the project will vary depending on the nature of the project and the schedule.

[petra_r]

---

@Preston H wrote:

If "Freelancer A" charges $20/hour and produces the desired result in 5 hours, the cost to the client is $100.

If "Freelancer B" charges $100/hour and produces the desired result in 1 hour, the cost to the client is $100.

Both freelancers produced equivalent results for the same cost, but one is slower than the other.

---

 And if both have spent 1 and 5 hours and produce absolute cr*p, the client has spent $ 200 he can't get back if the work was done on the tracker and still hasn't got a logo .

[mtngigi]

Pravin,

In most cases, graphic designers charge a fixed rate for a logo, usually with a set number of revisions allowed. I believe that it doesn't matter who the logo is for, you should receive a good end product that you're happy with, regardless of your company size, big or small.

Make sure you ask for and receive the original vector artwork file. You want a vector logo because from that format, the logo can be saved in a multitude of file formats for different uses. If you only get a low-res web image, you'll never be able to enlarge it for other uses, like large-format signage or silkscreen t-shirts.

Good luck.

[eea6afa8]

Thank you every one for your valuable suggestions.