Fixed price vs. hourly

dsmgdesign · ‎01-04-2020

I've been reading the community discussions for a while (over a year), and it always surprises me how many people work on fixed price contracts. Many freelancers ONLY do fixed price. Based on all the horror stories I've read (in terms of getting paid), they are always about fixed-price contracts. It seems too risky to me. Am I wrong to always pursue hourly contracts? Are hourly contracts not safer...as long as I use Upwork's tracker? I don't recall ever reading ANY discussions about freelancers who use the tracker and write notes in the tracker having thier money taken away from them, but maybe I've missed those discussions...whereas with fixed price there are so many different scenarios to lose out (again in terms of making money on ALL of the work that you do). Am I missing something that others know about why fixed-price contracts are so attractive? Just curious more than anything. Would love to hear everyone's thoughts.

prestonhunter · ‎01-04-2020

David: You are correct in pointing out that fixed-price contracts are a more complex and more risky contract model than hourly contracts.

But if a freelancer wants to use fixed-price contracts and knows how to work them, then it can be a very effective and profitable way to work.

It's like asking why some people would choose to work as a firefighter when accounting is so much safer. If you can make it work for you, then go for it. But know the risks and how to avoid them.

(But also: Some people don't know better. A newer freelancer who doesn't understand the system well and doesn't feel like she is in a position to dictate terms to clients may work on fixed-price contracts because she's just taking what she can get.)

petra_r · ‎01-04-2020

I do fixed rate and hourly. I use manual time in hourly jobs too.

I've had an issue once with an hourly job, the client fixed it after a while.

I had one dispute on a fixed rate contract, and walked away with the money.

That's in 250+ contracts.

Personally, I think disputes and non-payments are largely avoided before a contract starts, by choosing clients very carefully.

Also, I have never been a risk-averse kind of person lol. When I started on Upwork (then oDesk) there was not even any Escrow, so fixed rate contracts were essentially on an honour system. I still always got paid, and only had to get stroppy once in all those years.

feed_my_eyes · ‎01-04-2020

I've done 336 projects via Elance/Upwork and probably 80% have been fixed price, so I would have missed out on a lot of great clients if I only worked hourly. I've been paid for every single job that I've ever completed, never been involved in a dispute and never asked for feedback to be removed. I agree with Petra that it comes down to selecting clients very carefully, also knowing how to manage your projects and provide good customer service. (As far as I can tell from reading forum posts, when things go wrong, the freelancers are just as much to blame as clients are.)

I think it's easy to get a skewed perspective from reading forum threads; people seldom come here just to report that everything is fine and they have no complaints. I'm sure that the majority of projects - both fixed price and hourly - go off without a hitch.

louisaj · ‎01-04-2020

I buck the trend here. I mostly do fixed price contracts. I've done nearly 400 jobs, and I've only had 2 people being awkward over releasing the funds. I have a handful of hourly contracts long term.

alexandernovikov · ‎01-04-2020

Clients balking to pay, being it fixed price or hourly, is a rarity and it's always easy to fire such a client.

Switching from hourly to fixed price work i have enjoyed a great increase of productivity and earnings. I work less and get paid more. No one would pay me my fair hourly rate (which is the actual rate i get paid on fixed price contracts vs time i spend doing them), or at least not on Upwork.

If your clients consistently try to avoid payments, you are doing something wrong and probably need to consider quality of your work. Client would not want to pay only if he sees project as a failure and money lost anyway: no point in scamming a freelancer with the job being done - because it will need later support being used, and who will provide it? Definitely not the freelancer who one has scammed already, and asking someone else to do it means learning some other person's job which is very costly, mistake prone, and sometimes impractical. So it's being done only if there is a certainty that the result will NOT be used.

kbadeau · ‎01-04-2020

I get most of my work through invitations, so I usually am not the one to suggest fixed rate or hourly. I do prefer hourly though. For clients who are open to it, I suggest hourly with a set limit on hours. That way we're both covered.

I almost always lose on fixed rate because I'll go down some rabbit hole and waste a bunch of time choosing fonts or stock photos or adding bells and whistles or whatever.

astepanov83 · ‎01-04-2020

Hi Alexander.

It's very interesting how switching from hourly to fixed price jobs became better for you in all respects. I assume that at first you agree on several milestones ahead (or all of them) with a client. How often do you mispredict the price/duration of a milestone? Did you have a situation when it was difficult to predict how long a milestone would take? What would you do in this case?

More details are very welcome.

I personally mostly work on hourly contracts. I have several long-running contracts. I split my work time on them to deliver results as quickly as possible and keep everyone happy. New clients, who are willing to work with me offer higher rate. And that helps me steadily increase my earnings. So basically, it's higher rate -> more earnings formula.

grimesr · ‎01-04-2020

I will add my few cents.

I will only do fixed price jobs. I have a totally different business model, one in which I am very selective about which projects I will take on. I only take on projects that I think would be fun to work on, maybe learn something new and have an interesting challenge. I do get a portion of those I bid on and I am sure I have been better qualified than anyone else; sometimes I even have an almost completed solution and yet I don't get the job. I bid on hourly jobs but always stipulate that I want to the job to be considered for fixed price.

I probably have been taken advantage of, but only because I let myself and knew it was happening.

In all my career I have never punched a clock and I hate the idea of doing it now - so hourly jobs are out of the question.

The bottom line is bid however you feel best. Don't do just what others do.

astepanov83 · ‎01-04-2020

It's not the first time I see someone mentions time clock. And I honestly don't understand why hourly contracts are compared with punching time clock and treated as the same.

Earlier people punched time clock. Now everyone, who works in an office, has a magnetic card that opens doors, but also records time, which is essentially the same as time clock. But the ultimate goal of this is to control that you comply with a working contract: you work no less than xx hours per day/week, you come to the office no later than yy every day.

Hourly contracts is to count hours to pay. One is free to work any day at any time.

grimesr · ‎01-04-2020

Aleksandr S wrote:
Earlier people punched time clock. Now everyone, who works in an office, has a magnetic card that opens doors, but also records time, which is essentially the same as time clock. But the ultimate goal of this is to control that you comply with a working contract: you work no less than xx hours per day/week, you come to the office no later than yy every day.

I think you might want to not use words like "everyone".

I haven't used a magnetic card in over 20 years. I don't record hours to get paid. I don't even work in an office.

If I were a client, I am not sure how well I would trust hourly workers in my area. I am more interested in results than keystokes.

astepanov83 · ‎01-04-2020

I limited "everyone" to "who works in an office" and you fall out of this set. Maybe not everyone, but definitely the majority.

Tracking time is used to calculate how much to pay. A freelancer is paid by hours, not by keystrokes. Making sure you'll get the result does not depend on a type of the contract.

tlsanders · ‎01-04-2020

David, everyone's situation is different. Hourly jobs handled properly are safer, sure. But, as someone who freelanced for a couple of decades before freelancing platforms existed, I'm not reliant on that protection--I've already spent 20+ years vetting clients and managing invoicing and payment. I'm also willing and able to arbitrate if it comes to that.

For me, fixed price works better for a lot of jobs because 1) I do a lot of my note-taking, outlining and sometimes even writing on paper--there's nothing to track, 2) I'm pretty fast, which means that for some types of projects the flat-rate value of a project is not fairly reflected in hourly billing, and 3) A lot of the background work for many of my jobs happens during non-work time--for example, when I'm writing a legal tech white paper, I'll typically review the source materials and then walk away and walk my dog or do some gardening or whatever and when I come back, the piece is largely formed in my head. I'm obviously not going to bill a client hourly for weeding my garden, but the thought process that happens during that time is part of the value I'm selling.

There's also a non-business reason I prefer fixed price for a lot of jobs, and that is a touch of gamification. If I'm working on a fixed-price basis and I improve my efficiency, I increase my effective rate per hour. That "challenge" helps keep me hyper-focused on the more mundane pieces, like law firm blog posts.

filip_knezevic · ‎07-02-2020

I'm interested in how are you providing estimates for fixed price projects, escpecially for technical work?

We all know how IT is like, and you can be stuck for hours over some stupid problem.

How do you bid for fixed price taking all that into account?

Do you set much higher price for fixed price vs hourly? Say, you charge an hour 50 dollars and you know you can do the job in 5 hours. Then you quote 500 to the client, just in any case? Or you would quote 250? My idea is to quote double for fixed price or accept a short term fixed price only when I know I can do something quickly.

I don't see any advantages in fixed price model if you qoute the price according to the numbers of hours you would need. You can just lose and also the client can blackmail you for some free work etc.

So, can any of the fixed price gurus elaborate why they prefer fixed price, when hourly model clearly has many more advantages (at least to me).

dsmgdesign · ‎07-02-2020

Say, you charge an hour 50 dollars and you know you can do the job in 5 hours. Then you quote 500 to the client, just in any case?

Yeah, that's pretty much what I do when I see a fixed price contract that I'm interested in. Like I said, I don't do alot of fixed-priced contracts though, perhaps for the very reason that I would need to inflate the charge in order to make sure I don't lose out. So, I'm probably bidding too high. Maybe everyone's specialty is different.

Or you would quote 250?

Nah, I'd lose out that way. I don't like losing out when it comes to my earned income. If I want to gamble, I'd rather go to the casino. More fun, and I get to have a cocktail with an umbrella. Haha.

prestonhunter · ‎07-02-2020

Filip, I calculate fixed-price quotes by estimating the number of hours a task will take, and multiplying that be my hourly rate, and then doubling that.

And I specify tasks very specifically. The must be very clear, short term tasks.

And always start out small with new clients... no more than about an hour's worth of work with a client you haven't worked with before.

So your ideas are in line with what I have found to work reasonably well.

diana-arous · ‎01-07-2021

I only work with fixed price, if i found a good gig with hourly pay i'd take it, but i usually pursue fixed cuz to me it's less confusing, i knwo what i'm gonna get and i agree to it, anything happens later it's on me, so i like being in control. Granted i never really worked Hourly, so i don't know how useful that is, but I like knowing my range ahead, and work accordingly.