How Do Freelancers Charge: By the Hour or By the Asset?

How do freelancers get paid: by the hour or by the asset?

Being self-employed, your salary doesn't quite work like it did when you were employed by someone else. You had a fairly dependable income, regardless of the amount of work you did. But that security vanishes when you become a freelancer.

The biggest difference is that you're in full control of your income. And for many freelancers, that's a scary thought! 

We're pulling back the veil on how freelancers get paid and my own best practices when it comes to setting your rates. 

Flat Fee vs Hourly Rate?

Some freelancers charge by the hour. Others charge a flat rate. Which one should you choose?

There aren't any hard-and-fast rules that favor one over the other. In fact, some freelancers do both, depending on the project.

For example, if you have a long-term project with lots of moving parts, it’s hard to put a price tag on each piece. Charging hourly makes sense when you don’t have a clear timeline.

Charging by the project or assets has its perks, too. You get paid the same no matter how long it takes you. It also lets the client know what they’ll pay so there are no surprises. This also helps you avoid having to track your hours.

Let's look at the pros and cons of each so you can decide which makes the most sense for you:

Freelancer Pay: Hourly Rates

Switching to freelancing after working a traditional job? You might be tempted to charge an hourly rate. You're still learning the ropes, not sure how long certain projects might take, and want to make sure you're paid for your time. 

I advise you not to do this.

Clients immediately ask, “Well how many hours is this going to take?” They’ll start picking your time apart and say things like, “Well it only takes me an hour to write a blog post. Why are you billing me for three hours? What exactly did you do during this time?” Then you’re spending more time trying to justify a timesheet to a client that already seems not to trust you.

I recently worked with a branding client who hired an outsourced CMO. The monthly fee she paid included eight hours of work, but she felt like the CMO was long-winded during meetings. That quickly ate up the promised eight hours of work that should have taken half the time. 

Though she felt the CMO did offer valuable advice, she was more concerned about how that time was used. 

This is a common issue for pay-by-the-hour projects. YOu might be doing all the right things. But your clients become more concerned with how you use your time. They're paying for it, after all, and want to feel like they're getting their money's worth. 

If you want to make a certain hourly rate, it's better for you and your client when you can estimate how long projects will take you. This way, there's a concrete agreement from the start. Clients know exactly what they're paying and you have the incentive to work studiously to finish the project on time.

Freelancer Pay: Asset Rates

In my experience, I find it better to charge per project. Here’s why:

First and foremost, the client is paying for an outcome. They’re paying me to do a specific task. When you take away the time factor, they really don’t care how long it took you to finish, as long as you deliver it within their expected timeframe.

Also, when you charge a flat rate, you’re increasing your income potential. When you charge by the hour, you’re limiting your pay based on the number of hours you work. Your time is also finite, so you’re capping your potential without even realizing it.

Flat rates add more flexibility. You might finish projects early, which leaves you to take on more work or work fewer hours.

I also think that being able to estimate total project costs adds credibility to the process. You look like a professional who’s done this before. That says a lot about your expertise.

Best Practice for Setting Your Freelancer Rates

There’s no right or wrong way to decide how you charge. In some cases, you may need to use both an hourly rate and a per-asset rate to keep your clients happy.

As long as you commit to your clients and find a method that suits you both, you'll be too busy counting your money to give it much thought. 

How do YOU bill your clients as a freelancer? Share your thoughts below.