What Pricing Structure is Best for Freelance Talent?
Fixed-Price vs. Hourly Contracts.
Back in junior high I had a newspaper route. This was in 1987, and I was trying to make enough money to buy a pair of the new Air Jordan 2s, the most beautiful basketball shoes ever designed.
Each morning I woke up at 5:30 to find a stack of newspapers on my front porch, which I would fold, rubber band and place in two bags on the handlebars of my BMX. My route was small — about 130 papers — and included my own house, so I never strayed too far from home.
On a normal day, I got through the route in two hours, which gave me time to shower and catch the bus for school. Looking back, the gig was pretty cool. I enjoyed the quiet moments while it was still dark, watching the neighborhood wake up.
I made $300 a month, which translates to $75 a week, a little under $10 a day and close to $5 per hour, assuming I got the job done in two hours each morning.
But on Sundays, subscriptions doubled. My process was still the same, only I now had 250 papers to deliver, which took me three hours instead of two. I would then come home and crawl back into bed, trying to milk a few extra hours of sleep before the day got away from me. Unfortunately, within an hour I was awoken by a bunch of angry calls from subscribers demanding to know where their papers were.
In turns out I had a nemesis down the street who stole papers off the front porches of 20–30 customers each Sunday, just so I would have to return and deliver them again. (I found out later he watched me from his upstairs window with his little brother, giggling.) This added another 45 minutes to my Sunday, not to mention made me quite unpopular on that particular end of the street.
Ultimately, I broke my wrist playing basketball and had to quit a few weeks into the job, much to my boss’s chagrin, but I think of that period now and again, especially when I get roped into a fixed-rate writing project.
Let me start by saying, there are pros and cons to freelance work, and there are pros and cons about the different contracts we have at our disposal. As an independent contractor, I can agree or disagree to anything in any contract I want. In theory, that is. But as someone who needs to keep the lights on, I often have to go along with whatever the employer proposes, because if I don’t, they’ll just hire someone else and I’ll be out of luck.
Say an employer is considering three writers for a particular project and they want to pay fixed rate rather than hourly, and I’m the only candidate who objects to the payment structure. Chances are I’m the one who loses the gig. That sucks.
But I have other concerns. As a writer, I obsess over every little detail, every em dash, every comma splice. Often I spend hours revisiting a story after its been sent for approval (or even after its already been published) to tweak a few words here, a whole paragraph there.
Some would say I’m a perfectionist, but that’s not it. I just have this need to try and get every little detail right, and my mind won’t stop until it sounds right, even if it adds hours of unpaid work.
Say I’m hired to write a 750-word essay (2–3 pages) and we’ve agreed on a $300 fixed rate, with the understanding that’ll probably take 3–5 hours to write. Seems reasonable, I guess, until you add up all the hours I spend researching the topic I know nothing about, and then the pre-writing where I outline everything and think strategically about how I’m going to structure the essay. Then the multiple drafts and the small tweaks along the way, then the fear at the end when I suddenly worry that I wasn’t clear enough about a certain point I was trying to make, and I go back and clean everything up so nothing gets misconstrued.
So what would take another writer 5 hours has now turned into a 15 hour ordeal for me. That’s the difference between making $60 an hour versus $20 an hour and it’s a big thing to overcome.
But not everyone is as neurotic as me, so let’s get down to brass tacks.
You’re a freelancer and you have some cool projects in the pipeline. As you bid and negotiate payment structures, what option is best for you?
Hourly Contracts for Freelancers
From my perspective, hourly deals are better for longer projects, when you’re unsure how long the work will take. Maybe your employer thinks something should take 20 hours but you get under the hood and realize it’ll take double that time. An hourly project protects you because you’re not forced to work for pennies on the dollar, so long as you maintain good communication with the employer and you’re able to articulate why something will take longer than originally thought.
Other benefits? Well, hourly contracts are more flexible and allow you to develop longer-term relationships with the client. Why? Say you’re hired to write some content and the deal stipulates that it should take 10–15 hours. That range is, in a certain respect, a test. You do the work, it takes you 10 hours, and you bill for those same 10 hours.
Your boss knows you could have billed for an extra 5 hours and they couldn’t have said anything about it, but you only billed for 10 and you come out smelling roses, assuming they’re happy with the work itself. You did a good job, and you proved you have integrity. That’s huge. What you might miss out in money initially you’ll most likely make up for in future projects and a better reputation.
Fixed-Rate Contracts for Freelancers
Fixed-rate deals are better when there are clear milestones you can accurately predict in advance. Sometimes you agree to this type of contract when you’ve never worked with somebody before, and you’re both trying to gauge how well you’ll collaborate together.
In this scenario, you agree to terms on a smaller project, clearly define a beginning and an end point in terms of time, and you do this new client a favor by helping them stay on budget.
Again, what you give up initially in terms of money can be made up in terms of subsequent projects, where you’ll have greater leverage to negotiate a higher-paying fixed-rate deal or a better hourly rate.
Ultimately, the best freelance contracts are the ones negotiated from a position of strength. If you know your worth, do quality work and have strong communication skills, you’re inevitably left with happier clients.