<story><title>How to charge clients: flat fee vs. hourly rate?</title><url>http://watilo.com/how-to-charge-clients-flat-fee-vs-hourly-rate</url></story><parent_chain><item><author>tptacek</author><text>I would never bill a client for the time it takes me to build a proposal, and I would think &lt;i&gt;way&lt;/i&gt; less of any contractor who suggested I pay for their proposals. Don&apos;t do this. Research for quotes and proposals is in almost all cases a cost of doing business.</text></item><item><author>rapind</author><text>One thing to keep in mind is that it takes time to come up with a detailed quote like this, and you&apos;ll want to be paid for that time.&lt;p&gt;I usually throw out a ball-park guesstimate (without signing anything) to see if the client is comfortable with it, and then ask them to pay for a detailed quote like this, which they then own and can shop around with.&lt;p&gt;You can take somewhat of a loss on the scoping since if they&apos;ve agreed to pay you for it, there&apos;s a really good chance you&apos;ll be awarded the contract (as long as it doesn&apos;t blow them away or they have unrealistic expectations, in which case thank god you scoped it out). This way at least you&apos;re still getting paid something.</text></item><item><author>ekidd</author><text>An hourly rate is easier, because you don&apos;t need to worry about scope creep. But your total bill should &lt;i&gt;never&lt;/i&gt; surprise a client—you need to communicate at each step of the way.&lt;p&gt;A flat rate, on the other hand, allows you to charge for the value you provide, and gives your clients a predictable budget. By charging a fixed rate, you&apos;re saying, &quot;I can do this work quickly and well, and I&apos;m sure enough of my estimates to take on all the schedule risk.&quot;&lt;p&gt;On the other hand, fixed-priced projects can explode horribly when the requirements inevitably change. I suspect that &lt;i&gt;somebody&lt;/i&gt; usually walks away unhappy.&lt;p&gt;I use a hybrid system: I break the project down into features, and offer a quote for each feature. The quotes are measured in &quot;points&quot; (as in XP or Pivotal Tracker), and I charge a fixed price per point. My clients choose which features they want. And if the spec changes, we just scrap some existing features and draw up new quotes.&lt;p&gt;If you&apos;re a highly-productive developer, and you&apos;re good at communicating with your clients, you might find that this system offers something for everybody: Your clients get predictability and flexibility, and you get a strong incentive to become a better developer.</text></item></parent_chain><comment><author>joelrunyon</author><text>I respectfully disagree.&lt;p&gt;The last company I was at completely turned around when we stopped begging people to let us do their proposals and instead started charging them for the privilege to have us analyze their business, create actionable guidelines (that they could conceivably have anyone implement) and provide a quote for what our services would cost to implement them ourselves. They were welcome to take that strategy plan elsewhere, but when we started charging people for it, we had more clients than we knew what to do with.&lt;p&gt;People start to see you differently when you value your time, ideas and strategy and don&apos;t just give them away. Yes, there are some cases where it&apos;s worth doing one gratis, but the vast majority of time, we got more business by refusing to work with people who didn&apos;t run through our proposal process.</text></comment>
<story><title>How to charge clients: flat fee vs. hourly rate?</title><url>http://watilo.com/how-to-charge-clients-flat-fee-vs-hourly-rate</url></story><parent_chain><item><author>tptacek</author><text>I would never bill a client for the time it takes me to build a proposal, and I would think &lt;i&gt;way&lt;/i&gt; less of any contractor who suggested I pay for their proposals. Don&apos;t do this. Research for quotes and proposals is in almost all cases a cost of doing business.</text></item><item><author>rapind</author><text>One thing to keep in mind is that it takes time to come up with a detailed quote like this, and you&apos;ll want to be paid for that time.&lt;p&gt;I usually throw out a ball-park guesstimate (without signing anything) to see if the client is comfortable with it, and then ask them to pay for a detailed quote like this, which they then own and can shop around with.&lt;p&gt;You can take somewhat of a loss on the scoping since if they&apos;ve agreed to pay you for it, there&apos;s a really good chance you&apos;ll be awarded the contract (as long as it doesn&apos;t blow them away or they have unrealistic expectations, in which case thank god you scoped it out). This way at least you&apos;re still getting paid something.</text></item><item><author>ekidd</author><text>An hourly rate is easier, because you don&apos;t need to worry about scope creep. But your total bill should &lt;i&gt;never&lt;/i&gt; surprise a client—you need to communicate at each step of the way.&lt;p&gt;A flat rate, on the other hand, allows you to charge for the value you provide, and gives your clients a predictable budget. By charging a fixed rate, you&apos;re saying, &quot;I can do this work quickly and well, and I&apos;m sure enough of my estimates to take on all the schedule risk.&quot;&lt;p&gt;On the other hand, fixed-priced projects can explode horribly when the requirements inevitably change. I suspect that &lt;i&gt;somebody&lt;/i&gt; usually walks away unhappy.&lt;p&gt;I use a hybrid system: I break the project down into features, and offer a quote for each feature. The quotes are measured in &quot;points&quot; (as in XP or Pivotal Tracker), and I charge a fixed price per point. My clients choose which features they want. And if the spec changes, we just scrap some existing features and draw up new quotes.&lt;p&gt;If you&apos;re a highly-productive developer, and you&apos;re good at communicating with your clients, you might find that this system offers something for everybody: Your clients get predictability and flexibility, and you get a strong incentive to become a better developer.</text></item></parent_chain><comment><author>bkhughes</author><text>I think this might depend on the case.&lt;p&gt;I&apos;ve had clients with only a vague idea of what they actually needed, meaning that we essentially needed to &lt;i&gt;design&lt;/i&gt; the product before we could quote it. We charged a nominal fee, which was discounted from the project if the proposal was accepted.</text></comment>