Re: Billing by project

[Peter Kent <techwr -at- ARUNDEL -dot- COM>]

I said:
> << It would be interesting to see how many bill by the project and
> whether
> that increases their income (I believe that overall it probably does). >>

Jim C. said:

> I avoid this like the plague.
> If I had done it on my first free-lance project, I would have ended up
> making
> about 20% of what I ultimately did.

It can't always be done, and if you do it, you'd better do it right. I
sometimes underestimated, but would still make an hourly rate higher than a
normal declared hourly rate. (BTW, I no longer do much contract work, so I
may use the past tense now and again...I'm concentrating on computer books
now, which is a completely different payment system.)

> This said, it seems to work for Peter.  I'd be interested in how this can
> be
> handled in such a way that the total initial estimate seems acceptable to
> the
> client,

First, you have to be able to come up with reasonable estimates; that's
something I think you can learn to do if you track your hours very carefully
for a year or so. I have no magic formulas, but eventually I reached a point
at which I could get a feel for a project; for how long it would take to
complete, for how many more features they'd have to add and how much that
would add to my work, and so on. Then, of course, you're billing high, high
enough to cover yourself if you have underestimated. Sometimes I'd win (and
make $150/hour), sometimes I'd lose (and make $60/hour).

yet covers things like software not really being 100% ready to
> document, 'minor' changes in project scope, unavailability of key people,
> unanticipated layers of review, etc.

If the project changes dramatically I'd want to be able to go back and ask
for more money. That's something that can be written into a contract.

> Also, why would it overall INCREASE income?

This is something I've heard from consulting gurus, that generally speaking,
across a wide range of businesses, people who charge by the project make
more than people who charge by the hour. Here's why.

If writers are charging $40/hour in my area, how can I make $100/hour? If
you want to make a lot of money, you have a couple of options. You can tell
the client you're going to bill one hourly rate, and then actually bill
another by overestimating your hours. Let's not kid ourselves, a lot of
writers do this. Sure, they bill $40/hour, but they bill far more hours than
they work. And actually it's a little difficult to exaggerate the hours to
push your hourly rate that high, anyway. I've never done this, and don't
like the idea.

The other way to push your rate high, then, is to charge by the project. You
have to be able to work quickly, though; and you know, it's funny how
quickly you can work when on piece-work rates rather than time rates!
Anyway, I've found that in many cases clients are quite happy to pay, say,
$20,000 for a project, rather than $30/hour. After all, what does $30/hour
mean to the client? Not much; it doesn't tell him how much the book's going
to cost, does it? Tell him $20,000 and he knows what it will cost.

Again, this works well if you work quickly. I can produce a book in half the
time taken by the average agency writer, or less. Yet I charge the client
what an agency would probably end up billing the client. Yes, sometimes I
win, sometimes I lose. But overall it works out that billing by the project
I make more.

Peter Kent

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