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2 min read

Hot Take: Hourly Rates Are Bad for Both the Client and the Freelancer

turtle in the road
Sad fact: hourly rates encourage freelancers to move slow. Photo by Nick Abrams / Unsplash

Hear me out.

For the client, you end up with two big issues:

  1. Hourly pricing puts clients in the dark. They never know the final cost until it’s too late, leading to budget overruns and nasty surprises.
  2. Hourly pricing increases the risk of going past deadlines and going over budget. The freelancer isn't incentivized to move quickly. Even the most honest freelancers will subconsciously work slower when billing by the hour.

The freelancer faces two significant problems:

  1. They're constantly chasing and justifying hours, leading to stress and burnout. It's death by administrative overhead.
  2. Financial insecurity is built into the system, leading to business failure. I'm no Vanderbilt, but this is generally considered bad.

Not a great dynamic. None of this sounds remotely fun for anyone.

What's the solution?

The obvious answer is a retainer, but that has problems too. What if a client has a full month of work in January, a few projects in February, but nothing more until May?

They're paying for nothing, that's what happens. Do you know anyone who likes paying for nothing?

I don't. And more to the point, Mildred in accounting doesn't.

Instead of a retainer, let's look at a subscription model. On the surface, they look the same: flat monthly cost.

But—and here's where it gets exciting—the subscription allows a client to pause or cancel at any time. It's like Netflix, but for design.

I know.

In the scenario above, a client who runs out of work mid-February could simply pause then and resume in May. In May, the clients get pro-rated for the cost they already spent in February.

Win/Win

With a subscription, the client knows the budget from the start. There are no surprises.

They can pause when things slow down, start back up when needed, and there's no "use it or lose it" risk.

There's also no awkward conversations with ol' Mildred in accounting.

The freelancer can take on more clients, reducing risk and the ups-and-downs of running a small business. Less stress, more joy, better designs. Everyone wins.

If you're interested in seeing how this could work in your business, head over to PaperPixels.co or book a call with me here.