Why Hourly Rates Are a Bad Idea for Freelance Writers
The difference between the cost of your time and the value you offer.
Many beginner freelance writers use hourly rates because it’s straightforward and familiar. You get paid this much for this many hours. That’s how your old boss usually does it. Easy, right?
However, hourly rates can actually put you at a disadvantage and cheapen the value you offer. Moreover, it can place a cap on how much you can make from a single project.
- Why Hourly Rates Are a Bad Idea
- When Hourly Rates Should Be Used
- Alternatives to Hourly Rates
- Frequently Asked Questions
How Hourly Rates Actually Work Against Freelance Writers
From penalizing efficiency to limiting the amount you can charge, there are multiple reasons why hourly rates can be unfavorable for freelance writers.
#1 Penalizes efficiency
When you charge hourly, you’re compensated for the amount of time it takes to complete a project. The more hours it takes, the more you earn. However, what happens when you’re really good at what you do?
Maybe you have tons of experience writing and knowledge about a specific subject — a freelance writing job may take you half the time it would take another generalist writer. You worked fewer hours but the finished product is immaculate. But wait, you made less money.
You’re penalized for being efficient.
Therefore, writers have an incentive for working slow. Naturally, this is at odds with the client who wants you to complete the project as quickly as possible.
#2 Does not factor in ROI
Depending on what you bring to the table, an hourly rate can cheapen your services. As an experienced freelance writer or content marketer, you might bring more than just a 1,000-word blog post.
Maybe you have an extensive network, rich with expert sources. Or perhaps you have in-depth SEO knowledge that can help contribute to the company’s bottom line.
While you can certainly factor in your added value into your hourly rate, there’s a cap on what you can charge (more on that next). Instead of placing a price on what the client has to gain, you slap a price tag on what an hour of your time is worth. Again, an hourly rate doesn’t always convey the true value you can offer.
#3 Limited by a psychology cap.
While you can certainly raise your hourly rate to factor in your added value (and desired income) there is a limit to how much a client is willing to pay. How you frame your services affects the client’s perception of your worth. Let me explain.
Writer A charges $500 for a 1,200-word SEO blog post and it takes him one hour to complete.
Writer B charges $500 per hour. It also takes her one hour to complete the same project.
Writer A justifies the price point because the blog post can bring the client organic traffic and establish their expertise. Writer B explains the same benefits but the client is still hung up on such a high hourly rate.
See, hourly rates add an additional psychology barrier — they want you to finish as quickly as possible. Productizing your services by charging a flat rate for a deliverable makes it easier to frame your services as an investment.
#4 Time tracking can be a hassle
I used to work for a legal secretary and I had to track each activity and how much time it took. For example, I’d have to bill 1/10th of an hour (12 minutes) to review and respond to an email.
I don’t imagine freelance writing clients would be as particular. However, time tracking would likely be necessary for interviews, researching, writing, editing and more. Then you may need to itemize all of those tasks on your invoice, adding headaches and work on top of your already busy schedule.
When Hourly Rates are a Good Idea
There’s a time and a place for everything — that includes hourly rates. Here are some scenarios where it makes sense to charge hourly:
- One-off tasks: This might be interviewing an expert or compiling research. I recommend charging a minimum of one hour, so you’re not charging for just 12 minutes of your time.
- Consulting: Offer one- to two-hour consulting sessions for the client to pick your brain on a specific topic, such as content strategy or SEO.
- Interviews, meetings, phone calls: During a project, the client may want to speak with you on the phone or have you hop in a meeting. Or maybe they want you to interview an expert, either within or outside the company.
Alternatives to Hourly Rates
Instead of using an hourly rate, consider using the following pricing structures to frame your services:
Project-based. Charging by project is taking the entire scope of work and slapping a price on that deliverable, as opposed to the number of hours it takes to deliver. For example, you charge $400 for an SEO-optimized 1,200-word blog post.
Word-count. You charge per word (e.g., $0.10 per word). I consider this a step-up from hourly since your price isn’t directly tied to your time. That means if you finish a 1,000-word blog post in 30 minutes, you’re not penalized for efficiency.
Retainer. You and the client retains your services on an ongoing basis over a specific period, such as three months. For a fixed monthly fee, you agree to deliver a set number of deliverables (e.g., four blog posts per month for $1,000). Side note: retainers are ideal for establishing predictable income.
Value-based. Your price depends on the value your services provide. Typically, this means working with more sophisticated clients over smaller clients. The reason being is that a well-polished blog post may potentially convert 10% of readers into customers for a big client with a working sales funnel, but may not generate traffic or sales for a solopreneur just starting their blog. As a result, you can calculate the value of those conversions and factor them into your final quote.
Frequently Asked Questions
Should I charge per hour or per project?
Charging per project is generally a better pricing structure compared to hourly. Hourly rates are straightforward but may not be the best way to structure your freelance writing rates. It can place a cap on how much you can charge and may cheapen the value you offer.
What is project pricing?
Project-based pricing is providing a final quote based on the entire scope of work. Sometimes called a flat fee, it typically won’t fluctuate the way an hourly rate or word-count rate would.
Dan is a freelance writer specializing in small business and personal finance. He works with FinTech and B2B companies and has written extensively about small business, from startup guides to payment processor reviews. Hire him to write for YOU at danmarticio.com.