Quote:Original post by Adraeus
Clarify one thing for me: are you advocating fixed price or value pricing?

Answer depends on whether you're the freelancer or the customer ;) From the POV of a freelance artist, it depends a little on the specific circumstances, as both can have their benefits. If you are more experienced, then charging an hourly rate is probably better: you know your working rhythm, your estimates are pretty precise, you have access to a large library of previous work (templates, code snippets, etc), and you have a reputation to lose (ie. your customer know you won't screw him). Although as I mentioned, I would only hire such a freelancer if he works on premises, unless I knew him very well and trusted him.

But for beginners, things are different. They often have great difficulties judging the amount of work involved in a project. More than often, the required work is greatly underestimated. Also, without a nice track record, getting customers is not as simple as if you're already set in business. Your customer knows that - trying to convince him that your estimate is precise, and that he won't face outrageous costs at the end of the project will prove difficult. If you're in this situation, a fixed price scheme is better: your customer wants a job to be done for a certain deadline. You offer to do this job for a fixed price, and your potential customer has a 100% guarantee covering all costs involved. Keep in mind that when hiring a novice freelancer, a customer already takes a risk, since he doesn't know if he can safely rely on your schedule, or if your know how is really up to it. Every newcomer faces this problem. Offering a fixed price scheme is already one risk less for the customer, since he won't have to worry about exploding costs.

For certain specific sectors of the market, fixed price schemes are also interesting for a professional freelancer. If you know you're going to complete a project in no time (perhaps due to previous work, webdesign can be such a sector), you can negotiate a fixed price based on the value of your creation, rather than on your time. This allows you to earn much more without (illegally) screwing around with working hours - and your customer will be happy as well.

Quote:
I've asked around and freelancers prefer hourly rates over other schemes. You also have to consider target markets and prospects. I've only done business with and extensively communicated with high-end creative pros that deal with high-end clients.

Well, I wasn't talking about high end freelancing - I was referring to the question of the OP. And reading Ekim_Gram's post, I somehow doubt he is in the position to ask for the same work and payment conditions as an industry veteran with 30 year experience... He is doing small scale webdesign, it's pretty clear that he is going to take a different approach than a freelancer on a multimillion Dollar project.

Quote:Original post by Adraeus
Well, there are a few things you need to take care of before you casually drift into value pricing... like discounts, premiums, definition of value, ensuring mutal attractiveness, etc.

Yep, that's indeed the job of freelancer, or better, his negotation skills. Many of the points you listed are just as important for negotiating contracts based on hourly rates, beyond the simple time = money equation.

Quote:Original post by Adraeus
Still, hourly pricing is a standard practice and anything else outside business norms and foreign to most clients.

I disagree. We extensively hire fixed price freelance contractors, and have done so for years. Many of our customers, eventhough being mostly from the highend packaging and industrial manufacturing sector, specifically ask for fixed price offers (admittedly we are a company rather than a freelancer, so the perspective is obviously a little different. Still the point stands: customers know very well of alternative pricing practices, and even request them).

Maybe this is due to a difference between the European and the American freelance market, although many of our US customers are very interested in the fixed price project, usually at milestone granularity (note, this was when I was still a freelancer myself, around 3 years ago, but I doubt much has changed since then). It makes the finance department feel much safer about their budget. I have witnessed that more than once during contract negotiations, when the finance people were quite uneasy about the deal, until a fixed and guaranteed pricing scheme was mentioned.

Quote:Original post by Adraeus
Time-based pricing has more advantages and fewer disadvantages than other methods--for the freelancer and its clients.

I disagree again, but you're entitled to your opinion.

OK, also to come back to the OPs specific case - let's do a little thought experiment:

Say you need a webpage designed. You're a small scale business, perhaps 3 or 4 people, you try to limit your expenses. You're browsing around the web for good offers, and find Ekim_Gram's webdesign site. It's very well done, and you think to yourself that this is exactly what you need.

You check the pricing, perhaps exchanging a couple of emails or phonecalls with the webdesigner. You know that he is pretty young, new to the market, and not backed by a large company. Still, you want to hire him, because he isn't very expensive yet still technically skilled. Now, let's consider two scenarios:

A) Ekim_Gram tells you he wants $xx per hour. He drafts an estimate of yy hours working on your project, with a total of yy * $xx plus taxes. You know that the final invoice might very well be more. You never worked with this guy before, you never met him, you don't know how seriously he counts his hours, he might live thousands of miles away from you.

B) Ekim_Gram tells you that your entire website will cost you $zzz. No hidden costs, you know the invoice will be exactly $zzz.

Now be honest, what option would you pick ?


[Edited by - Yann L on August 23, 2004 7:58:18 PM]

Quote:
Nope. The two basic value-based pricing strategies are premium and discount. Look 'em up and buy that book.

No thanks, I think I'm well set. But I could recommend a couple of French business books to you, if you're interested in discussing terminology outside of your native tongue...

(ie: don't assume someone to be ignorant because he doesn't know every special term in a language that doesn't happen to be his native one - you might quickly get in a very similar situation if we swap the roles)


Anyway, I think we better never make business together, we would probably end up in court ;) Let's keep it there, this thread already went far offtopic. I guess Ekim_Gram has enough arguments from all sides to be able to draw his own conclusions.