Please ignore the stuff before the horizontal bar (“=======”)

Instead, sell the value of your services rather than your rate or your activities/tasks. Think long term and build a relationship with the customer, build trust, and charge a flat rate per project.

When I work up my qoute I tally my time estimates for the various tasks and then increase that by a percentage. (Estimating time can be tough) That figure then gets multiplied by my desired rate. I might then ‘temper’ this by the value the customer places on the project. I try not to be greedy and to think down the road to future business. But while meeting with the customer, I try to get the ‘big picture’ of what they want and to gauge how valuable this is to them. To help nudge them in the right direction (more $$$) I might ask:
* how would this improve productivity
* how would this improve your company’s position
* how would this improve YOUR position personally
* what does this project mean to your boss
* what if you didn’t do this project
* what if the project failed

The customer never sees any of this, just the price quote along with an estimated completion date. The completion date varies depending on what other work I may have, how much time can I dedicate to the project right now, etc.

It’s important to periodically review/revise your contracts and to ALWAYS have a contract!

The contract is key because that is where the project scope is defined. It’s also where I state that “all dates and times are estimates” that I will make a “good faith” effort to meet. Of course I really DO try to meet those dates!!!

Also include a clause along the lines of “if it’s necessary to provide substantial additional Services, XYZ Company is not obligated to undertake such work until the XYZ Company and Customer have agreed on the scope of such Services and on terms of compensation.” And don’t nit pick. It’s more important to me to maintain good relations with the customer than to be too tight about additional work, even if it is a bit outside of scope. While the project scope is clearly defined in the contract, I not going to balk at including additional “easy” things. While it’s true that small things can quickly add up, maintaining the relationship is paramount. It is how I get repeat business and build my reputation.

Give a litte, get a little. Nit picking can go both ways, the last thing I want is the customer putting me under the microscope.

For the customer, the purpose of the contract is to tell the customer exactly what they are buying. For me, it is to limit areas of dispute. “Estimates”, “good faith”, “substantial additional work”, while these may seem to be vague “wiggle” words, they confine/define the discussion points should there be a disagreement.

Billing by the hour just gives more nits to pick. Don’t do it. You need to sell the customer on the value of a flat fee. Sometimes they do get the better end of the deal, but those are the breaks. You want to build that relationship. A few ways to sell the idea of a flat fee are:
* there is a cap on their investment
* the cost is known up front, the customer won’t have to get approval for more money later on
* there isn’t a meter running, the customer can call ‘any time’ without worry
* the customer’s workers don’t need to be concerned about racking up my ‘billable time’

There’s some good ideas here in these responses. Like tracking time to measure the accuracy of estimates. That’s an obvious thing that I haven’t been doing! Stupid me. (Thanks David F.)

As for payment, I usually go for an amount at execution of the agreement and the balance at completetion. What’s completion? Why that’s spelled out in the contract of course! You must have clearly defined objectives and spell out exactly how they will be measured. Either the specific criteria have been met or they haven’t. This is another example of how to limit areas of disagreement.

It might seem that I’m harping on about contracts rather than how to charge, but I think a well written contract is essential for your success. It’s part of the overall package. Sell your value, not your tasks.

Besides, I just hate keeping track of every minute of every day. I don’t want to be an employee working for some big company again!

I too had trouble remembering using computer based tracking software so I went low tech. For every project I’m currently working I have a sticky note on my work surface with the name of the project. I mark the date and the time I start. If I stop for more than 5 minutes as for lunch, a long phone call from another client or because I’ve had a brainstorm for another project, I clock out. I usually round to the nearest quarter hour and find this evens out and even takes into account a certain amount of the time I think about a project when I’m not at my computer. The notes are a visual reminder of which projects I’m working on at the moment and are easy to maintain. When a note gets full I tape on a new note or pop it into the physical client folder. At the end I tally up the time–fairly easy to do because everythings in multiples of quarter hours. I have started making short one- or two-word notes next the time blocks about specifically what part of the project I’m working on so that I am learning on average how much time each task takes even if I jump around between tasks. Every once in a while I don’t clock in and out for a particular time and then I go back and write in an estimate of the time I took. I am aided in this process by checking the time stamps on my emails and phone calls.

You’ll be taken advantage of every time. The client will never value all the skills, experience, and talent you bring to their project.

The worst part of doing something right the first time is that nobody appreciates how hard it was. You should be able to constantly develop your processes, skills, and tools so that you can do your job in less time and make the same or more money. Reducing your production costs and time to market will allow you to make more profit, be more competitive, just like any business. Tracking your hours helps you to know if you are estimating correctly, handling project scope creep, and things like that.

Also, why would you want to limit your income potential to some hourly rate x the max number of hours you want to work? One of the biggest benefits to freelance is that you (should) free yourself from the income ceiling most jobs have.

I have done a lot of work on results-based billing, but find that the clients are constantly changing the requirements, so unless I am constantly revising the estimate that doesn’t work well.

Even if I am working on a results-based contract, I still try to track my time, in an effort to figure out how long stuff takes and make results-based estimates as accurate as possible.

For time tracking, I use a timesheet to track my time, and keep one for each project. I find it works much better than time-tracking widgets and such, although it does add the overhead of transcribing everything every once in a while.

If you can have a real productivity edge results based is magic. For example if you write quick programs to automate parts of a job you might be 1000 times as productive as the person who does it manually. Why on earth would you want to pass on all the benefits of your skill and technique to the customer who had no part in getting you where you are.

On top of that time billing is a can of worms. I imagine that everybody who has ever done it understands that the time booked can come out way different for exactly the same job. I looked at data within a single company once. I don’t have details to hand but I think the differences in bookings for the same work varied by greater than 1 : 1.67 for the same time spent. It depended on the “philosophy” of the person making the booking. When you piggy back that on productivity the “rule of thumb” that some programmers are worth 28X others per hours starts looking conservative.

True those paying may well not to have a clue so you can cheat them. On top of that if you charge them a higher rate for less hours actually worked they might not hire you. So those who contract you might inadvertently influence you to be dishonest, book tea breaks, rest room breaks and lunch breaks so that you can charge a “lower hourly rate”.

Pick your path, but you do have choices. A plain spoken simple description and contract can work very well with the customer you actually want to have!! You’ll only know if you try.