One of the most difficult aspects of running a business is knowing what to charge. Whatever the industry, understanding your place in the market and how your offering compares to your competitors can make or break your journey to success. For many an hourly rate seems an attractive alternative to a flat rate fee, namely because of how easy it is to log the data. In the short term, for a start-up business, an hourly rate may not cause that much damage either. It is only over time that you realise setting your price based on time leads to underpayment further down the line and, ultimately, acts as a punishment rather than a reward for experience.
Graphic design is a good example of this. When you begin life as a designer you may work at a slower speed, feeling your way through the project. You set an hourly rate for this, £30.00 for example. Initially this works quite well, and you are making good money based on the time you put into projects. You get better as a designer though, streamline your processes and become wise to ways that you can speed up projects whilst retaining their quality. Your hourly rate remains the same, but the time you spend on each project drops. You are potentially producing better work, using more skill and utilising your experience, with less reward at the end. A difficult scenario to face.
The answer to this, I hear you cry, is surely to up the hourly rate. That is how you earn the money back. Assume though that you complete a project in half the time, eight hours becomes four for example, just because you are better now at what you do. Are your clients really going to accept a jump of 50% in your hourly rate to match this? When you suddenly ask for £60.00 as opposed to £30.00, most clients will run, and the others will simply attempt to drive you down. The alternative is to lie to the client instead, presenting the project as having taken twice as long as it did. Not a classy approach.
I use the example of a graphic designer but this scenario can be adapted to any field. Whatever the industry, being paid less for being good at what you do shouldn’t be acceptable. We spend time and effort building up our knowledge and honing our expertise in order to progress and bring ourselves success. An hourly rate robs us of that reward.
So what is the alternative? At Polar Creative we use a flat fee system, pricing all our projects up-front and providing our clients with a full, detailed and above all clear proposal before any work begins. Our prices are based on value, taking into account the amount of time we anticipate the project to take, the full scope of the work, how difficult it will be to achieve, any deadlines and, ultimately, which of our skills will be required and what that is worth to the client. Be believe we offer a fair and competitive price when you consider the expertise we have acquired and the portfolio of work we have behind us. We would never consider an hourly rate as it undervalues our service and thus doesn’t provide the client with the quality they deserve.
As I have already touched upon, this message applies to any industry where charging an hourly rate seems desirable. Instead of caving in, think ahead and make sure that the value you provide is because you are great at what you do, not because you are able to complete it quickly.