When hourly billing fits
Hourly billing works when requirements are uncertain, work changes frequently or a client needs ongoing support. The key is to define tracking expectations, approval thresholds and billing increments.
For example, a maintenance job with a variable scope might use a $90 hourly rate with a monthly spending cap. Provide transparent timesheets to make charges verifiable.
When fixed-price billing fits
Fixed-price billing gives clients cost certainty and may reward efficient delivery. It works best with a defined scope, deliverables, revision limits and a change-request process. Estimating too optimistically transfers significant risk to the freelancer.
Suppose your time, contractor and expense costs total $1,500. If you want a 25% margin on revenue, your fee is $2,000: $500 profit divided by $2,000 revenue. Simply adding a 25% markup would produce $1,875, a smaller margin.
Hybrid approaches
Many freelancers charge a fixed discovery fee, then use milestones or time-and-materials for changes. Specify what the retainer or project amount includes and how extra services are authorized.
Use a pricing calculator to test different hours and margins before putting a proposal in writing.