But it’s all just an illusion. Charging clients by the hour is fraught with problems and severely limits your income potential. Let’s go over some of the reasons why hourly rate pricing is not the wealthy freelancer way.

Clients don’t like it. To them, it’s too much like writing you a blank check. In his book, It Sure Beats Working: 29 Quirky Stories and Practical Business Lessons for the First-Time, Mid-Life, Solo Professional (BookSurge, 2007), successful freelancer Michael Katz reports, “When I was billing my clients an hourly rate, I could actually hear them speaking faster when on the phone ….”

You have to provide a project price anyway. Think about it. If you’re hiring a contractor to renovate your kitchen and he explains his fee is “$65 per hour,” what is your next question going to be? You’re going to ask him how long the job will take. Otherwise, you’ll feel the urge to stand over him with a stopwatch while he works in the hopes he’ll hurry up! So you’re going to have to estimate your hours, which is a de facto project price.

You get paid less the faster and better you get. If your specialty is writing executive speeches, aren’t you going to be able to crank out your fiftieth in half the time it took you to write your first? Isn’t that fiftieth speech going to be better; perhaps even your best yet? And shouldn’t you be paid more for that level of expertise? Of course you should. But if you bill by the hour, you won’t.

You have to track your time. Some clients demand to see a detailed report of the hours you’ve spent on a project. But how do you account for ideas you get while mowing the lawn? Or work you do in your head as you drive to your kid’s soccer game? Trust me, keeping timesheets for clients is a big hassle.

Your income is limited. When you bill by the hour, your income is determined by the number of hours you work times your hourly rate. If your rate is $45 per hour and you spend 25 hours per week on client projects (remember, you’ll need to spend time on such nonbillable tasks as bookkeeping and marketing), your income will be about $45,000 per year. Not bad … but it will never get much better.

You become a commodity. When you bill by the hour, clients tend to judge you by your hourly rate, not by the value you bring to the project. This opens the door to other freelancers with similar qualifications who could potentially replace you, simply by offering a lower hourly rate!

As you can see, charging an hourly rate only seems simple. It actually creates a lot of problems that get in the way of becoming a wealthy freelancer.

For example, if you were a graphic designer pricing a four-panel brochure, your quotation would say something like this:

If you get the job, the client will have no idea how many hours you spend on the project (and in fact, won’t care). You can get the job done in 5 hours or 20. That’s one of the benefits of being a project pricer. You don’t have to prepare timesheets for your client.

Another advantage is this interesting phenomenon: a client may balk at paying you $100 an hour for 10 hours of work, but will have no objection to a project price of $1,000 for the same project. Why? It’s all in the way a client looks at it. If your hourly rate is more than her hourly salary, she may think you’re asking too much. A fixed-project price, however, takes that salary comparison out of the equation, making the client stop and consider if the project is worth the price instead of whether or not you are worth your hourly fee.

And you can make a lot more money as a project pricer because you benefit financially by being faster and better. For example, I’m very good at writing effective sales letters. I’ve written hundreds over the years and know the best strategies and formats. I can craft a winner in about four hours and charge upward of $1,600. Clients have no problem paying that project price because a successful sales letter is so valuable to them. However, I’m sure I’d meet with serious resistance if I said my fee was $400 per hour!

Being a project pricer lifts your income ceiling. Indeed, it shatters it completely. As you gain more experience, and get better and faster, your income increases accordingly—as it should. Project pricing rewards you for getting good. Billing by the hour does exactly the opposite.

But perhaps the most compelling reason of all to be a project pricer is that clients prefer it. It eliminates price uncertainty. Often, when a client calls me and asks how I price my services, I can almost hear a sigh of relief when I explain that he will be quoted a fixed project price. An hourly rate worries a client. A project price makes it easier for him to say yes and give you the go-ahead. And that, of course, is what you want!

That can happen. But if you’re careful about how you quote the job, it won’t happen very often.

Before you propose a project price, you must ask the questions required to determine how much work is involved. You also have to clearly spell out your policy regarding attending meetings, handling revisions, dealing with project changes, and so forth.

Compared to an hourly rate, being a project pricer takes a little more upfront work, but the extra effort is worth it. You’ll win more projects at better prices and earn more income as your knowledge and skills grow. I’ve worked with some freelancers who have doubled their income simply by switching to a project price model. No wonder just about every wealthy freelancer I know prices their services this way. My suggestion? Join the club!