Charge per hour or per project?

Fixed price projects are really really hard. You will almost always end with arguments what is in scope and what isn't. You'll always have stuff in the proposal that turns out to be a lot of work, or unnecessary, but if it's in the contract the client will demand you do it.

With hourly projects, you don't have that issue. When the client makes unreasonable demands, you just tell them how much time it would take.

My recommendation would be to provide detailed estimates to the client, that show how much work every part of the project is. Include a few optional parts. When requirements change during the project (as they always do), then you can say, well, we could just skip this optional part and do whatever the client wants instead. This way the client is happy (they still have the same price) and you are happy (you don't have to work more hours than you expected).

I prefer fixed price projects because I don't have to keep timesheets and justify to the client why work that they think is simple took longer than they thought it should. The problem with fixed price is that you need a very solid specification and contract. If you don't clients will scope creep on you. The other difficulty with fixed price is that you have to estimate the effort accurately. I have had to swallow my pride and complete fixed price projects for lousy hourly rate because I under-estimated. But with time I got better at estimating and very assertive about specifications and contracts. Best to have a schedule of progress payments and deliverables. It can really hurt if you work on a project of a couple of months and then the client refuses to pay. I have had that problem too.

With all the cons of fixed price, I won't go back to hourly rates. I just can't stand the nit picking timesheet stuff. Seems that every client has a brother-in-law's nephew who programs faster and for less money. But why they don't give him the gig is always met with lots of hand-waving.

I tend to charge a day rate - in Germany that seems pretty normal and I charge at about the going rate. If the client is more price sensitive or has a very specific task in mind then I do hourly. I track all of my time for myself (including invoicing, admin, side projects etc.) but I don't expose any of this directly to clients, this really helps me figure out which clients and projects are worthwhile and which not. Fixed price has never worked out well for me but that's not to say it can't work for everyone, as a sibling comment explains it requires very specific requirements and contractual agreements, if you are going to go fixed price I'd recommending setting yourselves some minimum price that you won't go under. This helps to filter out a lot of the work you don't want to do.

Your proposal structure should be tuned to the project.

Fixed fee is great for clients with experience paying for the type of work you do and who want you to stay in business.

Time and materials is worth considering for any other situation. Inexperienced, lowest cost seeking, and/or I-win-you-lose.

The big thing is not how you charge, but whether or not you are paid. The clients for new companies is generally "a market for lemons." Existing service providers hold on to good clients. Good clients hold on to existing service providers. That's what makes them good clients.

The first phase of your business is finding client relationships. Your great clients will be those who you help grow their business. And that will take time. Good luck.

There are pros and cons for each method.

Perceptionally, charging hourly is safer or you. But clients always think that you will pad the bills and take more time to do things than it should. It's in your best interest to take as much time as possible. That's just the way it is.

Now, fixed bids. There's a risk doing for a fixed price. What happens if it goes longer, and you spend more time than you planned? You take it in the shorts. But, the customer knows that you are going to do your damnedess to get it done on time and under budget.

But for comparison, look at public works construction companies. Those that build airports, highways, etc. All the companies give a fixed bid, and the lowest fixed bid wins. Adding a $5 billion wing to a major metro airport Like LAX or SFO is incredibly complex.

They key is to be super careful on your bid. And, like construction companies that do bids on complex projects, you have to be super vigelent about change orders. Meaning, the person you are working for wants changes to their original proposal. Because then it changes your bid. And, in construction and in programming, there are ALWAYS changes. So if they change their specifications in the slightest bit, you have to be 100% sure to charge them more. This is how construction companies actually make money. On the change orders. Here is what the ABA says about construction change orders: https://www.americanbar.org/groups/construction_industry/pub...

This is just general information for you. I am not a lawyer.

But, after you make a bid, and the person that you are doing the work for decides to make a change, that's on them, so they can't really accuse you of trying to "pad the charges."

Fixed bids are actually really great if you get super good at doing one thing, and get it done under the time you bid. If you work super fast and efficiently at an hourly rate, you won't get paid as much. For instance, if you do a bid to do create a software powered toenail clippers for $4,000, and you've done it before and can do it in 2 hours, you get paid $2,000 per hour. But if you do an hourly rate at $150 per hour, you only get a total of $300. So doing a fixed bid, as long as you actually know how much time it will take you, is the best of all possible worlds. The only thing to be 100% on point about is that any changes make a change to the fixed price, and you can either go hourly or fixed price on the changes, depending on the situation that you can do.

For sure you need to make progress payments as you go along, and make sure you charge a hefty amount before you even start. Whether it is 25% or 33%, whatever the situation demands, but you want to get some cash flow going right away. Cash is king. Money talks, bullshit walks. Never take someone’s word on it. Never take any job where you don’t get paid a portion up front. Before you walk in the door. And make sure you watch the definitive video on getting paid: https://www.youtube.com/watch?v=jVkLVRt6c1U