Freelance fees: project or hourly rate?

By Linda VandeVrede on July 16th, 2009 In Best Practices

Hourly rates for PR solo practitioners seem to have gone down slightly in the last 9 years since the big dot com bust. 

This is by no means an official survey, but I checked with contacts across the U.S. to ask them what the current rate was in their city.   The results?  New York City and Phoenix range from $85 – $125/hour.  Boston and Chicago average $150 – $200/hour (can this possibly be true?  Seems high to me).   San Francisco ranges from $100 – $150/hour. 

For more official research, you can look at a study completed by Jay Rayburn, Vincent Hazleton,and Kelly Davis.  (Thanks to Colleen Seaver at PRSA for pointing me in their direction). They surveyed 138 solo practitioners, of whom 22% were male, 78% were female, with a mean of 21 total years of experience, 7 of which were as independents.  The largest segment worked in cities of more than 1 million people.  27% charged hourly, 5% charged by the project, and 68% charged using both approaches, with rates varying by the kind and level of work. The mean rate in 2001 was $121/hour; by 2007 it had fallen down to $111/hour. Similarly, non-profit rates fell from a mean of $104 in 2001 to $87 in 2007.  You can read the full report here. 

The big choice in freelancing, of course, is whether to charge by the hour or by the project.   As one freelancer put it, “many of my clients seem to prefer a project-rate bid rather than hourly…they tell me they like it because it gives them more clarity up front about cost.”  

Writer’s Market offers one formula for coming up with an hourly rate:  choose your target annual income (let’s say $100,000), add in fixed expenses such as quarterly taxes, social security, office supplies, etc.  Add in health insurance.   Then take that total – let’s say it’s $150,000 — and divide it by 1,000 billable hours, or about 21 hours/week – to come up with the target hourly rate.   In this example, it’s $150.  This assumes, however, that you can actually bill 21 hours a week – not so easy to do. 

Another approach is value-based fees, very nicely described by consultant Alan Weiss in his book by the same name. He points out that “most consultants place their value proposition at the wrong end of the equation — they focus on their ability to do rather than on their client’s ability to improve.”  (Copyright 2002, reprinted with permission).  In other words, consultants focus on tasks and not on results.  

He offered me these reasons for choosing value-based fees over hourly:

1).  Hourly (time-based) fees are unethical, in that the client deserves a rapid response but the consultant makes the most money with a lengthy response.

2). The client doesn’t have to make an investment decision every time the consultant may be of some help.

3). You CANNOT become wealthy with a time-based fee.

 

Freelance fees: project or hourly rate?

Comments

Robyn Says:
July 16th, 2009 at 8:38 am

Linda, another great post! Whether you practice PR alone or with an agency I think across the board we have to re-assess how we are compensated in a way that makes sense for client and practitioner. Thank you for another great reference!

Justin Locke Says:
July 16th, 2009 at 8:47 am

well when used to do video production, i would do project rates but then i switched to project rates based on a presumed # of hours, that way, if time needed to do a project grew beyond the estimate, so did the fee. yes, hourly rates incentivize one to take more time, but i found that project rates made me really resent client input that created delays. the other problem with project rates is scope creep, i.e. “while you’re at it, could you . . . ” so every new idea becomes an argument about “is this included or is this a new project for more money.” having a handy hourly rate in place solved that argument, and stopped clients from trying to pile on extra stuff for free.

i think this may be too broad a topic . . . some projects and clients are best managed by hourly rates, others by the project. some clients are more honorable than others.

note, as a speaker, I don’t charge for time, I charge for the value. as one speaker bureau manager explained it, if i entertain 1,000 influential people and make them glad they came to your event, that hour is easily worth $10,000, as it’s only $10 a head.

summed up, different clients and situations call for different methods, imho. –jl

Courtenay Says:
July 16th, 2009 at 10:32 am

Linda, I really appreciated your post as I have been assessing this issue recently. Besides the Writer’s Market, where else would you recommend those in the field go to compare their rates with other professionals of a similiar experience level?

RSS Ray Says:
July 16th, 2009 at 12:04 pm

Excellent post. I think value based fees are the way to go.

Further pressure on fees will happen now that more “interactive” companies are entering the PR space and companies attempt to create buzz with social media. If you aren’t linking fees into the solution of client problems, you are just another hourly worker.

Tyler Hurst Says:
July 16th, 2009 at 2:07 pm

Project-based or retainers are the only way to go. Hourly fees create a problem in unknown areas like social media. I’d rather plan for 40 and work 80 knowing what I’m getting paid and what I need to accomplish than plan for 40 and NEED to work 80 and not finish the job because of hourly caps.

Linda VandeVrede Says:
July 17th, 2009 at 8:22 am

Courteney, when I first started out freelancing, I called on a few peers in the field and met them for coffee. I asked if they would be open with me and share their freelancing experiences, including rates, and they were extremely helpful. Every few years, PRSA puts out a salary guideline as well, although I don’t know when the next one will be.

Courtenay Says:
July 17th, 2009 at 2:41 pm

Thanks Linda–sounds like I’m on the right track!

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