Fixed Price vs Hourly

Two fundamental pricing models for service businesses: fixed price charges a set amount for a defined outcome; hourly charges for time spent regardless of outcome.

Hourly billing creates perverse incentives (you are rewarded for being slow). Fixed pricing rewards expertise and speed, and gives clients cost certainty. Most experienced freelancers move away from hourly billing.

An accountant charges £75/hour. A tax return takes 6 hours = £450. The same accountant switches to a fixed £650 per return, more profit for the same work, and the client knows the cost upfront.