Different client needs give independent consultants and freelancers the opportunity to bill in a manner that is mutually beneficial.
A retainer model works best for my goals, however, it’s not for every situation nor consultant.
In today’s newsletter, I discuss 3 different types of billing methods consultants may consider when engaging in new client work.
Hourly Billing / Time and Materials
When engaging in hourly billing, or time and materials, I bill for every hour I work. This is popular for freelancers, contractors, and ad hoc work.
The benefit to this approach…
When I provide specialized services for one of my niches (SFCC or migrations), I can command a higher billable rate because there are fewer SEOs that can do what I do.
Conversely, if I contract for a 3rd party agency, they have their pick of SEOs so to remain competitive I must lower my hourly rate.
This isn’t ideal.
Another downside to hourly billing is, unlike other value-based contracts that package services, I’m still trading time for money.
I don’t completely shy away from this model but I don’t prioritize it.
Fixed-fee Projects
Fixed fee projects have 1 price tag, which is paid out based on the agreed upon terms.
Brands are receptive to this model as they aren’t locked into a long term engage but still gain value from freelancers.
I typically engage under this model for SEO audits or reviews.
Under my payment terms, a deposit has to be paid prior to the start of work.
Additionally, I can divide the lump sum into milestones paid out over time. I’ve found his approach helpful on projects with diverse needs.
For example, the below payment distribution is an example from a previous engagement that centers around 3 milestones.
If I plan accordingly, these types of projects can be liberating and lucrative.
Similar to hourly projects, however, they are finite and once they’re done the engagement ends.
Fixed-fee projects aren’t totally secure but I find the predictability much more appealing than hourly billing.
Retainer-based
Under my current circumstances, I prefer the stability and predictability that retainer method brings.
During such an engagement, the client and I enter into a service agreement for a duration of time, ideally 6 months to a year, where my payment terms are monthly.
In my case, I charge the last month upfront, which serves as a deposit.
Naturally, both parties are committed and I won’t have the fluidity of moving on to new clients but it brings financial security.
What’s more, the retainer model allows both the client and I to see our optimizations through the long term.
Which Billing Method is Right for You?
This is a very profound question.
You have to be honest with yourself and your circumstances as a freelancer.
Do you have the time to take on multiple retainer clients, or could you spread the projects out using a fixed-fee approach?
Would you rather work at an hourly rate and, if so, do you feel comfortable with how much is billed?
For me, I prefer the retainer model but love when I’m balancing a long term retainer with fixed-fee projects. I feel this dynamic doesn’t stretch me thin but is also lucrative.
Don’t Lose Sight of Client Needs
It’s easy to get excited about a sale and the prospect of long term revenue.
But the opportunity shouldn’t come at the expense of client needs.
For example, I won’t pitch a 12 month engagement if the client is looking for issues plaguing their site after a migration; they would benefit from an audit or review.
Brands have often told me that vendors pitch services with unfavorable payment terms that are irrelevant and disjointed from their actual needs.
If you’re looking to maintain your brand, then don’t sell something that clients don’t want.
Preparing for Your Next Project
Having a firmer understanding of billing models, you can be more intentional with how you earn income.
In tandem with the above, hone in on your SEO proposals and contract preparation to build an engagement that benefits your clients as much as you.
