I’ve been doing some consulting work over the few months and wanted to share a pricing model that’s been working well for smaller projects. I’ll sit down with the client to understand the scope of the project and work with them to break it down into smaller, more manageable components. Based on this break down, I’ll estimate the time required for each piece and come up with an estimated total time. I charge my usual hourly rate for the work that falls within the estimated time but will charge a steeply discounted rate for every hour that goes over.

This aligns incentives since it gives me an incentive to complete the work within the estimated time and helps the client feel more comfortable that the project won’t run past its estimate for the sake of me working more hours. The other major benefit is that it forces us to scope out the project together so we’re both on the same page and avoid any future surprises.

I don’t think this approach would work well for larger projects since those are significantly more difficult to estimate but any feature can be broken down this way. For larger projects, I think trying to bill weekly as advocated by Patrick is the right approach if you’re able to agree with the client on it. In my case, I have multiple projects going on simultaneously so it’s been difficult getting a weekly rate worked out.