Copywriting rates: Why I switched to hourly after 8 years’ fixed priceNovember 4th, 2010 18 Comments
Fixed price was the natural way to go for me
When I started Divine Write, back in 2002, it seemed natural to me to quote fixed prices. There were 3 reasons for this:
- When I get tradesmen to work for me, I always want to know how much they’re gonna cost. I’m a tight bastard!
- I’d come out of the software industry, where I’d worked as a salaried technical writer for 9 years. I was used to fixed earnings. Had I come out of an agency environment, I might have been more used to working hourly. It seems to be more common there.
- I thought clients would like fixed prices better.
So from the get-go, I charged fixed prices.
And it went OK for years
This seemed to work well. I was earning OK money, and I had plenty of work. In fact, most of the time, I had too much work. At first, when this happened, I tried outsourcing the work. But then I ended up spending as much time managing and fixing the job as I’d have spent writing it myself, and I was earning less for the privilege!
So after a few failed attempts at scaling, I opted to simply raise my prices whenever I got too busy.
I kept doing this until I reached a nice balance point. I had just the right number of clients — repeat and new — to earn a comfortable living, without having to work crazy hours, outsource, or take short-cuts on jobs. I could give each job the time it deserved.
But then things started coming unstuck
But by then, I was ranking very well on Google, so I was getting a lot of request for quotes. A LOT. I devised all sorts of systems to deal with this additional workload, but I was still spending near as much time quoting, as I was spending writing client copy.
Now obviously quoting isn’t a bad thing if you’re converting, but because my fees were quite high, my conversion rate on quotes was quite low. So most of my quoting time was wasted.
So I decided to redesign my website and publish my prices. I figured the combination of up-market website and high published prices ($1,190 for a home page of up to 150 words, and $2 per word for sub-pages) would turn away the low budget clients and tire-kickers.
I was right. The request for quotes dropped off significantly. I went from putting out an average of 1-5 quotes per day, to putting out 1-5 per week.
Too many un-billable hours
This drop-off in quotes freed up a lot of time. But unfortunately, none of that time was billable. I needed to bring in more client work. I had to increase either my traffic or my conversion rate.
But after 8 years in business, I’d already topped Google. I already had an effective social media strategy in place. I’d already refined my marketing message. I knew if I increased my prices, I’d earn more per job, but I’d win fewer jobs. Likewise, I knew if I dropped my prices, I’d get more work, but I’d earn less per job.
So, with my existing business model, I really had only 1 choice: invest in some other form of marketing.
I didn’t want to shell out for marketing
As discussed above, I’m a tight bastard. I didn’t like the idea of this at all. Plus I’d learned through my failed attempts at outsourcing that scaling isn’t always the answer, no matter how logical it looks on paper.
I decided to go out on a limb, and try something completely new: charging hourly rates.
Clients pay less when they pay by the hour
My reasoning was that, even though most clients want a fixed price, in reality, an hourly rate would usually cost them less. That’s because they’d be paying only for the time I actually spend. When I quote fixed prices, on the other hand, I have to assume the worst. I have to factor in the risk that the job will take longer than I estimate because of something unforeseen.
For example, the average home page of about 100-200 words actually takes around 5-6 hours to write. (I mean to write it well — to craft a compelling, effective message. Obviously, I could write 100-200 words in 10 minutes, and it would read beautifully. But it usually wouldn’t be very effective.) But sometimes it takes 8-10 hours. So when I quote fixed prices, I have to factor in a bit extra just in case that happens.
Plus, SOME home pages have taken a LOT longer than that. One took me 20 hours! When you’re quoting fixed prices, you need to have this covered too. You need to spread the cost of these occasional blow-outs across all your other jobs. In other words, EVERY client pays for that 20 hour job!
Quoting an hourly rate, if a client’s home page takes me 4 hours, I charge them for 4 hours. They don’t have to pay extra to cover my risk.
But how to convince the client?
Now obviously this means THE CLIENT is taking on the risk. Because they’re paying for my time, they’re wearing the risk that the job may take longer than I estimate. So this is obviously a barrier to conversion that I have to overcome in my marketing message.
The way I’ve overcome it is to simply lay it out: I cite the 20 hour example above. And I explain that I’ve been writing copy for nearly a decade, and I have a very good feel for how long things are likely to take. I explain that most blow-outs are due to clients changing their mind about what they want to say, changing their offering, demanding hours on the phone, or making me spend hours justifying why it’s OK to start a sentence with a conjunction. Those sorts of things…
Now I’m earning more
The upshot? Clients are good with it. And, although I now earn slightly less on most jobs, I’m earning more overall, because my conversion rate is higher. (This is slightly different from lowering my fixed prices, and earning less on ALL jobs, because now, if a job takes me longer, I get paid for that time.)
I’ve been using this model for about 3-4 months now, and it’s been very successful for me. So successful, in fact, that I’ve once again had to raise my rates!
Some interesting side-notes
- Tracking & targets — One of my other reasons for switching to hourly rates was that it allows me to more easily set revenue targets and monitor whether I’m hitting them. I know that if I do around 5 hours of billable work per day, I’m on target. Before, not all my hours were billable, even when I was working on a client job. So things weren’t this simple. I’d have to go on actual invoicing and revenue, and those things go up and down drastically. Some weeks, no money would come in, other weeks, thousands would come in. So tracking was possible only by the month or even quarter. And I don’t know about you, but if something’s going wrong in my business, I want to know about it immediately, not 3 months down the track!
- Quoting & up-front payments — When I was working to fixed prices, I was charging 50% up-front. This was very simple, ‘cos I always knew exactly how much the job would run out to. Now that I’m charging by the hour, I can only estimate the total fee. But that doesn’t mean I can’t charge an up-front. Now, I simply charge for 50% of my estimated hours. Clients are fine with this.
- Clients understand it — When you work to fixed prices, the deliverable is ambiguous (to the client). You’re delivering copy, but they feel you should be delivering so much more. They want results, guarantees, miracles. (James Chartrand, of Men With Pens, wrote a very good post on this the other day: Why Selling Writing Doesn’t Get Results. She said clients want to “get jazzed and excited and hear angels sing”, and that copy, by itself, doesn’t do that.) Copywriters can’t GUARANTEE results unless we test, test, test. And that means having control of all the controllable variables. We’d have to devise testing strategies, and set up and maintain testing procedures. We’d have write and test multiple versions of the copy. And all of this takes time. Most clients are loathe to pay for 1 version of the copy. There’s no way they’d pay us to write and test 2, 3, 4, maybe 10 versions of the copy. Charging hourly rates overcomes most of this problem. Clients understand hourly rates. They’re paying for your time. Simple.
- Tools — I’m now completely in love with my time-tracker, Yast, and my project management and collaboration tool, Liquid Planner. These tools have immediate and very direct benefits when you’re charging by the hour.
Anyway, I’ve gotta get back and earn some money!
Please comment below with your thoughts. I'm not so old a dog that I can't learn a few new tricks!