Project vs Hourly Billing: Which Model Actually Works?

You've probably heard conflicting advice: "Never charge by the hour" versus "Fixed-price projects always lose money."

After years working both as a freelancer and managing projects at a web development agency, I've learned that neither extreme is right. The pricing model that works depends on your experience, your client, and your project type.

Here's what actually matters: understanding when each model works, how to prevent the disasters that give project pricing a bad name, and how to evolve your pricing strategy as you gain experience.

Why Clients Push for Fixed-Price Projects

Most clients ask for a fixed price before any work begins. It's understandable—they want budget certainty.

The problem? This reasonable request creates a trap for inexperienced freelancers.

The Real Cost of Fixed Pricing Done Wrong

During my agency days, we measured project profitability with a simple formula:

Hours billed to client ÷ Actual hours worked

Since the sales team had already locked in the price, only one variable remained: minimize hours worked.

This created toxic incentives:

• Code as fast as possible (quality takes a backseat)
• Refuse all change requests not in the original specification
• Cut invisible work like testing, error handling, and documentation

When a project went over budget, tensions exploded. Project managers saw profitability collapse and tried to minimize time spent. Clients felt neglected. Both sides ended up frustrated.

The misaligned incentives are the real problem—not project pricing itself.

What the Research Actually Shows

Recent data from Swiss and French markets reveals surprising patterns:

• Swiss freelance hourly rates averaged 137.68 CHF in 2021, down 9.4% from previous years
• Scope creep costs firms an average of £5,830 per month, with 58% finding it awkward to address
• Experienced French freelancers recommend transitioning to project pricing to increase profitability long-term
• Minimum viable Swiss hourly rate should be 100 CHF, and "only about half remains after taxes and overhead"

The data suggests a maturity model: beginners should charge hourly to learn accurate estimation, while experienced freelancers profit more from project or value-based pricing.

Calculating Your Swiss Freelance Rate

Don't guess your rates. Calculate them based on your financial needs.

Basic Formula

(Desired annual income + Business expenses) ÷ Billable hours per year

Example calculation:

• Desired income: 100,000 CHF
• Business expenses: 20,000 CHF (insurance, software, office, marketing)
• Total needed: 120,000 CHF
• Billable hours: 1,344 (28 hours/week × 48 weeks)
• Minimum hourly rate: 89 CHF

But this doesn't include social charges...

Swiss-Specific Considerations

Social charges:

• AHV/IV/EO (social insurance): ~10% of income
• Pension (BVG): Either through Säule 3a or Auffangeinrichtung
• Accident insurance (UVG): Required
• Health insurance: 300-600 CHF/month minimum

Actual calculation:

• Revenue needed: 120,000 CHF
• Social charges (~10%): 12,000 CHF
• Insurance: 9,600 CHF
• Total needed: 141,600 CHF
• Realistic minimum: 105 CHF/hour

And remember: this is your minimum to break even. For profit and growth, add 20-30%.

Realistic Swiss rates:

• Junior (0-2 years): 100-120 CHF/hour
• Mid-level (2-5 years): 120-160 CHF/hour
• Senior (5+ years): 160-220+ CHF/hour

Making Your Decision: A Framework

Ask yourself these questions:

About the project:

• Can I define deliverables precisely?
• Have I done similar work before?
• Is the scope likely to change?

About the client:

• Is this a new or existing relationship?
• Do they understand the value I provide?
• Are they organized with clear decision-making?

About yourself:

• What's my experience level?
• Can I estimate this work accurately?
• Do I have systems to work efficiently?

Decision matrix:

The Bottom Line

There's no universal "never" or "always" in freelance pricing.

Hourly billing protects beginners while they learn accurate estimation. Project pricing rewards experienced professionals for efficiency. Value-based pricing aligns you with client outcomes at the highest level.

The real keys to pricing success:

1. Prevent scope creep through clear contracts and communication
2. Evolve your model as you gain experience and data
3. Calculate rates based on your real costs and desired income
4. Choose clients who value outcomes over price
5. Use proper tools to track profitability regardless of model

Start where you are. If you're new, charge hourly with project caps. Track everything. Build your dataset. As you gain experience, transition to models that reward your efficiency and expertise.

The goal isn't to win the pricing model debate—it's to earn what you're worth while delivering exceptional value to clients. The right model helps you do both.