What is project price?
Project-based pricing is a strategy you can use when you want to take payment for the finished result of a specific project or set of tasks – no matter how long or short it takes you.
This approach is often used for clearly defined projects. This could, for example, be the delivery of an article, a report, website, graphic work or the like.
What is the advantage of using project pricing?
The biggest advantage of using project-based pricing is that it is based on a concrete result, and not least a fixed price for your customer.
Customers most often think in terms of results – not time consumption. It is therefore a simple and easy-to-understand way of being specific about a project, and standing shoulder to shoulder with your customer.
A project price can make it easier for your customer to budget, and not least helps to avoid scope creep. That is, the one where your customer comes and says "can't you look at this thing too".
Of course we have to make things easy for your customer, but a project price also gives you some great benefits. You can plan and budget the project more easily, and if you are good at your work, you can also increase your earnings here.
By going the project price route, you as a freelancer must also be good at keeping focus on the end goal. You help your customer to eliminate a headache, and if your customer values his own time, you also have a good argument for why things must go fast. After all, you didn't become good at your job overnight.
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What are the disadvantages of a project-based price?
Probably the biggest disadvantage comes when, as a freelancer, you try to push down a project price for a task that is too complex and involves too many unknowns.
If the task is not already well defined from the customer's side, it is difficult for you as a supplier to give a precise offer, which in turn can create an easily drooling customer with a question mark hanging over his head.
If you have walked down corridors with the project price sign, and the task starts to take hold, you as a freelancer may well find yourself in a squeeze. The customer has paid to have a problem resolved. If it takes you one hour, yes, then it is you who is frothing the cream, but if it starts to go beyond your estimated hourly consumption, you can usually hang on to it yourself.
One of the other major drawbacks of project-based pricing is that it may not be suitable for customers who need ongoing support or maintenance after the project is completed.
If you get there, consider offering a model where customers pay a fixed monthly fee for ongoing support and maintenance. We cover that further down under cutting card/retainer.
When does it make sense to use a project-based price?
You must give your customer the opportunity to buy into a solution when you have a clear idea of what is required of you to complete the project. A fixed project price is also easily understandable for many customers, and makes it easier for them to manage their internal budgets.
Small to medium-sized projects are often best suited to be priced this way. Always make sure you have a bulletproof contract in place, where it is clearly defined what is part of the budget and what is beyond.