How to price a fixed fee project
A fixed fee moves the risk of overrunning onto you and the reward for working efficiently as well. Price it so both are covered.
The short answer
Price a fixed fee from your hourly estimate adjusted by how much your projects historically overrun, not from the estimate itself. The fee then covers the expected case rather than the optimistic one, and you keep the upside when a project goes well.
The formula
expected hours = estimated hours x (1 + historical overrun rate)
fixed fee = expected hours x hourly rate
break-even hours = fixed fee / hourly rate
realised rate = fixed fee / actual hours
Break-even hours is the number to write down before starting. It tells you the point at which the project stops being better than hourly, and it makes an overrun visible while there is still time to talk about scope.
Worked example
A project estimated at 34 hours, an hourly rate of $79, and a history of projects running about 25% over:
expected hours = 34 x 1.25 = 42.5
fixed fee = 42.5 x 79 = 3,357.50
break-even hours = 3,357.50 / 79 = 42.5
if it takes 30 hours: 3,357.50 / 30 = 111.92 an hour
if it takes 42.5: 79.00 an hour
if it takes 55: 61.05 an hour
Quoting the 34 hour estimate at $2,686 would have paid $48.84 an hour in the 55 hour case. The overrun adjustment is what makes a fixed fee survive a bad project.
Measuring your own overrun rate
Take the last ten projects, compare estimated hours to actual hours, and take the median rather than the average so one disaster does not set your pricing forever.
Almost everyone underestimates, and the interesting part is by how much and on what. Most freelancers find their overrun is concentrated in a particular kind of work, which is more useful than a single blended number.
If you have never tracked hours, track them for one project before quoting your next fixed fee. One project of data beats any general uplift.
What must be written down for a fixed fee to work
What is included, what is not, how many revision rounds, and what happens when the client changes their mind. Without those, a fixed fee is an unlimited commitment at a fixed price.
Revision rounds are the usual failure. Two included and then hourly is a normal, defensible structure, and stating it removes the most common source of unbilled work entirely.
A defined start date and a client response time also matter. A project that stretches over four months because approvals take three weeks each costs you far more than the same hours in three weeks.
When hourly is the honest answer
When the scope genuinely cannot be defined yet. Pricing a fixed fee against an unknown is guessing, and the guess is always wrong in the direction that hurts.
A useful middle: a fixed fee for a small, well-defined discovery phase, then a fixed fee for the main work priced from what discovery found. The client gets certainty in two steps and you stop pricing blind.
Fixed fees also suit clients who want budget certainty more than they want to see hours, and that is a real preference worth charging for rather than resisting.
What this leaves out
- Assumes an hourly rate that already covers overhead and unbillable time. Building a fixed fee on a rate that does not just multiplies the problem.
- Assumes the overrun rate is measured on comparable work. A rate from a different kind of project transfers badly.
- Excludes payment terms and deposits, which matter as much as the fee on longer projects.
This arithmetic is free to run in your browser — no signup, nothing held back.
Open the free calculatorCommon questions
- Should I tell the client how many hours it will take?
- Usually not on a fixed fee, because it invites a negotiation about hours rather than about value, and it makes an efficient delivery look like overcharging. Quote the outcome and the price.
- What if the project overruns badly?
- If the scope changed, raise it as a change and price it. If your estimate was wrong, absorb it and update your overrun rate, because that is exactly what the rate is for.
- Is value-based pricing better than either?
- Sometimes, where the outcome is measurable and large. It still needs the same floor: if the value-based price divides out below your hourly rate on expected hours, you have not priced on value, you have discounted.
Spreadsheets that do this
The formulas above, already built and checked — so you fill in your numbers rather than the arithmetic.
Freelancer Quarterly Estimated Tax Tracker
See the smaller, IRS-safe quarterly payment between two tax methods, from your client income log.
- Google Sheets
- Excel
Pricing & Profit Margin Calculator
Set a price from cost and target margin, or check margin on an existing price.
- Google Sheets
- Excel
Related guides
Last reviewed 22 August 2026