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Better yet, don’t charge hourly. The number of hours has nothing to do with how much value you’re providing to a company.

by gk1 8y ago

noufalibrahim 8y ago
Very good advice. I recently had a friend with a strong background in sales and business development join me. He recommended higher amounts by estimating the value we were delivering rather than just the hours we were spending and things got so much better.
ykevinator 8y ago
I disagree with this, the client will always try to maximize value, your costs are hourly, I like the other poster who said never do a fixed bid. Clients benevolently keep asking for more and you benevolently keep saying yes and then that niceness on your part becomes a liability after a few days or weeks because now it all blurs into being "in scope". I would also always put the concept of scope discussion process into every contract.
- gk1 8y ago
  So don’t say “yes” to things that are out of scope. The recurring thing here seems to be that consultants keep putting limits on themselves and then justify it. “I have to charge hourly because...” “I have to agree to go out of scope because...”
  - maratd 8y ago
    > So don’t say “yes” to things that are out of scope. To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take. At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work. I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed. The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
- sokoloff 8y ago
  I think of my costs as more "daily" than "hourly", to be honest. Whether I have to work 5 hours or 8 hours on your project, either way my day is largely shot.
himynameisdom 8y ago
In 10 years of consulting, I've yet to see a client buy this line of thinking. Clients want an accurate forecast for cost and key assumptions being made to formulate that cost. At the end of the day, it's in their best interest to get a good price. This doesn't mean you can't over-forecast the hours needed in a week to deliver x, it can be an iterative/incremental process. But don't think for a second a client won't want to see how you came up with your pricing model before signing an SOW.
- gk1 8y ago
  Have you tried? In my six years I’ve never had to switch to hourly billing. The most pushback I encounter to this idea is from other consultants, often before they even try it.
cloudartisans 8y ago
Alternate view that's worked well for me: not only do I not charge by the day, I don't even charge by the hour. I charge by the minute and tell them exactly what I did in the time I worked. Even when something takes me a paltry couple of minutes because I may have recently spent an hour on it for another client and I could easily charge more money for it. This level of transparency earns me an incredible amount of trust with my clients, who, so far, have each become "client for life." And the overhead isn't bad--a simple spreadsheet--complete a task, describe it in several words, enter the number of minutes spent, and everything gets summed up to the total amount due at the bottom. EDIT: for clarity, I build RESTful API back-ends on AWS and support them with DevOps; I can see how my method may not work for other industries.
- HillaryBriss 8y ago
  I believe you. Do you know if they actually read the detailed descriptions of work which you provide?
  - cloudartisans 8y ago
    I've never actually asked or gotten questions about my invoices. So, either everything is crystal clear, or you're right, they don't look at them. I suspect every client probably looks at the first couple to get to know me and establish trust, and then just skims them thereafter. But it's nice for both of us--we can each review and see exactly what I did and how long it took.
    - HillaryBriss 8y ago
      Thank you. Yeah, I try to do the same with my invoices. My experience is about the same as yours. My current clients don't complain and they pay on time. It works well enough, but it takes longer for me to create each invoice. OTOH, a while back I had a client that told me to stop detailing everything on my invoices. They just wanted a total number of hours. I think maybe it had to do with the review process upstream. Fewer details gave the higher ups less to scrutinize and complain about, I guess. And none of the other contractors were providing such detail.
bluedino 8y ago
Better yet - after the 'project' is done, charge T&M
HillRat 8y ago
You always charge hourly, it’s just that you don’t always expose it as such. All of your costs are either driven by time (rent, salry and benefits, SaaS costs, calories per day) or amortizable over expected number of billing hours. You need to know your total loaded cost per billable employee, because you’ll need to charge more than that for an hour of their time. In the end, fixed-price contracts are just really crappy T&M contracts from an estimations perspective.

Better yet, don’t charge hourly. The number of hours has nothing to do with how much value you’re providing to a company.

by gk1 8y ago

Better yet, don’t charge hourly. The number of hours has nothing to do with how much value you’re providing to a company.

noufalibrahim 8y ago

Very good advice. I recently had a friend with a strong background in sales and business development join me. He recommended higher amounts by estimating the value we were delivering rather than just the hours we were spending and things got so much better.

ykevinator 8y ago

I disagree with this, the client will always try to maximize value, your costs are hourly, I like the other poster who said never do a fixed bid. Clients benevolently keep asking for more and you benevolently keep saying yes and then that niceness on your part becomes a liability after a few days or weeks because now it all blurs into being "in scope". I would also always put the concept of scope discussion process into every contract.

gk1 8y ago
So don’t say “yes” to things that are out of scope. The recurring thing here seems to be that consultants keep putting limits on themselves and then justify it. “I have to charge hourly because...” “I have to agree to go out of scope because...”
- maratd 8y ago
  > So don’t say “yes” to things that are out of scope. To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take. At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work. I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed. The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
sokoloff 8y ago
I think of my costs as more "daily" than "hourly", to be honest. Whether I have to work 5 hours or 8 hours on your project, either way my day is largely shot.

himynameisdom 8y ago

In 10 years of consulting, I've yet to see a client buy this line of thinking. Clients want an accurate forecast for cost and key assumptions being made to formulate that cost. At the end of the day, it's in their best interest to get a good price. This doesn't mean you can't over-forecast the hours needed in a week to deliver x, it can be an iterative/incremental process. But don't think for a second a client won't want to see how you came up with your pricing model before signing an SOW.

gk1 8y ago
Have you tried? In my six years I’ve never had to switch to hourly billing. The most pushback I encounter to this idea is from other consultants, often before they even try it.

cloudartisans 8y ago

Alternate view that's worked well for me: not only do I not charge by the day, I don't even charge by the hour. I charge by the minute and tell them exactly what I did in the time I worked. Even when something takes me a paltry couple of minutes because I may have recently spent an hour on it for another client and I could easily charge more money for it. This level of transparency earns me an incredible amount of trust with my clients, who, so far, have each become "client for life." And the overhead isn't bad--a simple spreadsheet--complete a task, describe it in several words, enter the number of minutes spent, and everything gets summed up to the total amount due at the bottom. EDIT: for clarity, I build RESTful API back-ends on AWS and support them with DevOps; I can see how my method may not work for other industries.

HillaryBriss 8y ago
I believe you. Do you know if they actually read the detailed descriptions of work which you provide?
- cloudartisans 8y ago
  I've never actually asked or gotten questions about my invoices. So, either everything is crystal clear, or you're right, they don't look at them. I suspect every client probably looks at the first couple to get to know me and establish trust, and then just skims them thereafter. But it's nice for both of us--we can each review and see exactly what I did and how long it took.
  - HillaryBriss 8y ago
    Thank you. Yeah, I try to do the same with my invoices. My experience is about the same as yours. My current clients don't complain and they pay on time. It works well enough, but it takes longer for me to create each invoice. OTOH, a while back I had a client that told me to stop detailing everything on my invoices. They just wanted a total number of hours. I think maybe it had to do with the review process upstream. Fewer details gave the higher ups less to scrutinize and complain about, I guess. And none of the other contractors were providing such detail.

bluedino 8y ago

Better yet - after the 'project' is done, charge T&M

HillRat 8y ago

You always charge hourly, it’s just that you don’t always expose it as such. All of your costs are either driven by time (rent, salry and benefits, SaaS costs, calories per day) or amortizable over expected number of billing hours. You need to know your total loaded cost per billable employee, because you’ll need to charge more than that for an hour of their time. In the end, fixed-price contracts are just really crappy T&M contracts from an estimations perspective.