As most of you know, I am not a fan of hourly billing. In fact, I only recommend you only charge clients based upon a billable hourly rate when you provide services that cannot be completed under a fixed bid agreement. These types of services include, but are not limited to:
- Extra rounds of changes on a project
- Maintenance requests for digital projects
- Simple design changes
- Minor content updates
- Debugging code
Trading time for money (i.e. charging your clients by the hour) is the least profitable way to price your work because it eliminates charging for the value of the work you produce. It also penalizes you for working quickly. When charging a client based upon an hourly rate, the faster you complete the work, the less money you make.
Billing by the hour is also disadvantageous to your client because your subconscious motivation will be to take longer on the project so you will earn more money. Additionally, the client won’t know exactly how much to budget for the engagement. In summary:
Billing by the Hour is Not Beneficial to Your Client
If you charge hourly, it motivates you to take longer on the project. The longer you take, the more it costs the client.
Billing by the Hour Is Not Beneficial to Your Business
If you charge hourly, it penalizes you for working quickly. The faster you work, the less money you make.
Next time a client asks you for your hourly rate, respond with this script:
“Thanks for asking. We don’t bill by the hour. We have found that it is better, for both our clients and us, to create a detailed project scope and a fixed price. You will know exactly what services and deliverables we will provide and how much you will invest in the project. No surprises. When can we meet to discuss the scope of your project?”
I hope that helps you understand the cons of hourly billing and provides you with a response for the next time a client asks you for your rate.