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7 Reasons You Shouldn't Charge by the Hour
February 25th, 2008 in Business & Process
by: Matthew Griffin
A week ago, I posted an article entitled . It included a brief explanation of why I avoid charging clients by the hour. I've since realized that this explanation was inadequate. After spending way too much time explaining and clarifying in the comments section, I decided to expand the topic into a separate post. So if you would like a deeper look into the melee of hourly billing, you've come to the right place. Here are seven reasons I avoid hourly billing like the plague.
1. It's time consuming
Constantly starting and stopping timers is an annoying and time-consuming practice—it's completely counter-productive. Also, heaven forbid you forget to start the timer or forget about the time altogether. Then you'll end up with a compounded time-consuming mess. Flat-rate billing circumvents this problem completely.
2. It makes clients nervous
You would be surprised how much more comfortable your clients will be if they know exactly how much they are going to spend. Open-ended hourly billing, even accompanied by a ballpark figure, makes buyers nervous. Flat-rate billing makes them feel secure even if they know they'll most likely end up spending more.
3. It encourages lower productivity
When you're getting paid by the hour, there's no incentive to work faster or smarter. In fact, the slower you work, the more you get paid. Flat-rate billing encourages you to work efficiently.
4. It lends itself to tedious website update work
Some may feel differently about this, but I hate doing updates on ugly sites I didn't design. Charging by the hour lends itself to this kind of work. I want to spend my time designing new sites and helping my long-time clients. Flat-rate billing will help you do more of what you like to do.
5. It doesn't stop feature creep
One common misconception about hourly billing is that it puts an end to feature creep. In reality, all it does is frustrate the client. I their mind, every time they ask for something that should have been included in your original time estimate, they're being hit with unfair additional charges. Start with a flat rate with plenty of padding for feature creep, and this will rarely happen.
6. It severely cripples billing potential
Imagine giving an $3,000 estimate for a very basic website. Let's say you've been designing websites for awhile and you're getting pretty fast—you know it will take you about ten full hours of work to get the project finished. Billing by the hour, puts your rate at $300 per hour. It sounds outrageous when you put it in those terms. They have no idea how much work and effort it's taken to hone your skills to their current level. That same site may have taken you fifty hours when you first started designing websites. Flat-rate billing allows you to charge what your services are really worth.
7. It encourages clients to abuse you
When you charge by the hour clients tend to argue and grumble about every little charge because they can see every little charge on the invoice. When clients feel that you're cheating them by not working fast enough, they can get really grumpy. Flat-rate billing keeps everybody happy.
I've had great success with flat-rate billing and will continue to stand by it. It's not just a little better than hourly billing; it's night and day. If you manage flat-rate billing correctly as prescribed in my , you'll never look back. That's not to say it will solve every billing problem you've ever had, but it sure will solve a lot of them.
UPDATED 11/12/2009
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