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What’s wrong with billable hours

daedtech.com

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Re: What’s wrong with billable hours

#31

Post by rootusrootus »

the_lonely_road wrote: post #29
ChristopherM wrote: post #15

I charge by the hour and will never change. It forces the customer to focus on getting the requirements right instead of hand waving it like "oh yeah, that's just what I want" and then come back later "I didn't want that, what I meant was" repeat ad infinitum. You see they are paying for my time, not results. If they choose to waste it... doesn't matter to me, it's all billable just the same. I will do my best to ste…

I clicked on you because I was curious and noticed your bio says you live in Nevada still if you care.

And not just anywhere in Nevada, but Incline Village. Pulled that up on Redfin and I can see why someone would be tempted to brag.

Re: What’s wrong with billable hours

#32

Post by gatinsama »

I have been a fan of Erik for 6 years now.

If you are happy about where you are in life and are making close to half a million dollars a year, like some on this thread, feel free to ignore his advice.

If you are stuck in the race to the bottom and wonder why, for example, the company's management doesn't pay attention to anything you say, then read his blog.

Re: What’s wrong with billable hours

#33

Post by jkaptur »

I tried this. A very large company reached out and asked for a custom version of diffdiff.net. They asked what my hourly rate was, and (thinking along the lines of this article) I offered to do it for a flat rate instead.

They ghosted me!

In retrospect, a "very large company" didn't reach out, a relatively junior person at the company did. I should have worked within their constraints. (Or just not taken the job, which, I guess, is effectively what I did).

Re: What’s wrong with billable hours

#34

Post by d_sem »

To each their own I suppose. In my personal opinion, hourly billing is economically aligned to better product-stakeholder fit. Without economic cost, stakeholders seem to tend toward over requesting / flip flopping resulting in a worse product. I've experienced this in larger B2B projects where those customers who paid monthly where incentivized to filter out the things they don't need and focus on the high value functionality.

Re: What’s wrong with billable hours

#35

Post by poulsbohemian »

ChristopherM wrote: post #15

I charge by the hour and will never change. It forces the customer to focus on getting the requirements right instead of hand waving it like "oh yeah, that's just what I want" and then come back later "I didn't want that, what I meant was" repeat ad infinitum. You see they are paying for my time, not results. If they choose to waste it... doesn't matter to me, it's all billable just the same. I will do my best to ste…

Here's the challenge I ran into, so I'm curious how you handle it...

If you bill by the hour, first they fight you over the hourly rate. Then they want to argue over how many hours it will take to do the work. Then they want to argue over you billing them for all the project management and planning hours you are spending with them, they only want you to bill them for "the work." Then when they get the bill they want to argue over the hours you bill them.

And before anyone says "find better clients" I found this in everything from Fortune 500 to mom and pop. And Fortune 500 is net-180 regardless of what's in the contract.

I was spending so much time in this kind of BS that I went to a monthly retainer model. You get access to me, but you are doing so in a way that we can both set aside haggling over hours. For the smart clients it was a great deal and it saved me a whole lot of accounting overhead.

Re: What’s wrong with billable hours

#36

Post by tetha »

ddkto wrote: post #9

Professional business people are familiar with different business models, and when to apply them. For instance, hourly billing makes a lot of sense if the scope is vague - the client carries the scope risk. Fixed price is amazing when the client has a specific, measurable problem that they don’t know how to fix (but you do). You can solve it cheaply, get paid waaay more than hourly and have a happy client. Being a pr…

Game development adds another dimension. A musician I know helps small indie artists with music as a side business. His contract states a fixed number of hours producing the music and effects is free, until earning some 100k revenue / month, when it starts costing 0.1% of revenue royalties / month. He has fun with it, it's usually free, but if someone makes the new Minecraft with his music, he will get his share.

Re: What’s wrong with billable hours

#37

Post by r00fus »

fallat wrote: post #26
ddkto wrote: post #9

Professional business people are familiar with different business models, and when to apply them. For instance, hourly billing makes a lot of sense if the scope is vague - the client carries the scope risk. Fixed price is amazing when the client has a specific, measurable problem that they don’t know how to fix (but you do). You can solve it cheaply, get paid waaay more than hourly and have a happy client. Being a pr…

> when the client has a specific, measurable problem that they don’t know how to fix (but you do) Then the client tells you that wasn't their problem in the first place. In the 10 years of contracting I've never done fixed rate for the reason the client never knows what they exactly want. It's not like installing a tiled floor or drop ceiling. Being a professional means a lot of things, but fixed rate contracting is…

Which is why you have clear boxes on that fixed-rate, and stepping over those bounds means you're back into T&M billable. The legalese on these contracts needs to be quite tight, but it's a one-time expense to set that up, and it's best done properly (and updated as new edge cases show up).

Re: What’s wrong with billable hours

#38

Post by nico »

When first reading the title, I thought this was an article about consulting and legal firms

About 90%+ of the work you get from these companies is done by their junior employees, even if the senior partner that sold you swears otherwise

Especially if you are not one of their top clients

For most companies, it’s better to get a small firm or an individual. You’ll get better communication, better work and sometimes even better price

Re: What’s wrong with billable hours

#39

Post by travisjungroth »

sudhirj wrote: post #17
the_af wrote: post #6

Well, I found this article insightful, even if I've no plans of going freelancer (though of course... "life, uh, finds a way", so who knows). I think my most immediate objection is one that is raised in the comments from TFA: customers don't know what they want. For a flat rate to apply, you have to work to an initial set of requirements set in stone, and we know these requirements are almost always wrong (except for…

If someone's a pro, they'd charge a flat rate to tell the customers what they need, or for a given outcome. Like a flat rate to spec out an MVP. Or to get to $X in revenue.

A flat rate to hit a revenue target? That seems incredibly unrealistic.

Re: What’s wrong with billable hours

#40

Post by user_named »

tetha wrote: post #36
ddkto wrote: post #9

Professional business people are familiar with different business models, and when to apply them. For instance, hourly billing makes a lot of sense if the scope is vague - the client carries the scope risk. Fixed price is amazing when the client has a specific, measurable problem that they don’t know how to fix (but you do). You can solve it cheaply, get paid waaay more than hourly and have a happy client. Being a pr…

Game development adds another dimension. A musician I know helps small indie artists with music as a side business. His contract states a fixed number of hours producing the music and effects is free, until earning some 100k revenue / month, when it starts costing 0.1% of revenue royalties / month. He has fun with it, it's usually free, but if someone makes the new Minecraft with his music, he will get his share.

Good luck ever getting that share of revenue
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