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What’s wrong with billable hours

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Re: What’s wrong with billable hours

#61

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…

> It forces the customer to focus on getting the requirements right

This is an issue that the article does not address, and it should. Part of the business risk that the article is talking about is the risk of ill-specified requirements from the client. But that means that any flat-rate pricing has to price in the extra time and effort required to make sure the requirements are well specified (and that's true even if a fair amount of that time and effort happens before a contract is signed--you still need to recoup those costs somehow). Either that or you simply have to not take on clients who can't specify their requirements well enough up front.

> consider their motive

I agree, this is always a good thing to do.

Re: What’s wrong with billable hours

#62
post #7

Entirely disagree with this post. I do a combination of fixed price and time and material work. Sometimes fixed price is a good model, sometimes time and material is a good model. Fixed price works when you know the scope, and are confident that there won’t be roadblocks and rabbit holes. If a project takes longer than you think, you are eating the difference. There’s nothing wrong with charging per hour if you know…

To give a specific example with respect to writing.

Want an article, blog post, or somewhat longer customer-facing material. So long as I know something about the topic and know where to go to get more information (maybe from you!) I'm happy to quote a fixed rate (+/- word count requirements). I have a very well-calibrated sense for how long this sort of thing takes and I'll put in some language about review cycles, etc.

If you're a law firm that needs an expert witness report, I'll almost certainly charge an hourly rate (which is what the law firm likely expects anyway).

Re: What’s wrong with billable hours

#64
I've been a consultant for 15+ years and have often come to this conclusion that hourly billing is not ideal for various reasons. I haven't found a great alternative, and the problem is I'd want a great alternative I could enthusiastically sell to my clients. "Always do fixed price" doesn't seem feasible when scope is not fixed, fixing it would necessitate time-consuming research and waterfall style project management, and clients often don't know scope until they have tangibles in hand. (ie "this looks great, but can you do this "little" thing we invision in scope, but you invision out-of-scope-but-not-worth-arguing-about"")

I feel like a retainer of sorts may make sense, but that seems a hard sell for some projects. "Make us this 5 page app that does XYZ". "Ok, pay me X/mo forever". Both consultant and client would need an exit that I'm not clear on. Also, to be honest about it, the consultant should limit their clients to some reasonable number so that they can serve them in reasonable time.

Re: What’s wrong with billable hours

#65
post #26
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…

In software, all problems are research and development problems. (If it wasn't, it would already be solved now.)

Re: What’s wrong with billable hours

#66
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…

> 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. What about fixed price makes the client happy in this situation? It's definitely not the fact that the contractor billed "waaay more than hourly". The upside of fixed price is that it's more predictable and it align…

The client is happy because you solved their problem. Now they can take that solution and earn money on it, or reduce their ongoing costs, etc.

If your bid is more than the problem is costing them, they won't accept the bid.

If your business model is "inflating fixed price bids" rather than "solving problems for clients" then sure, you won't do very well in the long term.

Re: What’s wrong with billable hours

#67

Earlier quoted context omitted.

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.

Incline Village is the closest you can be to the Bay Area and still live in Nevada. It's where a lot of tech folks go after they exit or if they get a remote gig because then they don't have to pay income tax, but are only a 3-4 hour drive to SF if they have to go in.

It also has great schools.

So you end up with a lot of moneyed California ex-pats there.

Re: What’s wrong with billable hours

#68

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…

I have a similar arrangement but I look at it much differently than you.

The retainer allows a client the freedom to contact me over what they think is nothing, because it is nothing, but 9/10 times that nothing will lead me to discover some issue that did need my attention, and I can give it that attention when it's still a nothing and not a barn-on-fire problem in their business. It also means I can log a trivial amount of hours doing the monthly maintenance that most clients gripe and piss and moan about you charging for: they already paid me. If a retainer hasn't been used up by the end of the month (and it usually hasn't) that's when I go do housekeeping for them.

Client gets a consistent-ish expense in their books, I get paid, everyone's happy.

> 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.

I mean this is just the game, dude. I personally just do not have these arguments, I'm not open to these discussions. This is the price of my time, this is how much time it took, this is the bill. If people don't pay then I don't perform services and anything I have access to goes down until I will, but I've only had to do that once so far, and they got the point very quickly.

If you don't want to do this then yeah freelancing/contracting isn't going to be your bag. I don't judge you for it but like, that's just how it goes when you're in business for yourself.

Also worth noting: I absolutely charge for time spent haggling. Any time I'm doing thinking work for you, that's time I will be compensated for. I outline this very clearly from the off, and if people drag it out over hours, then they pay for those hours. Simple as. I'll never inflate my hours or make something take longer than it does, but also, I demand compensation for what's spent on their whatever.

Re: What’s wrong with billable hours

#69

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…

> This year I'm on track to bill out between $360k and $400k > To anyone reading this [post] and thinking they are offering you helpful advice, consider their motive Honestly I'd be happy to sign up to your newsletter and be upsold into a private $20/mo high-end consulting community forum if I were to learn how to earn those kind of numbers and I was disappointed you didn't.

I started "programming" in 1982 on a VIC-20, I taught myself C++ in 1991 and programmed as a hobby until I switched majors in University. Then I moved from Job to Job once I stopped learning/progressing. Along the way I made many contacts at a diverse group of companies.

I started at a medical device company reverse engineering MRI/CAT scan data for a 3D device used in brain surgery. Then I worked for a company that specialized in Bug Tracking and Project Management. Then a company that engineered optical archival storage discs with a 100 year life span. Then I managed a team developing a video keno/poker gaming machine that was available to the Nevada/Montana market. Then I managed a team in reverse engineering cell phones for forensic analysis. Then a medical company that made a continuous glucose monitoring system for critical care environments. After 1 year working on their firmware, I was brought back as a consultant to rescue the Software department as a Director of Software Engineering over product and manufacturing.

Through all these jobs I was well liked and since then have been contacted by people I used to work with for consulting work. And now I'm getting consulting work from other consulting job referrals.

I currently charge $180 an hour plus expenses, but come January 1st will be raising it to $200 an hour because of the inflation and the fact it's not stopping. In terms of stating new increased prices; through the years I've informed clients to have them tell me it's too much. Then 30 days, 9 months come back and just sign a new contract at the new rate. You have to be willing to walk away, you have to have money in the bank so you don't "need" their work, but would be happy to if they pay your going rate. Just be professional, explain that you could be making more doing work for another client and it's "just business".

I specialize in device drivers Windows and Linux, firmware, embedded RTOS and even desktop applications, mostly Windows but also can do some Qt on linux. My favorite language is C++ but frequently use C as firmware and linux device drivers are written in C. I also have quite a bit of experience managing, hiring, extracting and documenting software reguirments, architecting and implementing as necessary.

As for getting new clients, I tend to pick up a client for 3-6 months of work and still do work for them 6+ years later. In the beginning they get most of my time, later I end up sitting in on weekly meetings, reviewing their code/design, mentoring their junior level software engineers, and helping them to hire more as needed. I end up standing in as their CTO/director/senior manager as they usually don't have the funds to hire a full time one.

Re: What’s wrong with billable hours

#70

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…

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