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What’s wrong with billable hours

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Re: What’s wrong with billable hours

#41

Post by chrisoconnell »

poulsbohemian wrote: post #35
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…

Have you considered a monthly retainer with an hour cap?

This prevents you from being treated like a salaried employee, maintains your work life balance, and ensures the client is still providing solid requirements and thinking through their ideas.

We have found a lot of great success with this model, and our clients respect it. It ensure we can have multiple clients, without one taking up all of our time, and taking it from others.

If we spend under X hours, that's fine. But there's simply a cap. It essentially means that each client gives enough work for us to work for those total number of hours, and we still have MRR regardless. We can help our clients maximize usable time, and it makes our project management valuable to the client as well.

To combat long Net Terms, you can kickoff a client with a project, which begins upon receipt of payment, and is continued with the retainer. This initial project should be able to support you until your retainer payments start (180 days in length) but your retainer should start ASAP.

It also allows the client to see your value, and you get to feel the client out.

Re: What’s wrong with billable hours

#43

Post by MassiveBonk51 »

the_af wrote: post #22
tptacek wrote: post #11

Billing hourly is bad, but you don't have to give up time & materials billing altogether. Just charge a day rate, or a weekly rate.

I'm genuinely curious: what is the difference between hourly and daily/weekly rates?

Less granular time tracking for both parties.

Re: What’s wrong with billable hours

#44

Post by PaulWaldman »

Goronmon wrote: post #28
PaulWaldman wrote: post #5

It's incredibly important to have a clearly defined scope prior to entertaining fixed pricing. If expectations are not established with the client, they will make assumptions and they won't be in your favor.

If expectations are not established with the client, they will make assumptions and they won't be in your favor. I think you can shorten this statement even more. Clients will make assumptions and they won't be in your favor. The goal is to limit those as much as possible, but they'll still happen. "Fixed price" is largely not fixed anyways, as you should always account for change requests and other budget altering m…

>The goal is to limit those as much as possible, but they'll still happen. "Fixed price" is largely not fixed anyways, as you should always account for change requests and other budget altering mechanisms. I don't think I've ever seen a non-trivial project not have some level of change once work has started.

These need to be handled as separate change orders. Following the model, price the scope changes appropriately based on clearly defined requirements. This part takes some finesse. Many clients may not realize how they can achieve their goals in the most cost-effective manner.

Re: What’s wrong with billable hours

#45

Post by ozim »

the_af wrote: post #22
tptacek wrote: post #11

Billing hourly is bad, but you don't have to give up time & materials billing altogether. Just charge a day rate, or a weekly rate.

I'm genuinely curious: what is the difference between hourly and daily/weekly rates?

Mostly that you don’t have to haggle over hours or 30mins here or there.

If you do daily or weekly you don’t register time in 15mins increments to later argue with the client.

Re: What’s wrong with billable hours

#46

Post by neals »

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'm a lot like you, I started out that way. Over time I added 4 good developers to my team and now have a steady flow of almost steady income.

Re: What’s wrong with billable hours

#47

Post by poulsbohemian »

chrisoconnell wrote: post #41
poulsbohemian wrote: post #35

Earlier quoted context omitted.

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…

Have you considered a monthly retainer with an hour cap? This prevents you from being treated like a salaried employee, maintains your work life balance, and ensures the client is still providing solid requirements and thinking through their ideas. We have found a lot of great success with this model, and our clients respect it. It ensure we can have multiple clients, without one taking up all of our time, and taking…

At this point in life, I've moved on to a new field altogether, but some of the ideas you are sharing above are exactly the types of models I experimented with.

Re: What’s wrong with billable hours

#48

Post by mk_stjames »

One thing I've noticed more now that I read HN more than other places...

Software people sure like to talk/write a lot of about their business. Like, a lot.

I'm a mechanical/aerospace engineer, and I've done some short term consulting for startups (but now mostly retired).

There is verrry little online in the form of blog posts like this mulling over how people work in that type of engineering (especially in the higher-end of the field, like what happens in automotive and military/commercial aerospace- it's all very closed-doors). Especially less in the methods/metas of the field and the business surrounding it.

But software people? HN is flooded everyday with long form exposition just like this blog post. And it's honestly been pretty eye opening reading how much people pontificate in this area. Like, goddamn. I'm starting to think people talk about their ways of work more hours of the day than they actually.... you know... work.

>

Re: What’s wrong with billable hours

#49

Post by PaulWaldman »

CuriousCosmic wrote: post #10
PaulWaldman wrote: post #5

It's incredibly important to have a clearly defined scope prior to entertaining fixed pricing. If expectations are not established with the client, they will make assumptions and they won't be in your favor.

Also have pre-established policy for revisions. Like 2 minor revisions included in the cost but then have further revisions priced by how complex they are.

It's best to shy away from explicitly including things like "2 minor revisions". Who determines if the change is minor or not? The client will always assume minimal effort is required. If the change is in fact minor, then just implement it.

If the change is significant, then provide a price for its implementation.

Specifying that minor revisions are included in the agreement provides too much ambiguity.

Re: What’s wrong with billable hours

#50

Post by [deleted] »

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…

[deleted]
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