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Freelancers And Consultants: 3 Reasons You Shouldn’t be Billing Hourly

Freelancers And Consultants: 3 Reasons You Shouldn’t be Billing Hourly

Imagine a method of paying for a time-sensitive service whereby the slower the service provider is, the more they’re paid; and by contrast, the faster they are the less they earn.

One bizarre consequence of this arrangement is that the more experienced professionals in a given field, whose experience typically makes them faster than newcomers to the profession, will be treated as less valuable than the inexperienced practitioners who usually take longer to complete the same amount of (often inferior) work.

And consider also that this payment method means not only that the service provider has incentive to drag out his work as long as possible, but also that the client paying for the final product has incentive to rush the work.

Insane, right?

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And yet this is how tens of millions of service providers, consultants and other freelancers charge their clients. Hourly billing. What on earth are we thinking?

For the same reason the “Print Screen” key persists on desktop keyboards years after its real estate should have gone to, say, a “.com” key, consultants in just about every profession continue to bill by the hour. Because we always have.

If you’re a consultant, freelance contractor or the sole proprietor of a service business, there will of course be times when a client insists on paying you by the hour. (That simply means the client hasn’t given enough thought to this arrangement, either, because it works against their interests as much as against yours.) In those cases, what can you do?

But if you’re given the choice, or asked to define your preferred method of billing, here are 3 reasons you should not opt to charge by the hour:

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1)  It creates an adversarial relationship between you and your client — when such conflict is totally unnecessary and another billing arrangement would better benefit both sides.

Say you’re a graphic artist, and you and your client agree upfront that the new icon set you’re going to create for their website is worth $1,000 — for the first set, plus one round of revisions. (Tweaks beyond that are another matter, not important here.) You’re happy with that figure, and your client is as well.

Now that you’ve got that out of the way, you both have an incentive to arrive at an icon set everyone loves as soon as possible. The sooner it’s done, the sooner your client starts reaping the benefits of their new icons — on their website, in marketing collateral and in other branding channels. And the sooner it’s done, the more time you have for other paying projects — and the more “per hour” you’ve earned, if you want to think of it that way.

In other words, once the client has determined what the final work product is actually worth to them, the fact that you can bang out an excellent icon set in a hurry becomes a virtue for both parties. When you’re billing by the hour, by contrast, you have a perverse incentive not to finish your excellent first draft too quickly, because it means you’ll get paid less.

And this inherent conflict of interest carries through your entire relationship with your hourly-paying clients: If you demonstrate you can complete an icon set very quickly (and in fewer hours than the job’s compensation would be worth to you), you also have to worry you’re setting a precedent that the client should expect all of your design work to be completed fast — and not to have to pay you much for it.

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2)  It measures and rewards the wrong things (and neglects the right ones).

Let’s stick with our $1,000 icon set example. Imagine you’re billing hourly — say, $50 an hour — and you nail the icons on the first shot. Your client is thrilled with the work! You’re thrilled with the great feedback you’ve gotten. And because the job took you 20 hours, you can bill them $1,000. Not bad!

Now a different scenario: Your first draft falls flat. The client calls you frustrated and a bit panicked. After an unpleasant conversation, you crank out a second draft and, after you send in the new icons a couple of days later, the client responds that they’re pleased. Not thrilled, but pleased. And because the two drafts took you a combined 31 hours, you can bill the client… $1,550?

But wait. In the first scenario, you nailed the work on the first try. And they loved it. Second scenario? Not so much. It took you two tries, you shook your client’s faith in you, and you didn’t turn in an approved draft for an extra couple of days. But they paid you 50% more!

In a perfect scenario — or at least one where the client pays you for your work based on criteria less arbitrary than the number of hours the job takes — you’d whip up a brilliant design ASAP and then get yourself back out there working on other billable projects. And your client would start reaping the benefits of your completed work sooner.

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But in this nonsensical hourly-billing arrangement, you and your client are actually both working counter to your own best interests. You are, because you’re spending more time than necessary on the project (or at least holding back on delivering until you’ve racked up a number of billable hours you can live with). Your client is as well, because they’re rushing you to hurry the work rather than take the time you need to make it outstanding.

All because you and your client are measuring the project’s worth based on the totally arbitrary “total hours worked” rather than what really matters.

3)  It creates a built-in mechanism to make your work less compensated as you gain more relevant knowledge and expertise for your client.

Imagine you’ve been working with your icon-set client for a few months now. You’re learning about their organization, products, vision, customers and competitors. In short, you’re becoming faster at understanding new projects and banging out great work. Doesn’t this mean you’re becoming more valuable to your client than you were on your first assignments for them?

And yet, if you’re billing them honestly, the fact that you’re becoming quicker at completing assignments — and turning in work that delights your client — means that your compensation from this client goes down the more the relevant knowledge and experience you gain for them goes up.

My advice: Bill by the project. Once you and your client agree on the ultimate worth of a given task or service, your interests become nicely aligned from that moment forward. And you can both get on with the business of generating the best work possible in the shortest time possible.

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robbie hyman

Copywriter

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Last Updated on June 26, 2020

25 Easy Tips on How to Save Money Fast

25 Easy Tips on How to Save Money Fast

“How to save money fast?” This is the question asked by all of us not in the top 1% of rich people.

If you are looking for ways to drastically reduce your expenses immediately, first look at what you need to spend money on every week. And I mean really need.

You don’t really need to order in food. You don’t really need to buy expensive perfume.

Building from that, you can work out how your regular expenses can be reduced.

As for irregular expenses, they can also be deceptively costly in the long run. Once-off buys can also be tackled with some prudent planning and a little extra research.

And remember: a budgeted lifestyle does not mean a bad or boring one!

But first, understand what budget you can cut down on daily:

  • Regular expenses for the average adult (can be trimmed but not eliminated):
    • food
    • rent/mortgage
    • cell phone
    • insurance
    • socializing/entertainment
    • transportation
    • hygiene products
    • household bills
  • Irregular expenses for the average adult (can be eliminated or cut down a lot):
    • travel
    • clothing
    • medication (*depends)
    • grooming (hair, nails etc.)
    • gifts

Now, let’s dive right into the 25 ways to save money fast:

Save Money on Food

1. Bring a stock of food to the office/work

Instead of popping out for an overpriced salad and a smoothie, leave a set of basic utensils at the office as well as a stock of non-perishable goods such as tinned fruit, tuna, rice crackers and so on (try to avoid the junk food and this can turn into a pretty great diet!).

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Stocking up means you won’t forget or say “I didn’t have the time” when you rushed out to work in the morning.

2. Buy the store-brand version

Many basic foods, such as bread and milk, will taste exactly the same as their branded alternatives. Go for stuff with minimal additives and preservatives. Meat in a tube is probably insanely unhealthy!

3. Eat cheaper cuts of meat

Learn how to tenderize and flavour cheaper meat and fish, and save on the (typically) most expensive item on your grocery bill.

4. Have group dinners

If 10 friends put $5 each in the kitty, it’s pretty easy to make a giant lasagne and get refreshments, as well as hang out with your favourite people.

Save Money in Transport

5. Get a bicycle

Save on gas money and bus/metro fares with this underrated mode of transport.

6. Use public transport and/or don’t get taxis

Some places can only be reached by car. But as a good practise, check your public transport website and see if any routes pass nearby where you need to get to. Walk as much as you can.

7. Find the cheapest gas

Regularly check out where the cheapest gas can be bought.

Save Money in General Shopping

8. Shop online

Not only will you save on the gas or transport fares from going to the shopping mall but you will also find better deals

9. Sell your old stuff

Get your unwanted belongings up on eBay ASAP and earn a few dollars.

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Here’re more ideas for you: 25 Things to Sell to Make a Lot of Money

10. Bulk buying stores

For regular non-perishable/slow perishable purchases such as toilet paper, cat food, pasta, washing powder and so on, do an epic stocking-up trip to a co-op or equivalent (my mum used to go to a place that restaurants buy from).

Be wary of supermarket “deals”, as some have been found to be fraudulent after working out a simple calculation.

11. Become a flea market/car boot sale/street market guru

You can find original gifts and develop good negotiation skills at these places.

12. Generic brand medication

More often than not, the generic version of paracetamol and other basics work the same as the branded version.

13. Choose deodorant, not perfume

It blows my mind when someone drops $70 on a bottle of spray. Stick with a nice deodorant, and not only will you smell just fine but you’ll be sweat-free as well!

Cut Down on Household Expenses

14. Printing

Ink is one of the most expensive substances in the office and coloured ink is doubly so. B

e more efficient and choose black and white, and if your printer doesn’t have a print-both-sides options, just print odd pages first, re-insert the paper and print even pages.

Expand the margins of what you are printing as often as you can to save on paper.

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15. Minimize SMS and phone calls

A combination of a free chat service such as WhatsApp and a free call service such as Skype can reduce your bill to nothing (so long as you have a decent Wifi connection).

16. Shop around for insurance

Most people don’t spend enough time searching for the best insurance deal.

Keep a watchful eye out for deals and new competitors in the market.

17. Try re-negotiating your rent/mortgage

If you have built up a good credit history or a good rapport with your landlord, then chances are a frank chat about needing to tighten your spending could result in lowering your payments. You’ve nothing to lose from trying.

18. Don’t get a TV

Invest in a computer/laptop and an internet-only package. You can watch more (and often better) entertainment on the web, and skip the advertisements as well.

19. Pool your internet bill with a neighbour

My apartment building is basically a big old house split into three apartments. There are five of us in total. We pool the internet bill, making it crazy cheap.

Save Money in Socializing, Entertainment And Travel

20. Have house parties

Instead of paying for overpriced drinks, set up a series of in-house get-togethers with your friends. Everyone takes a turn, so it’s not always your house that needs cleaning.

For sound insulation, hang heavy drapes on the walls and windows. For music, invest in a good second-hand set of speakers which you can connect to your computer. Let Spotify or Grooveshark playlists do the rest.

21. Open festivals, meetups and events

It never fails to surprise me how much underground stuff goes on around me for free or for very cheap. Find out who runs the blogs and websites that list all the less well-known cultural activities.

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22. Volunteer

If you can’t pay for a ticket, volunteer and get to be there anyway.

23. Housesit

There are multiple housesitting websites offering you the possibility to avoid paying hotels and skip the discomfort of crummy hostels.

Save Money on Hygiene and Beauty

24. DIY beauty

French manicures, pedicures, waxing, eyebrows… pretty much all of these can be achieved at home (and done well) with some practise. There are plenty excellent blogs and YouTube tutorials to help.

25. Fewer haircuts/volunteer at a trainee hairdresser

If you can’t bear the risk of a trainee touching your locks, learn more ways to manipulate your hair as it grows and get haircuts sparingly. Women’s haircuts are outrageously priced in many cities.

Bonus: Effective Money-Saving Tips for Everything

Here’s a summary of what you can generally do to save more money:

  • Share/pool resources. Organize a neighbourhood sharing scheme, common resources for your apartment block or with your friends. Not everybody needs an individual lawnmower.
  • Buy energy-saving everything. The easiest way to lower your bills – replace those lightbulbs!
  • Buy in bulk. Be sensible about it (i.e. make sure you have space!), and drastically reduce weekly expenditure.
  • DIY. Skill up using YouTube tutorials on plumbing and many other essential services so you never have to pay for simple problems again.
  • Research a lot before making a decision. Most money-wasting is the result of poor preparation and planning. Don’t shirk this part just because you don’t like it!
  • Use your network. Your network is full of resources that can ease the pain of budgeting. Ask for help.
  • Stop and think. Do I really need it?

Unfortunately, there are some things that require plain ol’ giving up for the time being. This can include high-cost sports such as skiing, the latest versions of some technologies, the finest brands of food/drinks, premier seats at the opera and most other indulgences.

What is important to remember during lean times is that when you look back on your life, it will be the experiences that stand out, not the extra comforts.

Living on a budget can teach you a lot about how much you can really get out of your paycheck. We only live one life, so make the most of every penny you earn!

More Tips for Personal Finance Management

Featured photo credit: Unsplash via unsplash.com

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