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"Hourly Billing Is Nuts"

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loop101

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I'm listening to Michael Dominik (Linux Action Show alumni) interview Jonathan Stark, the author of "Hourly Billing Is Nuts".

Sounds like you determine the annual value of what the customer wants, and then determine what you can do for 10%, 30%, and 50% of the value. You work backwards from the dollar amount. This is different than determining how many hours it will take to do what the customer wants, and then billing them by the hour. Also different than charging a fixed amount for what the customer wants. You basically tell the client what they will get for the Bronze, Silver, and Gold amounts. If a client wont pay 10% of the annual value, or the dollar amount is too low for you, then you pass on that client.




https://www.amazon.com/Jonathan-Stark/e/B001ILFMCQ?

There Is A Better Way To Price Your Services

The first step in increasing your profits is to shatter the illusion of hourly billing.
I realize that “everyone” bills by the hour. I also realize that with enough discipline, it can be made to work reasonably well.

BUT...

As long as you bill yourself out by the hour, your clients will treat you as labor. Hired help. A pair of hands to be directed. You’re better than that. You’re the expert at what you do, your clients are not.

Stop letting clients tell you how to do your job. Take back control. Be the trusted partner that your clients long for. But you can’t do so without changing your thinking. This book will help you see the light.

You need to sell your head, not your hands. Your expertise, not your labor. Outcomes, not activities. Benefits, not deliverables.
 

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minivanman

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I'm listening to Michael Dominik (Linux Action Show alumni) interview Jonathan Stark, the author of "Hourly Billing Is Nuts".

Sounds like you determine the annual value of what the customer wants, and then determine what you can do for 10%, 30%, and 50% of the value. You work backwards from the dollar amount. This is different than determining how many hours it will take to do what the customer wants, and then billing them by the hour. Also different than charging a fixed amount for what the customer wants. You basically tell the client what they will get for the Bronze, Silver, and Gold amounts. If a client wont pay 10% of the annual value, or the dollar amount is too low for you, then you pass on that client.




https://www.amazon.com/Jonathan-Stark/e/B001ILFMCQ?

There Is A Better Way To Price Your Services

The first step in increasing your profits is to shatter the illusion of hourly billing.
I realize that “everyone” bills by the hour. I also realize that with enough discipline, it can be made to work reasonably well.

BUT...

As long as you bill yourself out by the hour, your clients will treat you as labor. Hired help. A pair of hands to be directed. You’re better than that. You’re the expert at what you do, your clients are not.

Stop letting clients tell you how to do your job. Take back control. Be the trusted partner that your clients long for. But you can’t do so without changing your thinking. This book will help you see the light.

You need to sell your head, not your hands. Your expertise, not your labor. Outcomes, not activities. Benefits, not deliverables.
This is how I've always ran every service business I've ever owned. What I have found is, it is much easier to sell the BRONZE if you have a gold and silver to offer. And, if you don't get them to buy the BRONZE, you will almost always get them to buy the GOLD. RARELY will people ever choose the SILVER. People love to have choices.

When I would go in to a ladies house to give her a bid, I would always take control as soon as she opened the door. Then she would be asking about a million things during the walk through and I would just talk about HOW we cleaned what she was asking about. Then I would write the prices in on the blanks (Printed bid sheet with info). And basically all the answers they wanted would be right in front of them so it made it kinda easy for them to choose. ......... but what if I want the ceiling fans cleaned but I only want the SILVER plan? Sorry, ceiling fans only come with the GOLD plan. So they would almost always atleast take the GOLD plan. I learned from the start, if it was MY business, I needed to run it like MY business and not let potential customers run it.
 
Last edited:

ugisozols

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I've been following Jonathan for some time now and couldn't agree more with him regarding hourly billing (and a lot of other stuff he's saying). For example, there's no incentive to improve your process because working faster means you make less money.

He’s big on value-based pricing and that's something I'd like to try and do too. It's not a magic pill to solve all pricing issues but it makes a lot of sense. And I know it will It take time and practice to hone it (to not undercharge) but I don't want to bill by the hour ever again.
 

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