Category Archives: Compensation

Charging For Time is a Bad Idea

The long-running standard in working with many consultant/agency-based professionals is to charge by the hour. Web designers, lawyers, PR firms, marketing agencies – they all normally ding you with a certain min. fee for a project, then an hourly rate on top of that.

Which is stupid.

Charging By the Hour is a Bad IdeaCharging for time doesn’t care about the customer. Charging for time is centered on how the person doing the service will come out.

But no client ever goes into a project thinking, “You know, what I really need is about 20 hours from a great designer,” or “If we could bump our marketing firm up to 35 hours a week, then that would take care of everything.” No, clients are looking for results, and the service provider is only a means to that end.

When people charge by the hour, the client automatically reacts in two ways:

  1. “I wonder how much time it’s going to take to accomplish what I’m shooting for.” The catch here is that the client has no idea – that’s why she’s looking for someone to do it for her. So this leads to endless questions which only make the service provider squirm and hem and haw and nobody’s left comfortable.
  2. “I wonder if this guy is going to take his time getting this stuff done so he can earn more.” Whether it’s warranted or not, this thought always, ALWAYS enters into the mind of the client when you charge for time. Which is natural, because the very nature of the consultant’s compensation is based on time spent working on it. More time = more money.

Both reactions above are seeds that you really don’t want to have planted when starting a new relationship with a client. They’re starting out with doubts and second thoughts, and you’re starting out with a client that’s not completely sold out to the way you’re going to do things. In addition, you know most of your competition is also charging by the hour, which means a) you don’t stick out in this area, and b) there will always be someone cheaper, which is attractive to clients when they’re being charged by the hour.

If you know the way you charge a customer makes them uncomfortable, and if you know your pricing model makes you just another hourly consultant in a dime-a-dozen world, why don’t you change it?

Start charging by the hour. Better yet, charge by results. Your clients (the guys who pay you) will love you for it.

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