September 11, 2018
Hourly Billing Is Nuts— Stop Trading Time For Money
The handsome and talented Chris Do of Blind and The Futur interviewed me live on YouTube today. We chatted for 90-minutes but it flew by - everyone had a blast. I was truly blown away by the professionalism and production quality evidenced by Chris and his team.
Here’s the description they posted for the interview:
Why is it a bad idea to bill hourly? How can you make more money and work less? How hourly billing limits the growth of your business. How hourly billing damages your relationships with clients. How does value pricing work? How does value pricing differs from hourly billing? How to start the transition from hourly billing to value pricing. Never charge an overage again. Never justify your price. Jonathan Stark is a former software developer who is now on a mission to rid the world of hourly billing. He is the author of Hourly Billing Is Nuts, the host of Ditching Hourly, and writes a daily newsletter on pricing for independent professionals.
And here are the discussion points that Chris captured during our talk:
(Aside: he captured all these AND made slides for them in real-time - incredible!)
- Clients prefer fixed price (certainty) vs hourly billing (uncertainty)
- Define goal/outcome with client
- Why this, why now, why me—talk the client out of hiring you
- Assess motivating factors (business reasons e.g., risk, cost, churn, etc)
- Determine fit: good project, budget, timing, value to client
- What would a home run look like? What would a complete disaster look like?
- Three price options (small, medium, large)
- Set boundaries early on (position yourself as a partner, not “hands”)
- Focus on goals/outcomes (measurable)
- Race to zero with (upwork, fiverr, et al)
- Desperate cash flow situation eliminates your ability to negotiate
- You need “keep the lights on” money (limit to 20/hrs per week)—free up time
- Goal: land one high profit client
- Get into virtuous cycle
- Calculate floor price (what is costs you to produce)
- Calculate value (annual basis) and divide by 10
- Pick the higher of the two numbers
- Avoid “selling to your own wallet”
- Uncover the underlying business objective (measurable)
- “Why would you give me this money to do this? You’re going to have buyer’s remorse.”
- The term “retainer” is a land mine—sell advisory retainers (selling access, not selling chunks of time)
- How to avoid Time Vampires
- Use the “Dinner Test”—would you have dinner with this person?
- Get past the gatekeeper (talk to someone who has the answers, decision maker, stake in the outcome)
- Discount for uncertainty
- Offer guarantee what you can control—charge up to 100% of the value (demonstrates confidence)
- Overcome perception of commodity by specializing, developing expertise
- Differentiate, unique
- Unique point of view
I told you it was a marathon!
You should really watch the recording - if only to see how great a livestream can be - but especially if you’re a designer, you should check out Chris’ stuff. He’s the real deal.
Here’s the link...
BTW - this was my first livestream... PLMK how you think it went!
(And if you think of it, consider encouraging Chris to keep creating such amazing work.)
Yours,
—J
P.S. Are you sick of the feast/famine cycle created by the hourly billing trap? The Pricing Seminar might be your ticket out. Doors just opened this week so it’s not too late for you to join over 100 peers from all types of professions who are tired of not being paid what they’re worth. Registration closed Monday at midnight ET. Learn more »