January 11, 2019

Hourly billing vs value pricing isn’t an either/or proposition

There was a thread on Twitter the other day in which some freelancers were rolling their eyes at people like me who advise against hourly billing. The general thrust of the thread was that when you’re first starting out value pricing is too hard to be a realistic option.

Here’s the thing:

The folks on this thread were conflating “ditching hourly billing” with “value pricing everything” so I thought I’d take a sec to dispel the misconception that you have to do one or the other.

I totally agree that value pricing is incredibly hard when you’re first starting out, which is why I advise people to work their way up to it with a variety of approaches designed to build experience, confidence, and cash flow.

For example:

Add a fixed price option to an hourly estimate at an 85% premium
Create a fixed-scope productized service that you offer at a set price
Practice value pricing on one very small project at a time
Get very focused in your positioning to attract more and better leads
Create a low-priced info-product (e.g., report, book, course, white paper, etc) that aligns with your high-priced services to create a broad base of satisfied customers who may be interested in investing more with you

Of course, most of these things take time to design and create. If you absolutely have to bill by the hour to keep the lights on while you’re spinning these things up, that’s fine with me under two conditions:

You limit your billable hours to a maximum of 20 per week so you have the time and energy left over to work on building your business.
You recognize that billing by the hour is a temporary solution that you are using to bootstrap your way into products, productized services, and value priced custom projects.

Yours,

—J