Captain’s log, stardate 20200131
Sent by Jonathan Stark on January 31st, 2020
Longtime friend-of-the-list Ant Pugh sent in this interesting observation about hourly billing based on his unusual circumstance (shared with permission, bold mine):
Jonathan, I’ve recently switched back from billing by the project to hourly billing (I’m now doing sub-contracting work for an agency after 3 years of doing direct client work). It’s funny going from one to the other - I’m so used to doing things as as efficiently as possible, and suddenly I’m being rewarded for being inefficient. I’m afraid there’s no exciting story to share, but I don’t assume many people go back to hourly, and knowing what I know now about charging per project, the ridiculousness of the situation is even more obvious. -- Cheers Ant
I’m endlessly fascinated by how powerful the financial incentives of hourly billing are AND YET how invisible they are to people who have never experienced any other approach.
Once you try value pricing (or productized services, or straight product), the insanity of the model comes into stark (ahem) relief.
Sure, hourly billing is easy. And it’s better than nothing when the bank account is empty.
But it’s a trap because it prevents you from creating leverage in your business. If you sell an hour of your time, it takes you an hour to deliver it. There is no way to optimize.