Captain’s log, stardate 20200223
Sent by Jonathan Stark on February 23rd, 2020
If someone hires you at your hourly rate, they are probably going to expect you to work for one hour for every hour that they pay you.
If someone hires you at your daily rate, they are probably going to expect you to work for eight hours for every day that they pay you.
If someone hires you at your weekly rate, they are probably going to expect you to work for forty hours for every week that they pay you.
But what about monthly? What’s the client’s expectation of how many hours you would work? 8 hours per day in the given month? 8 hours per weekday in the given month? 8 hours per business day in the given month? A flat 160 hours per month (i.e., roughly 4 weeks x 5 business days per week x 8 hours per day)? What if a holiday lands on a weekend vs a weekday?
Unless you explicitly state a fixed number of hours per month for your monthly rate, it gets pretty fuzzy what the client might expect at the month level.
And that’s a good thing!
Charging on a monthly basis encourages clients to think less about “hours worked” more about “outcomes achieved” because of the inherent dissonance between weekly and monthly cycles. i.e., there are a different number of weeks (and therefore business days and business hours) in every month.
To illustrate this mind shift, think about a simple content service you subscribe to like Netflix (or Spotify or ABC Mouse or whatever):
When considering the “fairness” of your subscription price, did you ever think once about how many person-hours went into delivering the content that you consumed in the previous month?
No you did not.
If you’re like me, you probably thought about whether or not the access to the content was worth the monthly subscription price (if you thought about it at all). With monthly subscriptions, the value is in the access, not the usage (and certainly not the hours worked behind the scenes).
Sure, if you go for six months and never use a subscription at all, you might start to question whether having access to the service is worth the monthly fee. But again, it comes down to access, not usage (and certainly not the hours worked behind the scenes).
Here’s the thing…
If you design it correctly, monthly pricing can shift you into the subscription category with things like Netflix or a gym membership or Porsche Passport or flood insurance or AAA - i.e., a situation where clients are happy to pay for access to you instead of the number of hours you work behind the scenes.