January 2, 2021

Hourly billing is the enemy of leverage

Let’s say a client asks you to do an hour of research into a new platform they’re considering investing in.

And let’s say that it turns out this research greatly benefits all of your clients.

Who would you bill for it?

(And if you think you have a simple answer to this, think harder.)

This is one of the classic dilemmas created by hourly billing.

In a situation where you have multiple active clients and you spend one hour doing something that benefits all of them, there’s a strong argument to be made that you should bill all of your clients for the hour.

This might feel wrong ethically because you’d be getting paid your full hourly rate for the same hour multiple times. But it makes sense logically because they would all be benefiting just as much from your hour of work as they would have if they were your only client.

There’s another perfectly logical argument to be made that any research you do shouldn’t be billable at all. You didn’t bill your clients for the hours you spent learning in college or at a bootcamp or at a conference, so why would you bill them for learning something now?

What about billing just the client who first requested the research? Well, then that client would be subsidizing all of your current (and future!) clients who get the benefits of the research for free. Does that seem fair to the first client? If they had waited a day and a different client had made the same request, then they’d have gotten it for free.

Here’s the thing...

I could go on, but what we’re wrestling with here is the inherent fact that hourly billing prevents the creation of leverage.

If you do anything whatsoever that benefits more than one of your clients, hourly billing dictates that you can only charge once for the time it took to do so.

If you charge more than one of your clients for the same hour, then you’re not billing for your time; you’re only pretending to do so.

You might be able to justify to yourself that double billing for an hour is fair, but you’re clearly charging for something other than your time.

So why not stop the charade, start PRICING your work instead of BILLING for your time, and create leverage that you don’t have to be sneaky about?