Don’t charge by the hour!

It always amazes me to see how many businesses still charge by the hour – it is a business killer. How do you like it if someone comes to quote for a job and then tells you he/she is charging you by the hour. You will have all or at least some of the following thoughts:

• How many hours will it take, can I afford this?
• I don’t know this person, I don’t know how good he/she is at what they do?
• Great, I am taking all the risk here, he/she can take as long as they want and I’ll have to pay?

The truth is that charging by the hour is terribly customer unfriendly and is therefor very bad for your small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants.

By charging by the hour you are creating so many barriers to doing business that your chances of securing the order is very small, if you are competing with someone who offers fixed pricing you have virtually no chance of getting the order. So if you work in an industry that charges by the hour and you need more work you know what to do.

In my experience you can charge more, if you charge a fixed fee and get organized. I believe that more accountants and solicitors loose work because they charge by the hour, the client relationship sours and then break down altogether.

Get rid of your timesheet – fix prices and bill your clients upfront – your customers will love you. ST.

23 Responses to “ Don’t charge by the hour! ”

1. Stuart Bruce
   
   Said on February 12th, 2008 at 4:54 pm

   And it’s important to understand the difference between charging by the hour and pricing by the hour. When you give your fixed quote it isn’t plucked out of the air, but is based on you using your experience and expertise to weight up factors such as how much time it will take you, what value (ROI) it will provide your customer, and the market rate.

2. Charging For Time is a Bad Idea « Brett’s Blog
   
   Said on February 13th, 2008 at 2:27 pm

   [...] Which is stupid. [...]

3. Robert Moore
   
   Said on February 14th, 2008 at 10:52 am

   In many forms of consultancy, especially law, it is difficult to know how long a job is going to take. The law is highly complex and the lawyer does not have all the information at hand before quoting for a job hence it has to be done on a time spent basis. Much of law, accountancy, IT, private medicine etc involves large amount of analysis even before a solution can be even suggested.

4. Stefan Töpfer
   
   Said on February 14th, 2008 at 11:14 am

   Hi Robert,

   Funnily enough I hired new lawyers yesterday. And they do work on fixed price basis in most instances. But you are absolutely right, some work will need to be time based as you do not know how much time you’ll need to spend. But this should always reflect the fact that these instances are outside of your control (solicitor).

   I think I was making the point if you are a professional you should know how long you will need to do a job.

   Stefan

5. SEO Lincolnshire
   
   Said on April 2nd, 2008 at 1:58 pm

   Fixed pricing is ideal for the customer. However, if you are working on a project, such as building a website and it takes longer than you expect. Then you need to consider implications of time.

   If you are charging £18 per hour as an example and you are doing 100 hours of work. Then it is going to be more expensive, therefore, fixed pricing will be more ideal. For your customers and you will be ideally to increase sales.

   Create time effective systems that will save you time and money.

6. Agel
   
   Said on April 10th, 2008 at 7:31 pm

   I’d rather go for charging by hours (from the point of view from a freelancer or worker).

7. home staging certificate
   
   Said on May 16th, 2008 at 6:54 am

   In my home staging business, I usually charge by the day, is that alright? I usually charge around $500 to $700. I’m lucky that my clients don’t ask me to show them any home staging certificate and why should I? I mean, I don’t need certification and i’ve only learned to do home staging business right at home with a little help from a book guide I purchased online. Anyway, that’s how I charge my clients through my real estate investor.

8. Construction Cranes Timmy
   
   Said on May 16th, 2008 at 11:59 pm

   I believe in deliverables more than the the actual time that was spent on a project or task. Thus charging by the hour is definitely something that i would do in my business. Then again, there could really be some businesses out there that really need to do so.
   At this point, i cannot really think of any example.
   One of them i thought of is the legal industry. But if even they charge on fixed price, what can i say!

   Anyone knows of any other examples that people really need to charge by the clock? I would be keen to know. But my stand is still on having a fix price…Its about cost predictability for your clients!

   

9. Construction Cranes Timmy
   
   Said on May 17th, 2008 at 12:01 am

   i got a typo in my above comment

   “Thus charging by the hour is definitely something that i would NOT do in my business. ”

   sorry…

10. Bob Richards
    
    Said on June 29th, 2008 at 4:07 am

    I wont pay by the hour. I tell attorneys or acountants to give me a price and if they dont, others will. It’s the buyer that will force businesses to charge by the project as aying by the hour is simply paying for another’s inefficiency.

11. Alex
    
    Said on July 26th, 2008 at 8:40 am

    I agree to some opinions above. I am into software engineering and sometimes charge by the hour. It is quite difficult though, the customer must trust you and you should be able to justify the time. However sometimes small half-hour tasks I don’t charge them at all and customers like it.

12. Darla Rowley
    
    Said on September 6th, 2008 at 9:59 pm

    Great discussion

    In my business
    Impact! Interior Design Solutions I almost always charge by the job, versus the hour.

    The only place that I will draw out an hourly charge is when I offer additional services, such as shopping with the client.

    Darla Rowley
    www.impactids.com

13. InjuryAttorneys
    
    Said on September 10th, 2008 at 10:57 am

    Thats good to see! The internet has given us the ability to start a successful business with very little income and without selling our souls to ‘the man’. I’m proud to be used for advertising, in this quint-essential bootstrapping marketing drive. I love the post the way its like fantasy…

14. mosaic tile
    
    Said on September 10th, 2008 at 3:05 pm

    what about a monthly pay with allowances??????

15. Jenni Hair Care
    
    Said on November 16th, 2008 at 4:44 pm

    That’s an interesting position i.e. charging by the hour is bad. A friend of mine who is a hypnotherapist/NLP therapist has just changed his business model pricing from charge by the change to charging by the hour, following a mentorship with a successful UK business coach.

    Being paid by performance has to be the best pricing model.

16. Jewelry Website Design
    
    Said on November 19th, 2008 at 11:45 am

    It’s good from earning point of view. But if you are professional and you can do a work in an hour and if you have no hour limitation then you will take whole day. So i think charges by hour is okay.

17. Keith
    
    Said on November 19th, 2008 at 2:16 pm

    There are always numerous ways to look at any situation, and also depend on what you would like to see.

    Pricing by the hour can be great, but customers like to know what their final cost will be before commiting.

18. Ideal Gift
    
    Said on November 27th, 2008 at 5:42 pm

    I always bill a customer for the job, as opposed to by the hour – I can’t stand being billed by the hour myself, as it can relate to how competent that person is at the job.

19. Leaflet Distribution
    
    Said on December 1st, 2008 at 11:11 am

    I feel that pricing or paying by the hour can be a route to corner cutting, not always, but the temptation can be there, whilst it may work for some, it will not for everybody, I suppose try it and see !

20. Jen
    
    Said on December 12th, 2008 at 3:52 pm

    It seems as though it would be unfair to clients to charge them by the hour for several reasons. If you’re unsure how long a project will take, the client could end up paying more than they expected, as it’s often hard to determine exactly how long different projects will take.

21. Jen
    
    Said on December 12th, 2008 at 3:54 pm

    It seems as though charging by the hour could be disadvantageous for several reasons. If you charge by the hour, a client may end up paying more than they expected, as some projects take longer than expected.

22. Removing stretch marks
    
    Said on January 13th, 2009 at 10:00 am

    I feel bad when someone says I am charging you for hour. But on place of money, many people mouth is shut. Anyway,
    The internet has given us the ability to start a successful business, and I feel joyed with it. And to surprise My client are happy with the offer additional services. So I don’t need more to increase cost. I like your virtual assistants on winweb. Thanks

23. Jay Desouza
    
    Said on February 19th, 2010 at 2:13 pm

    Your blog is absolutely right because work hours should be 8-9 hours. and charges is according also this is my thought thank you.

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