Why is hourly billing good?

This may be a surprising episode title for you considering everything you hear me talk about in regards to hourly billing, sucks!

Yet there are times when hourly billing is good and I wanted to share the other side of the coin from yesterday’s show with you today.

Quick / One-off task

If you are a designer or developer and have bandwidth or time in your schedule where someone presents you with an opportunity to do some quick task. Something you know you can bang out in a few hours, or maybe have even done it in the past for a previous client.

Or if you are a developer and another developer needs you to write some code. Or a designer and another designer asks you to design some simple elements.

Hourly billing may be an option for you.

To be honest, this is even a stretch, because I would argue that you would know what the outcome is and be able to put a price on it.

However if it truly is something that only takes an hour or 2 and both you and the client know that, it’s going to be hard to say “$1000 for that Facebook share image.”

You are terrible at estimates / Inexperienced

I get it, I’m a realist and if you are just starting out, your estimates are going to suck. You won’t know what you don’t know until you get into it.

Which means, you may have to take on hourly work at the very beginning by way of sub-contract work or just because you can’t define how long it will take for the scope of work.

What I would suggest though is that when you do take on the hourly work, track any and all time on the project. Be as detailed as you can so that you learn and get better at estimating and scoping out work.

Expanding services

As you grow your business, you’ll want to expand your services. Sometimes this means expanding into areas of unfamiliar territory.

Depending on what sort of services and market you are expanding into, your research may tell you that there’s a certain expected price. Especially as you are trying to break into that market, you’ll want to pay close attention to your own cost, as much as the client’s.

Therefore you may have to charge an hourly rate to the client just so that you get a better understanding of the value of your service to the client and cost to you.

Please note here that expansion of services doesn’t mean that this is the majority of your business. Chances are that if you are a solo shop, you’ll expand with one or two clients in this new market at any given time.

It should be in a very controlled environment. This is a part of business development and should be closely monitored to see if it’s a viable option for you and your business.

To wrap up

You’ve heard me before say that I’m a realist. If someone told the young Jason to start value pricing, I wouldn’t even know where to start. Back then I just needed to get some clients in the door and the easiest way was to set an hourly rate and go with it.

As I said though, in Why is hourly billing bad?, I put myself into the feast or famine cycle as soon as I did that. Twice, in fact, one resulting in me having to go back and sit at someone else’s desk for a few years.

Hourly billing should be thought of as either supplemental or experimental income for your business.

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