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I love hourly rates. I don’t do fixed-bid projects. I’ve written multiple articles and mentored clients about the benefits of hourly billing, and over time I’ve watched many freelancers and boutique firms abandon the fixed-bid model and move to hourly rate. The pros and cons of hourly billing can be discussed endlessly so I won’t get into that here, but this month was such a triumph for the hourly model that I thought a blog entry was in order.
Over the past 10 days, a series of events has happened which has demonstrated how an hourly model can result in a flexible, low-stress model which is good for everyone:
- We were about 50 hours into a complicated e-commerce site when the client suddenly announced that they want to make major changes to the designs, which were approved 6-weeks ago! Rather than being frustrated, I am fine with that because we’ll simply get the designer back in to mockup some new designs and bill all the hours that she spends doing it. We don’t need a change order or anything, we just bill for the extra work and keep going. The client knows this because we’ve been giving him projections along the way. So, this ‘big change’ results in higher profits for me without any paperwork or new agreements – just a single email saying that this would probably add 30 hours to the project.
- A new client started a consulting project with me. I was to help him author a technical spec for an application he’s building. We got about 5 hours into the project and he had a family emergency. No problem at all – I’ll bill him for the hours he used and we’ll simply stop working for a while. Our written agreement is still in effect and when he’s ready to resume we’ll just start up again.
- Another client who disappeared about 6 months ago for unknown reasons showed up again and we picked right up where we left off. There was no paperwork, change order, or approval. He just wanted to know how many hours we estimated (and thus the approximate cost) to complete the project, and when he agreed we went right back into production.
- A reseller client brought an urgent Joomla template job which one of his in-house programmers had messed up. We were in the middle of a job for him, and he agreed that we would push back the first job a week so that we could take care of the Joomla template. There was no paperwork or negotiation at all because reseller clients have a general services agreement with us and it covers all projects they submit. He sent us the spec and the developers jumped right on in.
- As usual, a handful of established clients trickled in their 2 or 3 hours jobs here and there – fixes, tweaks, and tiny modifications to older projects. There is never any question of whether we should do these fixes as part of the original job (which happens in fixed-bid projects) or how much they should pay for these small things. We just bill actual hours and that’s that. No paperwork. No minimum. Since our profit margin doesn't change with smaller jobs, we're happy to take them.
- Finally, and this was my favorite thing of the month, we completed a Joomla site for a university and I looked at the final numbers. We estimated the project early on but found that some of the complexities that we expected to deal with weren’t all that complex after all. So, we were able complete the job in about 130 hours less than we expected. Of course, the client benefited from that as they wound up spending much less than they had agreed to!
Sure, there is a downside in that last item because we could have easily charged the client what we estimated and made higher profits. But, our profit margin is always the same because we are time-based, so we were paid the same amount for our time as we would have if it had taken longer. And, we have a very happy client who I think will stay with us for a long time.
In the end, it was a pretty successful month and with all of the client changes and chaos that we endured, our profit margins didn’t budge a bit. The clients love the flexibility, are happy with us, and we made nice profits without stressing out. So, I’ll say it again, ‘I love hourly rates!’. |
