Say No to Hourly Billing

A consulting assignment that quickly brings in some extra cash can be tempting. Still, there’s something about the incentives that doesn’t feel right, and I want to explain why we choose to step away from the traditional consultant role.

Charging by the hour is a well-functioning model that has probably existed in our society for as long as we’ve been able to measure time that precisely. Many companies far more successful than mine use this model, and it’s standard in almost every industry to ask for an hourly rate.

On the other hand, just because something has been around for a long time doesn’t automatically make it good, and there are even more successful companies that don’t charge that way. Let me tell you about something that used to exist but that you may not know about. There were people employed full-time at companies whose job was to search for information and present it. They would look things up in phone books, encyclopedias, wander around libraries (I imagine), and flip through sweaty copies of dissertations. These people could have been replaced, in the digital revolution, by a company where you could type in a search query and get a list of ten relevant answers. For this, one could have been charged by the hour of using the search engine.

Scalability

Now, Google is “free” to use, so maybe the comparison isn’t entirely fair, but what I want to point out is scalability. Without a doubt, there are technical consulting firms of various kinds that have also scaled quickly, and the more straightforward sales pitch where everyone is used to hourly rates gives them a head start. But if I get to sell results rather than hours worked, then I’m closer to the actual goal and rewarded for solving problems quickly, rather than penalized. Almost every service I buy myself works this way — I buy content and pay per article, I buy advertising and pay per view. As a little side note, those of you who have followed us for a while know how hard it was to convince me about paying per view instead of per conversion or click.

It’s better that it works this way. If my supplier can automate the simplest steps in their delivery, that’s something positive, not something that should lead to fewer billable hours.

The 6-hour workday

You might not be in the same situation, but it’s still relevant to you, and I’ll come back to that. Brath has six-hour workdays and has had them since the start. That means we need to be more productive than our competitors. We have to deliver more results in less time, otherwise we’ll fall behind and won’t be able to grow. Our shorter days are a competitive advantage — we work in an industry where specialists are extremely sought-after, often nearly impossible to recruit, and often have very little experience. At our company, specialists tend to stay much longer than at most of our competitors, but the trade-off is that we have to produce more during the time we do work.

Of course, sometimes we stay longer on certain days too, but then it usually means working maybe 8 hours instead of the 10–12 hour days that at least I used to do before. One reason this works is that everyone understands that six hours is the result of being more rested, able to concentrate better, and therefore solve the same tasks in six hours that competitors solve in eight.

So what does this have to do with you, if you don’t have shorter workdays? Everything I’ve described also applies to those who work eight-hour days — it’s more about mindset than the number of hours. If you can produce more in your eight hours, you have a competitive advantage, and there are few things nicer to have than a competitive advantage. For example, it could mean that you have more time left for other things — things that are long-term, developmental, team-strengthening, or why not marketing? If you have to bill all eight hours, when will you improve your process?

Incentives

The final and biggest factor is, of course, incentives. If your job is to bill hours, you’ll make sure to do so — because you’re a good employee. Solving a client’s problem quickly then becomes a problem rather than the best thing imaginable. Since I’ve been in SEO for 15 years, I can solve a problem for you in 10 minutes, and it’s not those ten minutes I want to be paid for, it’s the 15 years. Anyone in the industry can put in a bunch of hours on a problem and maybe, or maybe not, solve it.

Summary and a small caveat

My view is that it’s generally better for everyone to charge in a different way than per hour. It helps you scale, and it helps your client get results rather than hours — or at least aligns your goals instead of setting them in opposition.

That said, of course, like with everything else, it’s a spectrum rather than an on/off switch. Of course, we sometimes bill by the hour too — sometimes there’s just no other way to do it.