Clayton Lengel-Zigich

The Secret to Greedy (but ethical) Hourly Billing

The typical client project goes something like this:

1. Provide estimate
2. Complete work
3. ???
4. Bill time spent
5. Profit

So why do so many people insist on killing their project’s profitability with endless tweaks and freebies? Take a page out of Gordon Gecko’s playbook and get a little greedy with your billing, your bank account will thank you later.

Selling Value

There is part of the project estimation process that is directly related to the sales process. Before you even get to the estimation process you should have a firm grasp on what exactly you’re estimating. Most importantly you should know what the value of this new work means to the client.

If, during your sales process you make an accurate determination of the client’s perceived value, you will be able to adjust your estimate accordingly to maximize billable hours and thus profit. If you cannot determine the value of this new work in the client’s eyes you will either charge too much (seemingly providing too little value) or charge too little (reducing your profitability).

Isn’t That Unfair

“I quoted 25 hours for this project, but only spent 15 hours working on it, isn’t it unfair to bill for 25 hours?”

Attention Beatnik: put down the bongos and look around. See this building, see these computers, those dreams and aspirations? See those hardworking employees. They are not concerned with the weight of your conscious, they are concerned about improving their lives and producing something of value for your clients.

I believe in the basic premise of supply and demand. At all points in the supply curve there are people willing to buy. You need to start thinking of your estimates and price quotes as a point on that curve and your client as the person who wants to buy at your price.

The client has accepted the reality that their project will be completed in the time you have quoted

But I Under Promise and Over Deliver!

I’ve got four words for ya.

More importantly, over delivering on your budget (by billing less than you said) is an empty gesture for your client and a step backwards for your profitability.

1. If your clients are the type of people who love you for saving them 3 hours of billable time you need to find less budget oriented clients and more value oriented clients
2. Not billing part of a project does nothing to send a long lasting, relationship building message, it’s as warm and personable as the GAAP
3. It’s not personal, it’s not thoughtful, and it’s not remarkable.

Extra Time is Not Time To Waste

If you’re 40 hours into a 50 hour project and everything is complete and ready to go, do not spend those extra 10 hours adding little things and beautifying the project.

“But I want to make the project as good as it can be!”

That’s what those FORTY hours you spent earlier were for. If you’re done with a project, you’re done with a project. If the things you’re wasting time adding at the end are really necessary they would have been in the project to begin with. If you’re concerned about your quality of work to the point where you need to go back after a project is “done” and fix it, you need to take a serious look at your production process.

“But I’m billing for the extra time, so why not make things better?”

The project is done, ship it, bill it and move on with your life. You need to be jumping on that next project where you can put those extra few hours to good use.

You Run a Business, Not a Charity

If you have some moral qualm with charging people what they’ve agreed to pay then perhaps you should get into the non-profit business where you don’t have to worry about making such difficult decisions (or money).

If you’re still having trouble coming to grips with this idea, consider these karma boosting ideas:

1. Donate a portion of your profits to charity (like Authentic Jobs does)
2. Donate money, equipment or services to support a local community group related to your industry
3. Spend some money educating your employees
4. Purchase thoughtful gifts for each of your clients (not at christmas either, make it “for no reason” gift)

What Would Gordon Do?

Gordon Gecko would remember that:

1. Your building something of value for your client
2. Your client wants to give you money for this value
3. Your dreams and aspirations are important
4. You’re responsible for other people
5. There is nothing wrong with being successful
6. All assholes speak in absolutes*

*(You don’t need to bill 100% of your estimates 100% of the time)