4 reasons why charging by the hour is self sabotage

Business Management

4 reasons why charging by the hour is self sabotage

I received an email the other day with this title

4 reasons why charging by the hour is self sabotage

At first glance I thought, "OK, I get it, I understand why not charging the hour can be a good idea."

Then I thought about all those projects I provided a fixed price quote for and went way, way, way over budget. Surely it's not always profitable to issue a fixed price especially where there are so many variables. 

But this is not really what the email was about.

Have a read and let me know what you think. Do you agree? Does this sound like a possible way to move forward for you and your business? 

Here's the email

4 reasons why charging by the hour is self sabotage

1.  It shackles your upside. 
If your revenue is in any way linked to your time, your business model is fundamentally flawed; there are only so many hours in the day and eventually, you will price yourself out of your markets reach.  The result is you drastically reduce your value, throttling your earning potential. 

2.  It creates a conflict of interest. 
If I’m paying a service provider by the hour, the longer it takes them to deliver the result, the better off they are.  Good for them, bad for me.  Time based billing literally puts buyers and sellers at odds with each other. 

It gets worse. 

3.  It retards creativity and innovation. 
On the flip side of my previous point, the faster a service provider delivers a result, the worse off they are.  If the market won’t allow you to charge more per hour, where is the incentive to do better?  There is none.  It’s insanity.   

"Time based billing creates conflict and retards innovation, creativity and efficiency." 

4.  It’s anti-entrepreneurial. 
Entrepreneurs strive to work on their business, not in it.  If you charge by the hour you’re literally building yourself into your business - handcuffing yourself to value delivery.  If you stop working, your business stops earning which strips the value from the vehicle you’re trying to build. 

The alternative to the evils of time based billing is to convert your skills and services into value based products.  The market will value a packaged result far more than it will your time.   

Productisation is the process for turning your skill set, into a value producing asset and is one of the 5 essential ingredients in you becoming a key person of influence in your industry.  

Cheers,

Glen Carlson

Let me know your thoughts

Darryn 


Darryn Altclass

Brand & Marketing Consultant at

I am very lucky to work as a Brand & Marketing Strategist for a number of small businesses in Sydney - XYZ, The Learning Community and Website in a Weekend. All my work is focussed on telling the right story to the right people on the right platforms to get the right action. And I feel very blessed as I absolutely love what I do.

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Wendy Huang

Wendy Huang, Full Time Blogger and YouTuber at A Custom Blog in 4 Minutes

I would have to agree to all the points :)!

Jennifer Lancaster

Jennifer Lancaster, Marketing Manager at Power Of Words

Of course this is written under the paradigm that we are all 'entrepreneurs'. Some of us are happy to be service providers with a work-home life balance. Project pricing helps those providers who keep getting better and more efficient at delivery, however there is always a limit to the charges for time. Books and online courses however, can deliver your expertise to anyone, anywhere, at any time of day.