Why are you still charging by the hour?


When I worked for Ernst & Young back in the early 90s, we had to account for every 10 minutes of our time. Each hour equated to 6 units, and we had a weekly target of billing a minimum of 75% of chargeable time.

In reality, most of us were billing over 100% of our time – working 70-80 hours, that was how you got on in the firm back then. Time was our currency.

The legal profession worked on similar principals, charging clients for the amount of time spent. It was a model that worked really well for the Professions – you could plan with certainty and huge profits were made.

Little has changed over the past 20 years.

So why do I have a problem with charging for time? Quite simply, it rewards inefficiency. The longer you spend on something, the more it costs me as the client. Where’s the incentive for you to innovate, to think out of the box? No, it’s easier just to load time onto the client.

But the world has changed. That kind of behaviour is no longer acceptable.

However the majority are still doing it and that’s where the opportunity lies. Modern firms think like businesses. They’re designed around the needs of the clients, not the needs of the firm.

Pricing is fixed. As the client, you know exactly how much you’re paying and what you’re getting for that. It’s much fairer. If you can innovate and find more cost-effective ways of delivering your service, then that’s absolutely fine. As long as both parties recognise the value that’s being delivered, at a fair price, then no-one will have a problem.

The days of the accountant & lawyer dictating terms are over. For those that don’t adapt, it’ll be a bleak future. Put the client front and centre. Focus on delivering value.

It’s what every other kind of business has to do, now it’s time for you to think like a business too…..

3 thoughts on “Why are you still charging by the hour?

  1. Hi Alasdair, I agree up to a point but there is still room for an hourly option where a small company needs specialised assistance for say, only a few hours a week. For those type of situations I offer an hourly rate then consolidate at the end of the month to one invoice to minimise everyone’s admin costs. If the invoicable amount is still low then we carry it over to the next month (if cash flow is good!!). Works well for smaller SME’s 😎

    1. Yup, as I said over on LinkedIn, for certain projects we have to charge time too, but we give clients an estimate in advance so that they know the likely cost. It’s not knowing that really pisses people off

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