Book Byte #357 "Hourly Billing is Nuts" by Johnathan Stark
Essays on the Insanity of Trading Time for Money
📣 Curious Quotes from the Author
"Clients don't buy hours, they buy results, which is what I sell."
"Hourly billing punishes increased productivity.
"A value price represents some fraction of the amount that a prospective client thinks your work is worth to get done.
"There is a difference between a traditional fixed bid and a value-based price/quote on a cost estimate to the client."
"The choice is yours: race to the bottom, or respect hourly billing and raise to the top."
"When you base your price on the client's perceived value of the project and NOT the hours, you will find yourself working fewer hours, charging more, delivering more effective results, increase customer satisfaction, and much, much more."
Questions To Ask Clients Before Writing Your Proposal
1. What would a homerun look like for you?
2. What about your business keeps you up at night?
3. If you could wave a magic wand and change one thing about your business, what would it be?
4. What's been at the top of your to-do list forever?
5. Is there anything that your competitors could do that would threaten your business?
6. How do you acquire new customers?
7. Have you been putting off any difficult decisions?
8. Does your business go through slow periods (weekly, monthly, yearly)?
9. If you had to set priorities now, what three things must be accomplished?
10. How has your business performed over the last 12-months?
11. Is there anyone on your team who isn't performing up to your expectations?
📚 Cognition of the Book’s Big Idea
"Hourly Billing is Nuts" is a book written by Jonathan Stark that argues against hourly billing for software projects and in favor of value pricing. The book argues that hourly billing is unfair to both the client and the consultant by incentivizing slow work and discouraging efficiency. Instead, the author advocates for a value-based pricing model where the price of a project is determined by the value it will create for the client, rather than the number of hours it takes to complete.
The book provides a step-by-step guide on how to transition from hourly billing to value pricing and includes a number of real-world examples. The author also provides advice on how to prevent scope creep, manage multiple projects, and create proposals that will win clients over. The book concludes by arguing that value pricing is a win-win for both clients and consultants, as it leads to better relationships, increased profitability, and more satisfying work.
Until Tomorrow,
Jason (Founder Club255)