At Oak Studio, we aim for building trust, increasing productivity, and putting out higher quality work than last time... without punishing our clients. We feel that hourly billing runs contrary to those values.
Here are 3 reasons we avoid hourly billing, and how it benefits our clients.
Fundamentally, charging based on time spent protects service providers (like us) from risk in a business engagement. The problem is, it also prevents us from coming alongside our clients, taking on the same risks, and having skin in the game.
Imagine a scenario with us:
Jake bills Susan for 10 hours of work on a landscaping job. In this scenario, Susan has to operate on good faith. She'd expected the job to only take 5 hours, and she's probably wondering what took Jake so long.
Now let's imagine that the hours were itemized on the bill:
- 1 hour picking up the property
- 2 hours pulling weeds
- 2 hours edging sidewalks
- 3 hours mowing
- 2 hours trimming hedges
At first, it might seem like this list answers Susan's questions. Now she knows how much time Jake spent doing each task.
But in fact, it's just given Susan five bills to evaluate instead of one.
Now we are back at square one. Susan may have not remembered seeing any weeds at all, or maybe she only has two hedges on the entire property, so 2 hours seems excessive. She might even feel like she needs to be present and supervise during the next job, using her valuable time to make sure Jake isn't taking advantage of their contract.
If you're a business owner, this scene is probably very familiar to you.
With goal-based projects, hourly billing raises time-consuming questions and has the potential to create distrust between us and the clients we serve. As you'll see, we aim to be on the same side as business owners, working as one team to help them make their vision happen and have staying power.
Let's face it: everybody has a deadline, and here at Oak Studio, we're really into solving our clients' problems quickly and efficiently. If there's a situation where deadlines put us on the same side as our clients, we want to create it.
That's where hourly billing causes some issues.
With an hourly model, the longer a project takes, the more we get paid. Our clients come to us with a business problem that they think we know how to solve. By billing hourly, we're forcing our clients to care about two things that are completely unrelated to solving that business problem:
- The technical details of our work
- How we track hours
Instead of being incentivized to finish quickly and stay ahead of our clients' deadlines, we now have a conflict of interest.
Spending time on bettering ourselves and others is paramount here at Oak Studio. When we price projects individually, we're opening the door to innovation and creativity that can benefit us, our clients, and others in our industry.
Take this thought on billing by the hour from Jonathan Stark:
In short, they have no incentive to get better at what they do.
When an entire industry consists of people operating in this manner, there is no hope of progress for the group. No one will ever forge ahead in a ground-breaking way because there is a financial disincentive to becoming better at solving problems faster.
By staying away from the hourly model, both we and our clients are rewarded by new tools, research, and methods that help us work better and faster. We don't believe in cutting corners. What we're talking about are ways to streamline or package our work that acheives the exact same results in less time.