It's Time To Ditch The Billable Hour

Before we purchase we weigh countless options. And when it comes to consulting, nearly all of the options are priced by the hour.

But consumers are growing cautious as false advertising and duplicitous business practices have many big-name companies apologizing. With a growing number of options to choose from and trust in corporations diminishing, customers are finding it harder and harder to find a partner—not just a transaction.

The market is starving for trust.

Consumers are looking for brands to trust and partnerships to rely upon long-term. As a result, companies like Everlane, Patagonia, and Whole Foods have embraced transparency in pricing, sourcing, and salaries as a part of their business model. And it’s working. In a recent study by the Harvard Business School, cost transparency alone was found to increase purchase interest, attract customers, and generate a 44% growth in sales.

For years, billing by the hour has been the standard. With hourly pricing based more on the industry standards than the experience of the consultant, billing by the hour is anything but transparent. Moreover, this practice forces customers into transactional, project-by-project relationships that don’t benefit the client or the consultant.

With the billable hour method, the client is forced to nitpick through invoices—hoping the time billed and hourly rate are accurate. The consultant is creatively crippled—with a set time limit for each project, hours spent using creative expertise to cultivate the client’s vision are undervalued.

Billing by the hour kills good creative work.

Consultancies that use the billable hour method are incentivized to count the minutes, not the creative value. Working on a project-by-project basis does not yield cohesive, engaging content, but mediocre copy that muddles the message.

“Today, it’s all too easy for brand messages to be muddled by content that conflicts with a brand’s values.” (Mike Romoff: Head of Sales, LinkedIn)

Because buying time is not synonymous with buying quality content, clients end up paying the price for a consultant’s inefficiency, to the detriment of their brand. Over time, the billable hour method leads to fractured client/consultant relationships as clients disassociate with consultants in search of a better value consultancy.

Billing by retainer leads to long-term relationships.

Consultancies that bill by retainer know their clients, partnering with them for multiple projects from month-to-month. As a result, the consultant saves administrative time on projects as they begin each new task with a developed understanding of the client’s goals. The client also benefits from this relationship, reaping the benefits of the consultant’s expertise as time is allocated to the projects that need creative direction the most.

With this model, a consultant’s rate reflects the value it brings to the client’s business, not the amount of time it took to complete.

“Every client would rather talk about value delivered than hours provided.”(Arjun Moorthy: VP of Business Development, HubSpot)

We must stop selling time, and start selling value. We must abandon the billable hour.

Because our clients deserve a relationship.

 

Dave HamiltonComment