Generally speaking, we think billing hourly often creates bad incentives, and earns less money at the end of the day.
And in past Stacked Marketer issues, we’ve argued that you should avoid hourly billing.
But while we think it’s usually not a great idea, there are a few cases when hourly billing might make sense.
When you should bill hourly?
We thought of a couple of examples:
When it’s hard to pre-define the scope of a project.
Certain projects are hard to price before you start working on them. If you’re not sure how long something will take, it’s often best to bill hourly. Otherwise, you risk undercharging.
When you want to be on retainer, but the client’s needs vary from month to month.
If a client needs you five hours one month and 20 hours the next, it might be hard to sell them on a flat-rate retainer. A set hourly rate, though, is an easier pitch and lets you stay flexible.
When you don’t completely trust the client.
Scope creep is common with flat-rate projects, especially with less-than-ideal clients. If you’re worried your client might take advantage of a flat rate, charge hourly so they’re incentivized to be as efficient as possible.
When you are consulting.
If you’re providing consulting or advice instead of specific deliverables and outcomes, hourly billing tends to work better.
By the hour…
There may be other edge cases in which hourly billing makes sense, but these are the most common ones we’ve seen.
Best of luck out there!
