Any service provider who bills clients by the hour will know the challenges of that method. When we start out with a new service-based business, it is the first method that comes to mind. It is easy to find out the range of rates within your industry, which provides us with a good low and high rate of what others charge. Depending on your level of skills, experience, and confidence, you start with what is probably a lower rate, and over the years work your way up.
We need to start somewhere, and hourly billing is standard for many services, e.g. anything from virtual assistants, plumbers and electricians, and consultants, all the way up into the higher echelons of hourly lawyer or specialised accountant fees.
Hourly billing clearly has its place, and it has good and bad sides. Here is an overview for service providers – and potential clients – to keep in mind when offering or seeking a service.
The Good
1. You get paid for the work you put in. That is actually a good thing; you do the work and get compensated for exactly that. As long as your hourly rate appropriately reflects your skills and expertise, this is a good way to get paid. Especially for a start-up service provider, like a virtual assistant, this is a good way to start.
2. Numbers can be established in advance. Hourly billing can help the service provider and the client agree on a set number of hours and compensation per month or per project. Both parties know how much time they will be putting in, and how much they will be spending or earning. This helps a client on a budget stay within it, and allows the service provider to plan around the hours they have available each month, and know their sales numbers in advance.
3. It is easy to calculate. Once you have decided on your hourly worth, there needn’t be any further debates in terms of the qualitative output. Of course, the quality of your work must be good, and a client may still query the output or time you spent on getting the job done, it is easier to handle though.
The Bad
1. You need to track your time. This is simple enough – though the task itself can take a fair amount of time. Depending on how you track it, i.e. with pen and paper, in a spreadsheet, on your mobile phone timer, or an online tracking system, you need to tally it all in the end. If your client requires a detailed and itemised timesheet or invoice, you may want to include part of that time investment in your billing.
2. Pricing may not reflect your expertise or outcome for your client. You have a university degree, professional training, and years or decades of expertise and know-how, or you are naturally gifted in your field; that should count for something, right? An hourly rate may not reflect all that, unless it is suitably high. Back again to my thought about lawyer fees – I guess they actually have it right!
3. Your speed penalises you. When you are very good at what you do, and once you have become accustomed to your clients’ specific tasks and processes, then naturally you become faster at doing them. Being on an hourly rate then means you get shafted for getting work done quicker!
Some Solutions
Instead of hourly billing, try to package your services. The standard seems to be to offer three or four package plans, from low to high, with the middle plan being the most popular, most chosen, and generally the best value for money.
Include a selection of tasks, services, or outcomes in each package, with the best package offering the most variety and/or frequency of services. For example, a Level 1 package would cover the basics of your services: the easiest, most requested, standard and quick to do tasks. Maybe you will describe some exact tasks or results that are included and you can quantify them, as for example with doing a client’s social media posts (how many, how often, on which platforms).
Level 2 could be all or some of the entry-level tasks, plus some additional services. Here you may also be more proactive in offering to assess and improve their current systems, programs and processes, and so on.
In Level 3 as your top package plan, you can dive even deeper and provide either a wider range of services or something more challenging and meaningful. You may include longer-term strategies, assessments, and more qualitative outcomes. This could be, for example, planning a certain business goal or milestone with the client and helping them achieve it. The top plan essentially offers the cake with the cherry on top!
Same as with defining your hourly rates, find out what package plan pricing others are offering and then rewrite it to fit your services and what you wish to include. When I created my package plans, I found it a truly challenging task! Was I aiming too high? Too low? Did I include enough service areas, or ‘give away’ too many?
I drafted what I thought was a good start, and then shared it with two business friends from different industries for review. Theirs was the best feedback I could have got! A fresh pair of eyes showed where I needed to be more specific.
So, I recommend just putting something on paper, and getting feedback from anyone who can look at it like a potential client would. If it makes sense to them, you are on the right path!