Many companies in this industry traditionally bill "by the hour".
Why is this bad for you, the customer?
Here are some of the disadvantages of Hourly Billing :
- Hourly billing misaligns the interests of our firm and you, the customer–– you want your work done effectively, whereas we want to log more hours.
- It does not focus on why and what you want to buy. You want buy value, not hours.
- It focuses on efforts, inputs, hours, costs, activities, rather than outputs, results, and value.
- It places the transaction risk on the customer.
- It fosters a production mentality, not an entrepreneurial spirit.
- It creates a nonsensical subsidy system by overcharging some customers while under-pricing others.
- It transmits no predictive information as to value, project management, the effectiveness of knowledge workers, or the future behavior of customers.
- It commoditizes our intellectual capital into one inadequate hourly rate, denying our firm the opportunity to differentiate itself from the competition.
- Hourly rates are set by reverse competition—that is, by what other firms are charging. This limits their usefulness for cost accounting, as they are not based on real costs.
- It does not take into account the risk our firm is assuming, working for various customers. Risk cannot be priced by the hour.
- It creates bureaucracy. Time and billing programs consume between 7 to 10 percent of a firm’s gross revenue to maintain. It does not set prices up front, violating the laws of economics and consumer psychology. Customers want to compare value to price before they buy, not after.
- It diminishes the quality of life. No one entered the professions to bill the most hours. Knowledge workers resent having to account for every six minutes of their day, as if their leaders do not trust them to do their work, and the right thing.
So, how do we solve this? By instituting a SLA (Service Level Agreement) which allows you a yearly flat-rate access to our knowledge and services (with certain limitations of course).
As each customers' needs are slightly different, we can taylor this to your needs. Please contact us and will send you a copy of the SLA (Service Level Agreement). Please note that due to the Sage PFW EOL, we will be revising the SLA shortly.
Note: text from "disadvantages of Hourly Billing" courtesy of Ron Baker's book