Why I No Longer Offer Hourly Consulting (And Why Hourly Billing Sucks In General)

I have done my share of hourly consulting for my usual rate of $250/hour. Does the money suck? Of course, not. But, I'm shutting it down. And I'll explain why. And why - if you do hourly billing for clients - you might want to think about the consequences.

I have done my share of hourly consulting for my usual rate of $250/hour. Does the money suck? Of course, not.

Plus there are reasons why having a consulting offer on a blog is a helpful thing.

For one, it is an awesome way to get SOME offer out there. Every person who is trying to make money from their blogs needs to have SOME offer out there. And, for many, offering some kind of service (like consulting) is a good way to go.

Secondly, it also frames your value. When marketing a product, the price is judged up against what it is compared to. For example, a $3 app in the App Store for the iPhone would be considered expensive because so many apps are less than that. So, you get people who are probably doing just fine financially who actually have to stop and think about spending $3 on an app…. right after they go blow that amount on coffee at Starbucks without even thinking about it. But, I digress. 😉

Price framing is important. So, when you set your hourly rate at, say, $100/hour… then you come out and sell a really great product for $75… all of a sudden that’s a bargain (if, of course, the product truly is good).

Why Shut Down $250/hour Consulting?

At $250/hour, the money doesn’t suck. Now, it isn’t as if I do a ton of consulting (since I’m busy enough with my own stuff), but $250/hour isn’t bad at all.

Of course, that is… in an ideal world. 🙂

Anybody who charges by the hour – especially in single-hour units – you know that it often takes much more than an hour in order to deliver an hour of service. You’ve got all the back-and-forth communications to line up the right time to talk. You’ve also got prospects who will grill you before they ever pay you a dime… all because they’re trying to get some sense that you can actually help them.

(Actually, psychologically, they’re trying to find reasons not to hire you at all. Not a game worth playing.)

So, what happens is that you end up wasting time on back-and-forth… or trying to PROVE to somebody that an hour of your time is worth what you’re asking.

No thanks.

If people can’t read my blog or my reports and see that I know enough to deliver more than $250 in value to you in an hour, then I’m not interested.

But, it goes deeper…

If we look at the PRODUCT that a person wants… how can that be delivered in an hour?

An hour isn’t any good for much more than just bouncing a few ideas off me. But, in my experience, in order to truly guide somebody to their REAL goal, it takes more consistent time working together.

In other words, we need to talk STRATEGY and then execute on that. And that takes more than an hour.

In an hour, all we can talk about is a few TACTICS… but tactics without strategy… or tactics based on a shitty strategy… isn’t going to accomplish our goals.

Lastly, here’s one thing any successful business owner will tell you…

As long as income is tied to your time, you cannot get rich.

Period.

As long as income is tied to your time, you have a cap on how much you can make. You can’t really build real leverage. And you’re at the mercy of clients.

The (Better) Alternative To Hourly Billing

Hourly billing sucks. Outcome-based billing makes a lot more sense.

People buy an outcome. They want an outcome.

They’re not so interested in merely your time.

In fact, if you stop charging for your time and instead product-ize your outcome, you can charge more (hint! hint!). 🙂

So, if you’re in a service business where you bill hourly, I would suggest you re-think things and find a way to bill for the outcome.

Or if you do charge for time, have them buy blocks of time which are large enough to where you can actually deliver a real outcome… as well as accomodate for the usual logistics that go along with this kind of thing.

And so… on that note…

The “Rent Me” option which used to be on this site is now gone. I used to offer consultations in as little as half-hour increments.

Well, you learn by living. 🙂

If you or your business wants to get some REAL strategies in place and work with me to perfect your content marketing and REALLY make it work for you, then I offer a few options now. The only one even remotely hourly is a 10-hour block. I’d consider any less to be a waste of your’s and my time.

Everything is also by application only now. I want to make sure you’re in a business which could stand to benefit from my strategies before I promise to help you. Only makes sense when you think about it.

And for everybody else, I’ve got the group option inside the Inner Circle. (But, big changes coming on that front soon, too. Stay tuned!).

All the best!

– Dave

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Responses

  1. Thanks David,

    I think it’s definitely the way to go. I know I like getting compensated when the client has got my best and satisfied with the results. I’m going to incorporated this strategy.

  2. Focus and concentration on your activity is must required thing to become an
    expert on their field Because People on all levels seem to have more creative
    for their challenges like you.

     

  3. Your points are very true and strong. If someone knows that
    he has enough potential to produce more and more then why he would work on
    hourly basis payment. These are very informative and use full tips. Thanks
    David.

  4. Big brains are obviously showing their abilities in a wide way. This was
    forwarded along to me and I have to say, it’s just interesting for every
    reader. Thanks for continuing to find innovative and useful ways to help all of
    us!

     

  5. Your points are very true and strong. If someone knows that he has enough potential to produce more and more then why he would work on hourly basis payment. These are very informative and use full tips. Thanks David.

  6. David this is so true, thanks for sharing your experience. It got me thinking, maybe some people also need to change their way of billing, maybe it will work for them too.

  7. Hey David, well it really makes sense because let’s face it. Who is going to get all their doubts cleared in just a one hour chat?

    Sure, you can even answer a crucial question in just one minute or even less but I really think that one hour is very limited.

    Just last week I was trying to teach some guy on how to use wordpress to publish new articles, upload images and all the basic tasks, we did last about three hours.

    We couldn’t cover everything and the guy had that look of ‘what the hell happened?’ that I knew he probably understood 30% or 40% of everything I told him.

    Really cool way of setting up your consulting hours man.

    Sergio

  8. Thanks for making all those mistakes and sharing your experience Dave. As an up and coming consultant, “how to charge clients” has been bouncing around in my head for a while now. Best.

  9. Hey David,
     As long as income is tied to your time, you cannot get rich. I am going to tweet this one. For the record David, I know you are a solid entrepreneur and I would pay you for your expertise.

    I offer a one on one coaching program but I think I will borrow some of your strategies in this post.

  10. David,
    I like your idea of charging for blocks of time as it’s far better use of time than the hourly rate. However, it’s still requires a time commitment on your part. I believe that best business models are free of any kind of one-on-one consulting. In other words – a purely  products based business is the best way for a small business to maximize it’s revenue.

    1. That’s true. But, typically, your “sales funnel” would have a high-end backend. And, most of the time, those higher-end offers are going to mean a much higher level of access. There will always be those people who want a 1-on-1 connection rather than the do-it-yourself option which is what any product could offer.

      In the end, people will only pay so much for any info-based product. At some point, to get to the next level and to satisfy the needs/wants of a certain segment of the crowd, you need to have a high-end, 1-on-1 kind of offer. Just charge accordingly. 🙂

  11. Dave,

    Hourly billing is a downer in a way because your time is limited to only 24 hrs per day, meaning you have a pay ceiling. 

    Alternatively, I tend to bill by retainer, or a monthly fee. It takes into account of your time, resources, value, and ability to complete deliverable.

    Retainers just work better for ME, might not work well for others.

  12. It’s really hard to deliver anyone value in an hour of time. This goes for freelancing as well: it takes 30-60 minutes to switch in then switch out of a context, which makes even a “trivial” change on someone’s website ruinously expensive in time, unless in “website fixing mode.”

    On the other hand, I’m about to pay a career coach here locally a good chunk of change for an hour of her time. My goal is to determine whether we’re a fit. (And that will probably take more like 10 minutes than an hour.) Nothing more.

    Your day rate is really good.

    1. Yeah, it is. 🙂 Might go up at some point, but the point isn’t just the money as much as it is ensuring I can actually deliver a result for somebody… and still make it worth dealing with for me.

  13. David

    I just saw your post on facebook, now I see why you dont do it anymore. I agree with you you cant really give a person all the tools and information they need in one hour, but at least you actually experience consulting others, now you are a million time s more valuable in the marketplace because of that

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