Comments on: WA Consulting: Fixed price or hourly? http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/ LunaMetric's blog on conversion rate and web analytics Mon, 08 Sep 2008 16:06:29 +0000 http://wordpress.org/ By: Kim http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-2068 Kim Wed, 13 Aug 2008 17:29:50 +0000 http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-2068 Hi - I am hiring a retired trainer to moderate a customer workshop- he is unsure of what to charge- can anyone give me some advice on what to pay him? I want to be fair. Thanks! Hi - I am hiring a retired trainer to moderate a customer workshop- he is unsure of what to charge- can anyone give me some advice on what to pay him? I want to be fair.
Thanks!

]]> By: steve http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-866 steve Mon, 08 Oct 2007 22:58:17 +0000 http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-866 Very thought provoking Robbin! From the position of a buyer, I would argue that the main focus should be on the deliverable. Here is what I want done, do it by then. Tom's comment that there weren't enough hours at the office strikes me as ... odd. I'd expect a minimal contact/hour at the office. Spending time at the office? That eats into my time, do enough of that and I could have done it myself!!! In the engagements we have of this nature, it is very much fixed price - and priced (higher) accordingly. If they can do a $50K project in 3 days? Good for them - we're buying results, not speed. However, I myself am on an hourly rate. I won't disagree with the generalisation by Tom that hourly rates promotes inefficiencies, but I *personally* regard that as a ... challenge to do stuff so well, that they want me to hang around for more. Well I'm in my 6th year here so I must be doing something right. :-D Hourly works well (IMHO) when you expect lots of curve balls - eg plumbers on call out. When it's more get in, do something, get out: a fixed price can be better. Perhaps a fixed price plus options to extend into hourly rates if the goal posts shuffle around? Similar to what Jacques seems to be suggesting? Cheers! - Steve Very thought provoking Robbin!
From the position of a buyer, I would argue that the main focus should be on the deliverable. Here is what I want done, do it by then. Tom’s comment that there weren’t enough hours at the office strikes me as … odd. I’d expect a minimal contact/hour at the office. Spending time at the office? That eats into my time, do enough of that and I could have done it myself!!!
In the engagements we have of this nature, it is very much fixed price - and priced (higher) accordingly. If they can do a $50K project in 3 days? Good for them - we’re buying results, not speed.

However, I myself am on an hourly rate. I won’t disagree with the generalisation by Tom that hourly rates promotes inefficiencies, but I *personally* regard that as a … challenge to do stuff so well, that they want me to hang around for more. Well I’m in my 6th year here so I must be doing something right. :-D

Hourly works well (IMHO) when you expect lots of curve balls - eg plumbers on call out. When it’s more get in, do something, get out: a fixed price can be better. Perhaps a fixed price plus options to extend into hourly rates if the goal posts shuffle around? Similar to what Jacques seems to be suggesting?

Cheers!
- Steve

]]> By: Tom "Bald Dog" Varjan http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-859 Tom "Bald Dog" Varjan Sun, 07 Oct 2007 13:47:25 +0000 http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-859 I believe in charging for perceived value. That actually bears a relationship to the client. Clients know they get what they pay for. I've never seen any correlation between value and time. Besides, clients don't buy time. They have business problems to solve. And time-based pricing promotes incompetency and ineffectiveness, while punishing greatness and proficiency: The more effectively I help you to get back on your feet, the less I get paid. I guess now we know why many lawyers love stretching out their engagements. Applying customised intellectual property (a.k.a. consulting) is not a linear process. But the problem is that for many people consulting means contract labour. I noticed this misconception even when I was working on my CMC in Canada. The instructor (MBA) kept emphasising that we get paid for the manual labour we perform FOR the client. And that clients use consultants to get the kind of work done which for which they have neither time nor inclination to do in-house. In Bill Kaine 's cartoon strip, Family Circus there is a little boy holding his homework out to his mother. She looks at him, a bit annoyed, and says, “You misunderstand. I’m a homework consultant, not a homework subcontractor.” That is, she can help him to do the homework, but she won’t do it FOR him. We just have to be very specific with value pricing because most clients are still trapped in the "hourly" paradigm. A few years ago a client withheld part of my fees because I didn't spend enough time in the office although we achieved the objectives the engagement called for. I showed him the contract that it included no time, only objectives. And he said the time part of obvious so it wasn't necessary to specify. No I specify that the contract and the payment are NOT subject to number of working hours. Well, life is a learning curve. I believe in charging for perceived value. That actually bears a relationship to the client. Clients know they get what they pay for. I’ve never seen any correlation between value and time. Besides, clients don’t buy time. They have business problems to solve.

And time-based pricing promotes incompetency and ineffectiveness, while punishing greatness and proficiency: The more effectively I help you to get back on your feet, the less I get paid. I guess now we know why many lawyers love stretching out their engagements.

Applying customised intellectual property (a.k.a. consulting) is not a linear process.

But the problem is that for many people consulting means contract labour. I noticed this misconception even when I was working on my CMC in Canada. The instructor (MBA) kept emphasising that we get paid for the manual labour we perform FOR the client. And that clients use consultants to get the kind of work done which for which they have neither time nor inclination to do in-house.

In Bill Kaine ’s cartoon strip, Family Circus there is a little boy holding his homework out to his mother. She looks at him, a bit annoyed, and says, “You misunderstand. I’m a homework consultant, not a homework subcontractor.” That is, she can help him to do the homework, but she won’t do it FOR him.

We just have to be very specific with value pricing because most clients are still trapped in the “hourly” paradigm. A few years ago a client withheld part of my fees because I didn’t spend enough time in the office although we achieved the objectives the engagement called for. I showed him the contract that it included no time, only objectives. And he said the time part of obvious so it wasn’t necessary to specify. No I specify that the contract and the payment are NOT subject to number of working hours.

Well, life is a learning curve.

]]> By: Robbin http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-854 Robbin Sat, 06 Oct 2007 17:23:18 +0000 http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-854 This is so interesting, Jacques. So do you say, "This is 10 days of work" and then when you keep your own accounting, you do it in hours (because sometimes you are only working on a client for one hour in a day, and you have to keep track of that) and then you bill them for 10 days work when it all is done. Or do you bill them for 11.5 if you spend 11.5? so is it daily with a guesstimate or fixed price? And is the beauty that you put it in daily format instead of hourly, so that they don't feel like every hour is accounted for? (this is the part that might be so cool, because then you don't seem to have the granularity and visibility of hours) and if you work for someone for 8 hours, do you consider that a day? Or is 10 hours a day? If you work for one person for 5 hours and another person for 5 hours on the same day, do they each get charged for half a day? This is so interesting, Jacques. So do you say, “This is 10 days of work” and then when you keep your own accounting, you do it in hours (because sometimes you are only working on a client for one hour in a day, and you have to keep track of that) and then you bill them for 10 days work when it all is done. Or do you bill them for 11.5 if you spend 11.5? so is it daily with a guesstimate or fixed price?

And is the beauty that you put it in daily format instead of hourly, so that they don’t feel like every hour is accounted for? (this is the part that might be so cool, because then you don’t seem to have the granularity and visibility of hours) and if you work for someone for 8 hours, do you consider that a day? Or is 10 hours a day? If you work for one person for 5 hours and another person for 5 hours on the same day, do they each get charged for half a day?

]]> By: Jacques Warren http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-853 Jacques Warren Sat, 06 Oct 2007 16:31:32 +0000 http://www.lunametrics.com/blog/2007/10/06/wa-consulting-fixed-price-or-hourly/#comment-853 Hi Robbin, In my case, I have practised the daily fee for years (even at Bell Canada). I give my clients an estimate of the job in day terms, and they can pay less or more depending on what is discovered along the way. I also include T&E in my fees most of the time. This model has been working very well; never heard a complaint nor had a bill challenged in more than 80 egagements. Hi Robbin,

In my case, I have practised the daily fee for years (even at Bell Canada). I give my clients an estimate of the job in day terms, and they can pay less or more depending on what is discovered along the way. I also include T&E in my fees most of the time.

This model has been working very well; never heard a complaint nor had a bill challenged in more than 80 egagements.

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