I have an increasing number of clients for my business consultancy (focused on nonprofit fundraising). As much as I was hoping to develop some economies of scale by securing several clients with the same needs, they all seem to be very different ... and require varying degrees of hours, energy, investment, etc I am struggling with how to best structure my billing in a way that is most appealing to prospects and also the most profitable (and easiest to manage) for me. I have a somewhat visceral reaction to the idea of tracking hours and billing based on time ... my natural inclination is to bill by the project. But this has bitten me in the backside a few times due to scope creep (and my natural tendency to take on too much, as if I were an interim staff member). I recently met a consultant who bills by the week; she focuses full-time on one client's project for a week at a time and bills them accordingly. This sounded appealing, but is untenable for me since I have multiple conflicts (i.e. I teach at a local high school three days per week and also have some standing meetings for other clients, so I can't dedicate a full-time schedule to any client). But I've been wondering if I could bill by the week and just tell the client it's a batch of about 4-5 hours per day? What have you seen to be a good model?Bidding based on projects (my current approach)? Daily or weekly rates? Or should I just grow up and bill by the hour -- and if so, how do you keep the client from feeling afraid of the running clock (or feeling nickel-and-dimed for every time they email or call you)?

I've been a consultant, both independently and through two of the "Big 5" consulting firms, for the majority of my career.

I've recently discovered that I have a serious aversion to time-based billing, that's been buried deep down in my subconscious for a while. Because of this discovery, I've been trying hard to break the direct bond between hours worked and income generated.

The concept of value-based billing can be very appealing in this regard. The co-founder and CEO of FreshBooks, Mike McDerment, wrote a pretty interesting and entertaining eBook on the subject, called Breaking the Time Barrier -

It's worth a quick read, if for no other reason than to experience a different way of thinking when it comes to billing for services.

Here are some of the stumbling blocks I've experienced, when trying to put value-based billing into practice -

1 - Finding the clients who are willing to take the time to hear you out on the approach

2 - Finding the clients who can appreciate the approach, however if you get through #1, #2 seems to be a bit easier, since their minds are already open enough to consider it

3 - Waiting out the time it takes to find and educate the "right" clients, as Mike describes them in the book, when you have bills to pay :)

I do feel that value-based billing makes a lot of sense for both the client and the service provider.

One thing that value-based billing does well is resolve the paradox between the client's goal of having a project delivered at a reasonable price and the service provider's goal of generating revenue, which, by nature, are somewhat at odds from the outset, since the client usually wants to pay for the fewest # of hours possible (whether they admit that or not, that's another story), while the service provider wants to put the time in it takes to get the job done right.

Answered 6 years ago

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