February 19, 2021

Hourly Billing Sucks at Determining Value

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Let’s pretend you are hiring someone to create a brochure for you. You get hourly rates for two workers. One is a college student charging $35/hr, and the other is an experienced professional who charges $75/hr. Because it sounds cheaper, you pick the college student.

After a few rounds of back and forth, you get the product – and the final bill. The college student says they took 15 hours to create the brochure and charge you $525. Meanwhile, in an alternate universe, you hired the professional, and they deliver you the flyer and a bill for 6 hours of work, or $450. Because of their experience, they get the job done more efficiently – and the product may well be higher quality. Now the ‘cheaper’ college student actually costs more.

Is the brochure worth $525 or $450? Probably neither. Its value lies in its worth to your business. Will a direct-mail campaign bring in 100 sales worth $50 each? If it can generate $5,000 in revenue, it may be worth more like $1,000 – especially if buying a higher quality design by an expert at designing for sales will convert more recipients into customers.

By the way, in this story, the professional estimated 5 hours, and the college student thought it would take 10. Neither was right, and it cost you more because of it. Project prices take variable costs out of the equation.

If you are a client, which type of work will you hire, hourly or project? If you are a freelancer or business, how will you price? It’s worth figuring out.

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