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This question has been answered, and points have been awarded.
Billing - Additional Hours?
Posted by Anonymous on
6/21/2010 at 12:07 PM ET
One of my coworkers was interested to know about an industry standard as far as hourly billing, and I've spent some time online but haven't found an answer yet. I was wondering if anyone out there might know.
We want to know what the typical amount of hours "extra" to leave unbilled. If we've estimated about 100 hours' work for a client, for example, and instead spend 109, should we bill those nine extra hours? If not, at what point do we start to charge again? (My colleague estimates no more than 10 should go uncharged, but a client suggested 13. Any ideas?)
6/21/2010 at 12:25 PM
The answer depends on why you are going over the initial estimate. If it's because your client asks you to do more work or makes changes to requirements that causes you more work to add in or change something you have already done, then you tell the client the impact in cost, and then you present them with a new estimate with the additional work tacked on and get them to sign off on it before you put the hours in. If you are going over because you can't tell how long something will take until you get into the project, then you let the client know what part you can predict and then agree you will update that estimate before incurring an "overage." If you are going over because you are a bad estimator, then se la vie! You eat it. It doesn't bring good will to your clients if you constantly bill more than the estimates. After a while, they think you are estimating low to get the job and then when they are "hooked," you give them the right cost. Think about it: If you have someone repairing your house and the guy says it will cost $7500 and you get the bill and it's $8250 instead, how are you going to react? Another thing - how much are you going to give back if you estimate 100 hours and it takes you less? 10 hours? 15 hours? If you do, good for you! If not, how's this fair?
Better yet, stay AWAY from hourly pricing! The hourly price has a negative psychological impact because I'm sure you charge $75 per hour or more. Traditional generation and some Baby Boomers will compare that to their thinking that $25 an hour is a lot. Charge based on the job. You can think in your own mind that you need $75 per hour and the job should take 100 hours, but give your client a cost of $7500. You may itemize it, if you think you need to - $500 for this, $2000 for that, $1800 for this, $1000 for that, $1200 for this, $300 for that, $700 for this. But don't talk about the time and don't report your time. This way if it takes you less time, you bid a fixed price, you get the rewards. Or if you're over your estimate, oh, well, learn from it and do better next time.
I hope this helps.
6/21/2010 at 12:53 PM
Wayde's point is right on. I can't think of one good reason to base your billing on how much time it takes you ... and I can think of several reasons not to.
Billing by the hour sets up a situation where you have an incentive to be inefficient and to take too long to complete the job. The client won't want to spend much time briefing you or providing feedback (because every minute she spends with you is costing her money), and if you're really efficient and do a great job quickly you get punished (with a lower fee).
And what business is it of the client's how much money you make per hour? What the client wants is a result, not a peek at your checkbook.
6/21/2010 at 1:08 PM
Much depends on how you bid the project - hourly, with an estimated number of billable hours stated in your quote to the client, or hourly with a fixed number of hours stated in your quote, or a fixed price with no hours stated in your quote.
If 1, you should be able to bill for the additional 9 hours since hour original quote was only an estimate. (Next time include a range of hours to be safe.). If 2, you eat the 9 hours. If 3, your also eat the 9 hours.
Whether dollars or hours, the smartest way to bid is to quote a range, and, if your client sits still for it, include a sentence in the agreement you both sign stating that the final cost may exceed that estimate, but by no more than 10%.
Hope that helps.
6/21/2010 at 2:38 PM
For the most part, our clients dislike surprises more than poor estimating.
Our policy is to provide an estimate number or range but base those numbers on our experience with a particular client and expected hours. We explain that our estimates may run high, but guarantee not to go over unless out-of-scope work is ordered, or revisions are made to already approved work. Before we are going to exceed an estimate, we alert the client as to why and how much.
If the job is completed for less than estimate (which is typical) then it is billed for the lesser amount. If more than estimate, and not the fault of the client, we eat the overage, and earn more experience.
SELMARQ Brands' Best Friend®
6/22/2010 at 8:58 AM
As others have said- the reason is why. If your answer is you simply didn't understand how long something will take-- expect the client to bark.
If you document it with work done beyond scope of original project-- they can see the reason why. But you should be advising all along this project is taking an unexpected turn and will probably effect the invoice.
As far as the difference between 10 and 13 hours-- kind of splitting hairs isn't it. And as far as the initial estimate -- learn from this and underestimate and over deliver.
6/24/2010 at 3:44 AM
I support the bulk estimate/quotation on a bid. In addition to Wayde's (very valid) points I would prefer to think about the market value of our offering (with a managerial eye kept on costs). We are marketers after all - when did we ever agree that bottom-up pricing is a good idea for anything?!
As a matter of interest, years ago I was charged overs on a design job where it had not been made clear and I felt it was unfair. I did pay - but I never used that agency again.
7/4/2010 at 11:48 AM
I am closing this question since there has been no activity in 10 days.
Thanks for participating!
Carrie (Production Editor)
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