If you’re involved in projects that deliver something to a client, hourly billing may be causing everyone more harm than good.
Let’s demonstrate this with a story about Picasso.
One day Picasso was having a nice meal in a Paris cafe when a fan approached him. “Would you mind creating a piece for me on this napkin?”
Feeling unusually happy that day (he wasn’t known for his good mood), he agreed and got to work. Picasso emerged from his creative adventure a few minutes later with a sketch on the napkin. After handing it over, he asked for a staggering amount of money for the work.
“But… that only took you two minutes to make. Why would I ever pay you so much?”
Without missing a beat, Picasso replies, “Actually, that napkin took me a lifetime.”
If Picasso billed by the hour, he would have been punished for his own talent (unless his hourly rate was laughably high… which would have scared off any business in the first place).
Hourly billing punishes effective work.
But there’s also a hidden temptation to make money from your own mistakes.
Clients are ultimately paying for an outcome. Any time you screw up, you’re now playing a tricky game of “which hours of the mistake gets billed vs absorbed”. Though not impossible, hourly billing blurs the lines of billable work.
Hourly work encourages you to take longer on projects! More time is more money, after all.
Unfortunately, some teams don’t balance their time bill it all anyways. Not only is this immoral, but it also casts a shadow over the industry’s reputation.
Here are some alternatives:
- Agree on an overall price tag – much like buying something at a store. The client usually pays a deposit on the total to kickstart the project.
- Build a fee schedule based on deliverables or project stages. When a stage closes or a deliverable is accepted, you get paid based on that specific item.
- Bill hourly until you hit a threshold. This still punishes your effectiveness but gives the client a known total they won’t pay more than.
- Work on retainer – have the client secure your services based on an hourly rate. Works well with frequent, predictable efforts.
Most of these options only work if you have a clear project scope – what are you actually creating?
When the scope of work changes, re-negotiate the budget or consider switching to hourly billing for new items (such as additional revisions or meetings).
You still need to know your team’s hourly rate – it forms the basis of your estimates. Don’t forget to account for meetings, handoffs, reviews, and of course, profit.
Share your thoughts with me on LinkedIn – how does your team handle billing and contracts?