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This may be a surprising episode title for you considering everything you hear me talk about in regards to hourly billing, sucks!
Yet there are times when hourly billing is good and I wanted to share the other side of the coin from yesterday’s show titled, Why hourly billing is bad? with you today.
Quick / One-off task
If you are a designer or developer and have bandwidth or time in your schedule where someone presents you with an opportunity to do some quick task. Something you know you can bang out in a few hours, or maybe have even done it in the past for a previous client.
Or if you are a developer and another developer needs you to write some code. Or a designer and another designer asks you to design some simple elements.
Hourly billing may be an option for you.
To be honest, this is even a stretch, because I would argue that you would know what the outcome is and be able to put a price on it.
However if it truly is something that only takes an hour or 2 and both you and the client know that, it’s going to be hard to say “$1000 for that Facebook share image.”
You are terrible at estimates / Inexperienced
I get it, I’m a realist and if you are just starting out, your estimates are going to suck. You won’t know what you don’t know until you get into it.
Which means, you may have to take on hourly work at the very beginning by way of sub-contract work or just because you can’t define how long it will take for the scope of work.
What I would suggest though is that when you do take on the hourly work, track any and all time on the project. Be as detailed as you can so that you learn and get better at estimating and scoping out work.
Expanding services
As you grow your business, you’ll want to expand your services. Sometimes this means expanding into areas of unfamiliar territory.
Depending on what sort of services and market you are expanding into, your research may tell you that there’s a certain expected price. Especially as you are trying to break into that market, you’ll want to pay close attention to your own cost, as much as the client’s.
Therefore you may have to charge an hourly rate to the client just so that you get a better understanding of the value of your service to the client and cost to you.
Please note here that expansion of services doesn’t mean that this is the majority of your business. Chances are that if you are a solo shop, you’ll expand with one or two clients in this new market at any given time.
It should be in a very controlled environment. This is a part of business development and should be closely monitored to see if it’s a viable option for you and your business.
To wrap up
You’ve heard me before say that I’m a realist. If someone told the young Jason to start value pricing, I wouldn’t even know where to start. Back then I just needed to get some clients in the door and the easiest way was to set an hourly rate and go with it.
As I said though in yesterday’s show, I put myself into the feast or famine cycle as soon as I did that. Twice in fact, one resulting in me having to go back and sit at someone else’s desk for a few years.
Hourly billing should be thought of as either supplemental or experimental income for your business.
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👉 For full show notes to this episode & more resources for you.
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I want to start off by stating, if you having yet read Hourly Billing is Nuts by Jonathan Stark go ahead and get it and read it!
Hourly billing puts the 2 parties in the service agreement at odds. The financial incentives are misaligned from the start. From your perspective you want to take as long as possible so you get paid as much as you can and your client wants you to finish as quickly as possible to keep the costs down.
This puts the goal, the motivation of the project, regardless of what that project is, on the number of hours to completion. Not on the business objective of that project.
There’s a laundry list of reasons why hourly billing is bad. So I don’t want this to become a two hour long podcast of me spouting out a list.
What I’d like to focus on are 3 reasons.
Clients prefer fixed price (certainty) vs hourly billing (uncertainty)
You are doing client service work and you can’t have your motivations different from your clients. “Serve first”, “Help”, “Put your customers first” are all things that you hear and see as inspirational and motivation phrases because of the archaic hourly billing model.
Clients want the lowest risk possible when hiring someone. They want to know exactly what they are getting and for how much. This means, understanding when the outcomes and deliverables will happen within that cost.
Clients will always invest in something that they can see the positive ROI.
The reason clients want the hourly rate as low as possible is because they (along with the freelancer) don’t exactly know how long it will be until the outcome is realized.
Businesses want certainty and in an uncertain world, the only way to limit risk is to have the investment as low as possible.
It’s your job to provide an outcome, a deliverable that’s the solution to your clients’ problems. If you know what that outcome is and have a proven track record for that outcome, you should be able to put a price on it.
When you focus on the goals, the outcome, rather than the time spent, you and your client are in alignment and as such there’s a value (from your client’s perspective) and price (from your perspective) that is placed on that outcome.
Get into the vicious feast or famine cycle
It’s the quickest way to become a commodity. If you feel like you are on a hamster wheel, then I’d be willing to bet you are billing hourly.
You started freelancing because you wanted to travel or spend time with your family. Yet, those things seem so far removed now because if you take your eyeballs off the screen, your income stops.
You can’t even schedule or book ahead either because you aren’t completely sure of when your current project will end.
The feast or famine cycle is a real thing and the reason why so many freelancers fall into it is because they start with hourly billing. It’s easy math to do and it’s something that they are asked for right from the start.
You are looked at as labor and a pair of hands on a keyboard once you answer that question with an hourly rate. Your clients will always tell you how to do your job.
Because of that you’ll be held down not just from your competitors, but also by your clients, and yourself.
You limit your growth
If your main source of income is hourly billing, then it is arguably, a lack of professionalism on your part.
You can’t prepare or predict when that next payment will come in if you don’t know when your current project will end.
If you don’t know when your current project will end, then you aren’t sure of what the outcome or goal of that project is.
Is that being a professional?
There are only so many hours in the day and that’s the most you can bill.
There is only so high of a rate you can charge for the work you do too.
It’s extremely hard to build in profits when there’s a ceiling placed on them.
If you have started freelancing with the idea of not having a restriction on your income and then charge hourly, let me save you some time and I’d suggest that you need to stay working your full-time job. Maybe freelancing isn’t for you.
The idea of hourly billing at its very core puts a restriction on income and scale.
I’m going to quote Jonathan on this “You need to sell your head, not your hands. Your expertise, not your labor. Outcomes, not activities. Benefits, not deliverables.”
You didn’t start freelancing because you wanted to work more, right? So why are you charing hourly?
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The short answer to this question is that I don’t, their business does.
A mantra that I’ve always lived by for my business is “Let the business drive the technology, not the other way around.”
The simple truth is that technology changes much faster than a business can. So if the technology were to go away tomorrow, would the business still be viable and run or would it be out of business?
Last week YouTube went down and the internet lost it’s mind! There are a great deal of people who build their business on YouTube. And if you don’t listen to those smarter YouTubers like Roberto Blake, Sunny Lenarduzzi, and Amy Landino who always talk about building a business on YouTube, but then say that it’s an absolute must to get customers onto your mailing list. It’s for that exact reason.
To answer today’s question though, you want to listen to your client extremely closely and objectively.
Be overly objective
My wheelhouse is WooCommerce, Subscriptions for WooCommerce, Drip, and ConvertKit. That is the technology that I work with and on for clients.
If I hear from my clients that they need a different ecommerce platform such as Shopify. Or an email marketing platform such as Mailchimp, then I don’t hesitate to share that with them.
There is any number of reasons why technology may fit or not fit for someone. Price, features, existing knowledge, existing business software, and timeline.
As a professional, you will want to give your clients the expertise that you have in order to provide them with the best possible solution, even if it isn’t your own.
If you don’t, you and your client will find out later in a much more painful way. If you don’t like having hard conversations then best to over-communicate early on.
Listen closely
Not every client project is a fit for you. What happens when you take on projects that are not is that your profits and time go right out the window.
What I mean by this is that if you provide a solution that your client is looking for and you shoehorn the technology that you know into it, there will be a high likelihood that further down the road your client will ask for something that the technology may not do, or do well.
When describing the requirements for the project, your client is coming from their perspective and knowledge of what they need.
That knowledge comes from their experience with the problem so far. There is no way that you’ll know every detail of the problem within a 30 or 60-minute conversation.
Rest assured though, you’ll find out the hard way when it arises.
It’s hard for me to cite exactly what to watch and listen for here. Every case is different. However keep in mind the phrase “If it walks like a duck, quacks like a duck, then it’s a duck.”
If you’ve got some gut feeling or the dots connect to form a specific technology that fits perfect, then that’s the answer. Don’t try and make shoehorn the business into some other piece of technology.
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First, I want to thank Justin Jackson for the mention on Build Your SaaS podcast.
Second, an episode of Build Your SaaS is part inspiration for this episode in fact. Couple that with a couple of conversations I had in a forum last week is where this question comes from.
Since they are two sides of the same coin, I thought that I’d share some thoughts around it.
How long does it take to become successful
So inside the forum thread was a person who was curious how long it takes to become successful in freelancing. Which obviously varies from person to person and business to business. Some may never get there in fact.
I responded to the question with another question “What does success mean to you?” And whatever that meant is what will dictate how long it could take.
Then in another thread we were taking about specific sales strategies and why it works and doesn’t work for similar businesses. It went on for quite a number of back and forth posts.
What came of the conversation was a needed level of patience and trial and error. In marketing and sales, you do things that you can get results quickly on and other things that take time. For example, Ads are quick, whereas Content Marketing is long term.
This particular strategy fell more on the side of longer term but this person wanted a quick win. So in this person’s eyes, the sales strategy didn’t work because not enough time was given.
What does success mean to you?
Before I dive into the answer to today’s question, I want to share with you what Justin and Jon unpack in their podcast episode. Justin has been championing a bootstrappers mindset campaign recently. Where the idea is that business is hard and everyone’s journey is different.
What they talk about in this episode is how MailChimp took 6 years to hit 10,000 users. That’s the point at which the owners became full-time to MailChimp instead of running their consultancy firm.
The flip side to this was that DHH said in a comment thread that Justin had been a part of “If it takes 5 years to get to the point where the business can pay two salaries, it’s possible that the business isn’t destined for that long-term.”
Which is interesting and fair to say. But everyone’s journey is different. Everyone’s situation is different. There’s no formulaic answer to this question.
I’ve been working on my business full-time since 2010, so that’s 8 years. I’m in it for the long-haul. In business, if you are freelancing, chances are that your goals are some sort of lifestyle goals.
You aren’t looking to exit, you aren’t looking to get acquired. You should have the mindset for the long term.
What do these numbers actually represent?
People throw around outrageous numbers that are 6, 7, 8 figures like it’s as easy to get as stepping outside you front door to get the mail.
I want to share with you some comparisons to put context around these numbers.
2 phrases come to mind here.
“Patience is a virtue.” and “Rome wasn’t built in a day.”
The advent of the internet has made it super easy to shout from the hilltops. When folks are shouting, they want to be heard. So the larger, more astronomical that number and the shortest amount of time to that number is what’s heard most and seems attainable. Where they are really the 1% cases.
Point to keep in mind that success in business is all based you and your actions of today to move the needle of the business. It’s what you do today that you control. You don’t control the person who has to put their hand in their pocket, take out their wallet and pay you.
Ryan Carson said to me on [Live In The Feast](https://rezzz.com/podcast/ryan-carson-on-relationships-motivation-and-mastering-sales/), that it’s the discipline of the day-to-day mundane tasks that you need to learn to love in order to realize your long-term goals.
There’s no such thing in business as a quick win. Especially in the freelance world. If you aren’t in it for the long-haul, then maybe freelancing isn’t for you.
If you are in it for the long haul, then do things today to move the needle of the business. Do what you can control, keep in mind your goals and your journey are your own and no one else’s. If you want those big numbers, you need to do the work to get them. It won’t be overnight.
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How do I know David Shriner-Cahn?
David Shriner-Cahn is the founder of Tend Strategic Partners and co-founder of the BestNetwork, which guides expertise-driven business owners to build recurring revenue.
David and I know each other from the NY entrepreneurial space. We met a few years ago in an online community called Youpreneur. Then we continued to keep in touch, meet up and continue spreading the word for building sustainable businesses.
David invited me on his podcast since we are both NYers and share in our love for podcasts. No I’m kidding (sorta), but he did invite me on because I’ve been doing client services work for so long and thought that I could bring value to his audience.
In this episode, I had a chance to talk about the following:
How to stop the feast or famine cycle
In case you don’t want to read the rest of this, you can check out the full episode for all the details.
In the episode, I shared a variety of things including:
Specifically I talk about building recurring revenue and how you can dive into the heart of any project or business owner and figure out what is most important to them.
Then once you understand what that is, how to work backwards and start to filter for that throughout all aspects of your sales process, starting with your project brief.
The main takeaways from this show are:
Definitely go check it out.
If you have a chance too, check out a few of the other episodes as well.
I’d like to thank David for being a part of it and included along amazing folks like Jessica Yarbrough, Gabriel Neuman, and Ben Walker
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What is a CRM?
A customer relationship management tool keeps all your contacts and the relationships with that contact in place.
This is used for managing customers, leads, colleagues, network contacts and so forth.
For a long time I didn’t use one, because I basically used my email inbox to manage my contacts. But that quickly became cumbersome and not ideal especially the more mature my business became.
I then shifted from my inbox to my email marketing provider, Drip, to manage my contacts through tagging and segmentation.
But then I had to switch from that as well.
Focus on the contact
The reason I had to switch was really based on the need to keep in touch with a single contact.
Drip and even my inbox was easy enough for leads and clients, but not for my colleagues and those that I wanted to be sure to keep in touch with over the year.
Due to the fact that my relationship with leads and clients are mostly a linear relationship, but colleagues and other contacts can become complex and evolve, I needed a system that is flexible enough to evolve with those relationships.
I use Pipedrive as my CRM.
Growing relationships
It allows for the growth of the relationships of leads and customers.
You’ve heard me so many times talk about the sales process and buyer’s journey on this podcast. Having a proper CRM allows for you to nurture the individual through each of the stages of the process.
By keeping tracking of emails, calls, and even in some cases social media posts, a CRM tool will retain all the information of that relationship you have without you having to keep those things in mind.
Opportunities
A CRM allows you to be to identify opportunities for your business and your clients as well.
What I mean by this is you can see a certain pattern of questions, objections, or reasons why a lead doesn’t sign on the dotted line. Performing a report on these can spark ideas and even opportunities for you that you wouldn’t have otherwise seen.
Pipedrive’s core is activity based selling. Which means that deals and contacts alike are all based around activities. When you create an email with a client, Pipedrive will then prompt you for the next activity and when.
At that point, you don’t have to worry remembering what that is until it’s that time again. It removes the clutter in your head.
Helps you with your numbers
Numbers don’t lie. Your cashflow is key to your business and if you don’t know how many people you need to talk to today in order to hit your revenue goals for the quarter or year, you’ll no doubt be reactionary and looking at lagging indicators of your business which is no way to run a successful business.
Pipedrive is so customizable, that you can set up the stages of your sales process and put goals on each of them. Then you can see how many deals come through to each stage and get that conversion rate for the next stage.
These conversion rates give you a much more precise insight into your business and an understanding of what you need to do to reach those revenue goals and profits.
I highly recommend you start using a CRM, whether it’s a spreadsheet and you move contacts around in cells or a proper CRM like Pipedrive.
By the way, this link above is an affiliate link, which means that I earn a commission if you do end up purchasing this product. It’s at no extra cost to you, and please if you have any questions related to this product, please let me know and I’d be happy to answer them for you.
If you’d like a quick demo about how this product can help you and share what it’s like, click here for a demo on YouTube.
As Chris Ducker, founder of Youprenuer and 2-time best selling author says “Business is about the P-2-P relationships; the people to people relationships you build.”
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In A152 - How do you do a review of your week? I talk about how important my weekly reviews are. It’s actually quite scary how my wife can tell Sunday afternoons how distracted or off my game I am if I haven’t done my review that morning.
Can I be completely candid with you right now? This is a funny question to me because about 2 weeks ago…talking with a friend…when I start looking…I’m just distracting myself.
I’m going to share with you X strategies to have a productive week, without question, but you need to really figure out what works best for you. The tools, strategies, methods that make me productive may not be right for you and that’s ok. Just like maybe you are a night person and I’m a morning person. It’s just how we are wired.
So let’s dive in.
Plan ahead
You need to plan your week before it starts. Whether that means you take Friday afternoon before you shut down for the weekend or are like me and plan on Sunday, you have to hit the ground running Monday morning knowing what you are working on.
Not planning ahead already sets you up for a slow start to the week.
Use a calendar and put the important stuff on it first
There’s only so much time in a day. So the very first thing you is to use a calendar. Post-its are great for ideas and thoughts, not for time based planning.
Use your calendar as a constraint and for accountability.
Put all the important things like date night, workouts, Dr appointments, vacations, time with the family down on the week first. If it’s not already on there.
Next put your marketing and sales activities on your calendar. This is the [blood of your business](A165) and needs to be something you prioritize doing in each and every week.
Use booking application
You are having sales calls, client calls, and networking calls with friends and colleagues. They all take a different type of energy level to do and different amount of time as well.
By using a tool like [Calendly](https://calendly.com) or Acuity(https://acquity.com) it allows you to create events based around your calendar and the availability you set within the application.
Then you get a link to send off where the other person can pick a time slot that works best for them based around what you have available.
Theme your days
Whether it’s a full day dedicated to a piece of your business or a part of your day, I’ll leave that to you.
But make sure that if Monday is meant for Client A and Tuesday is meant for sales and marketing and Wednesday is Client B and Thursday is content and so on, keep to that.
Switching around is scientifically proven to be a detriment to productivity. If you can batch a single bunch of hours to a specific activity, your brain will easily move through those tasks.
When I started out, I allowed calls and emails to run my week. I would take calls instead of scheduling and have my email open all day. I found myself consistently behind the 8-ball on projects and things like the business were always pushed aside.
That put me right into the feast or famine cycle. When I started guarding my time, prioritizing what is important, figuring out how to do that, and then just going ahead to do it, my stress levels and anxiety began to wane.
Peace of mind for myself and my clients became a reality.
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The funny thing about marketing is that when something works for your business, you want to know what’s the next thing you should try.
In the book Traction by Gabriel Weinberg and Justin Mares, which is a book written for startups who want to grow and build a customer base. It dives into 19 or so different channels to do this.
At the heart of the book though is traction. It’s not a book that tells you to try all the 19 different marketing channels. It’s a book that tells you to completely exhaust the one channel that’s working for you. To the point at which you start to almost see a decline.
Yes, this book is mainly designed and written for startup Saas companies, but much of the methods and strategies can be used for consultants as well.
Why WOM is bad
I know right now that 50+% of your new business and sales comes by way of word-of-mouth. And you are no doubt falling victim to the thoughts and pressures that your marketing is based off of someone else’s words.
Perfectly understandable and definitely something to consider.
Instead of thinking about diving head first into ads, or social, or some other form of marketing, have you thought about why 50+% of your business is word-of-mouth?
Maybe it’s due to:
To be honest with you, it’s probably a combination of several things.
Can I share with you what the reason for why word-of-mouth is such a big portion of my business?
It’s because I make the technical aspects of what I do easy to digest and understand.
I know this because I asked. I asked clients what they liked and I asked those that were referred to me what was it that they heard about me.
Why WOM is great
People are 4x more likely to buywhen referred by friends.
Word-of-mouth generates 2x more sales than paid ads.
Think about your own buying habits. Do you look at reviews? Do you ask your friends and family for recommendations? Or do you eagerly wait for those 2:20 breaks in between your favorite tv shows?
If word-of-mouth is 50% of your business today, and your best customers are coming out of those referrals, then I ask, how much effort are you putting into word-of-mouth marketing?
My guess is the bare minimum.
Here are 7 things you should be putting into your marketing right now to help promote yourself by allowing your existing and past clients to refer you.
1. Ask for referrals during and after your project. Every milestone you have with clients, you should be asking your clients if there’s someone that they know that has a similar problem that you just solved because it was awesome working together to resolve it.
2. Ask for reviews.
3. Create a referral program. These are easy to do nowadays with services like Rewardful and AffiliateWP.
4. Create an incentive
5. Create a podcast and invite your industry leaders, influencers, and other individuals with strong ties to the market on your show.
6. Create a memorable experience for your clients and customers.
7. Share your reviews, testimonials, and other nice things that folks say about you on your website, social platforms, and even in your email signature.
If you are doing all these things, then awesome. Well done. Move on and test the next channel, as the guys in Traction suggest. But if not, why not double down on what’s working for you now, dominate all that so that the word-of-mouth stops becoming happenstance and becomes predictable.
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This is something that I’m sure you’ve asked before, right?
I’m going to share with you 4 strategies and biggest tip on this but I want to ask you to be open to hearing me out for the next few minutes here
It all starts with your mindset. The reason you ask this is because you are stuck in hamster wheel that is the feast or famine cycle.
Clients are the blood of your business, yes, but you are the brain of the business and need to control it so that the success of it is driven by the actions you do.
You may be working on projects that are one-off and not recurring based and that’s ok. But often times when you ask this, you haven’t put in the effort, the time to properly set yourself up for consistent work.
Prioritize the money
This includes dedicated sales and marketing time on your calendar every single week. When I first start, I blocked out time every single Tuesday between 7 PM and 8 PM to do lead generation. Now I dedicate mornings to sales activities. Things like writing emails, performing outreach, and even having sales calls.
The consistent work you do for sales means that you will always have a pipeline of leads and clients coming into your business.
Guard your time
Another reason you ask this is that you aren’t protecting yourself and your business. Chances are good that are reacting to your clients instead of making your time a priority. What I mean by this are things like:
I get that you have a client services business, and these things happen from time to time, but they can’t be the norm.
A client thinks about their business and you should think about yours. You hopefully have multiple clients and you have your own business to run as well.
If you react, rather than plan ahead for client requests, you’ll be continually chasing down requests. Dedicate a day of the week or multiple days if needed, where your focus is on a specific client. Share that with them if you have to.
You’ll be surprised how receptive they will be when you tell them that you’ll look at this on Wednesday when you are working on their project.
Talking with your clients increases your value
This leads me to the next thought and that it create boundaries and expectations. This may surprise you, but clients often will see the communication as a value. Simply by sharing with them your plan for the week when it comes to their work or sharing with them an inside look at the very beginning of working together how it will be goes a long way in creating a sense of a higher value for your services.
It shows a level of professionalism that they don’t get from someone else. Communication is what business owners want more than anything else. If you have clients asking you a status on something, then start re-thinking about how you are communicating with them.
Raise your rates
And finally my biggest tip when it comes to this that you are more likely undercharging what your worth.
If you land a project and halfway through that project you are already looking to get that next sale because you need the money, then something is wrong somewhere.
Either your expenses are too high, or that you aren’t charging enough for the time and experience you are putting into the project.
If you are asking for 50% up front and then find yourself eating ramen three-quarters of the way through the project, then you haven’t charged enough. That 50% should last you through the entirety of the project, so that the final payment is profit in your business.
Building profit in your business is a must. That profit should be re-invested in your business as a tool for growth and opportunity. Having a buffer, or profits, in your business allows you breathing room so there isn’t a need to constant need to always get that next project.
If you have a pipeline of leads in your business, the profits will allow you to make sure that you are only taking on clients that are right for you and the business. You don’t want to see red flags and still take on those projects anyway.
That’s the surefire way to get stuck in the feast or famine cycle, I promise you.
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Lee Jackson is the founder of Agency Trailblazer. He helps agency owners fall back in love with their agency with his amazing community, workshops, and masterminds.
Lee and I are 2 sides of the same coin. Lee works with agency owners where I work mostly with solo business owners.
Lee and I had been bumping into each other around the web in various different groups and thought that we’d come together and dive into a few rabbit holes on a podcast together. See we both seem to have this uncanny ability to de-rail serious conversations.
When you listen to this show, you’ll hear us talk about NY accents, Jarvis from Iron Man and how that will work itself into web development in the future, how Lee got played from a fellow colleague, Phil Collins, and us being rappers.
Yes, the show gets quite off the rails, especially at the end. Yet, in the midst of all the tomfoolery, we unpack quite a bit of value for agencies and freelancers alike.o
Lee invited me onto his show and I invited him onto Live In The Feast and we had a number of jokes and laughs among all the amazing chat.
In this episode, I had a chance to talk about the following:
How to create memorable moments
In case you don’t want to read the rest of this, you can check out the full episode for all the details.
In the episode, I had a chance to talk about a variety of things including:
Specifically, I talk about how to create milestones with clients and then when they are reached, make them memorable with your clients.
When I say celebrate, I don’t mean just send off an email. I mean create a memorable moment in the mind of your client.
The main takeaways from this show are:
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