This post is for anyone who is considering hiring an outside design firm or consultant.
One of our most important guiding principles here at 16 Hoops for our clients is our complete avoidance of (and general distaste for) hourly pricing and "billable hours".
We brazenly vanquished hourly pricing to the hinterlands from Day One.
You might ask, "Why, 16 Hoops?! What did hourly pricing ever do to you?!"
It’s not only what it does to us--it’s what it does to you, our customer.
We believe in the concept of expertise. Expertise is the DNA of any business (including your own photography business).
Experts deeply understand the complex problems and solutions of their ideal customer. If they didn’t understand these things, they would, um, not be called experts. They would be called something else.
As design & strategy experts, they should have the knowledge to:
• look at your problem (diagnose)
• offer up a solution (prescribe)
• execute and solve the problem (apply)
• re-execute (re-apply) often and as needed as new problems arise
They are, in effect, staking their reputation on this expertly applied knowledge.
It doesn’t matter if it takes an expert 5 minutes or 500 hours to solve your problem. It’s their EXPERTISE you are paying for--not their time.
That’s what we call "skin in the game," and it manifests in Purposeful Pricing (AKA, "fixed bid" pricing)--they either solve your issue for an agreed-upon cost, or, if they are worth their salt, they work for free until they solve what they promised.
Hourly pricing, on the other end of the spectrum, is used by people who probably never even asked you detailed questions about your problem, and who can’t tell you how much it will cost to fix. They usually just start doing work, tally up those hours, and hand over the bill.
Did they even solve your problem? Did they even ask what the problem was in the first place?
(Side note here: "My website is old" is not a problem, by the way. That may be a symptom of a larger problem, like "I don't have clients anymore--help me," or "My revenue has dropped 35%," or "I want to own a new market niche," etc.
But a poorly designed, out-of-style website is NEVER the problem in and of itself. Ergo, simply building a new pretty website won't solve that underlying problem. Experts will charge you to solve the underlying problem, and one tool of many toward that goal will most likely be a new website. See the difference?)
In some cases, hourly billing allows for work to start before you have even agreed on the outcome or goal. It's equivalent to hiring a pair of hands, not an expert's brain.
Where’s the skin in that game? It’s on you. Hourly billers are asking you to take a ton of risk (is your problem solved??), while they take none (they can keep happily charging away whether your problem is solved or not).
In addition, it’s in their best interest to take longer to do the work. What is their incentive to do it faster when they are billing by the hour? It creates a conflict of interest at every turn between the designer and the customer.
It’s almost never going to be in the interest of the customer to pay by the hour.
Imagine if a real estate agent said, “Let’s just get you into the house, and then in 3-6 months, we’ll tally up the hours used and see how much this baby costs.” Crazy, right? (PS...that is kinda what happened before the 2008 recession. Let's avoid that for your business at all costs! Step one: Stop tweaking your website with no goal in mind!).
Hourly pricing should be exiled to the hinterlands, right??
Instead of asking "What is your rate?", ask this question
The question should never be, “What is your rate?” It should always be, “I have a problem, or I need to improve my business. How much will it cost to solve my problem, and what is my return on investment?"
See the difference?
There should be a major discovery session before any work begins or any costs are offered up (always costs, NEVER estimates). Experts know what questions to ask.
Experts usually charge what initially looks like more. But in the end, they actually solve your problem. The hourly guy could still be charging away, sometimes years later, and while you may have some pretty design elements complete, and some buttons on your website, you'll be no closer to solving your initial problem at the “end” of the engagement than you were at the start.
An amazing thing happens when you pay someone an "investment" sum for something that is important to you: Suddenly, both sides care more. Both sides are invested and will move mountains to achieve it.
Both sides have skin in the game, and magic happens.
PS. Check out Kirk Bowman’s Art of Value Podcast featuring Jonathan Stark if you want to get even more down and dirty with the pitfalls of hourly pricing.