The Billable Hour is a Thing of the Past - What’s Next for Businesses?
Say the words “billable hour” to any business owner and they might groan at the memory of tracking their work time in three-minute increments. Billable hours, once a staple of the business industry, are quickly becoming a thing of the past.
At Money Mastery, we’re experts at helping businesses get their finances in order and maximize their profits. And guess what? We’re all about changing your billing structure from the rigid billable hour to even more profitable and flexible options.
Still not convinced? Here are our top reasons why you should switch. (We’ve also got a video you can watch)
A Billable Hour Business Model Frustrates Your Client
One of the most notorious complaints about lawyers is that they “charge for the ink they used to bill you with.” Clients feel that the billable hour payment structure nickel and dimes them, which creates animosity, resentment, and surely does not motivate them to send other referrals your way.
Let me challenge you with a new line of thinking that is illustrated marvelously in the E-myth attorney: Read pg 92
Changing to a New Billing Structure Saves You Time and Resources
Having your employees or admins calculate billable hours per client and invoicing takes a LOT of valuable time. Even just ten hours a month at $250/hour means $2500 in lost revenue. That’s not even including your team members being super detailed and meticulous in their time punches. You paid hourly wages for your associates to spend time adding decimals and making notes on every small, minute increment - a lot of wasted time and money.
Hourly Billing Promotes Inefficiency
You know what I’m talking about here: dragging a case out so that there are a couple more billable hours in there. Hourly billing actually promotes inefficiency. By setting a flat fee, your business will revolve around the idea that the more efficient you become, the more your profit margin grows. It forces you to look at who is doing what in your business. Are you maximizing time by delegating tasks that can be done by someone else so that your team can focus on the things that only they can do? Not to mention that your clients will see all of this and be totally elated with your efficient processes that delivered them a great experience. Happy clients means more referrals!
Sounds Great - But How Do I Bill Instead?
The best way to streamline your services and charge efficiently is to compartmentalize your services.
Start with one service offering (the most simple & straightforward). Map out all the meetings/tasks. Run it by your receptionist, office manager, and associates to make sure you haven’t missed anything. And don’t fall into the trap of underestimating how long meetings will take. Leave room for calls.
Some services lend themselves well to flat-rate pricing. For example, a marketing agency offering a standard package for social media management. While you need contingency plans for when projects don’t go as expected, breaking down the consistent elements within a service allows you to accurately determine your average project fee. This helps streamline billing and provides clients with clear, predictable pricing.
Let’s just be upfront here that this will not work every single time. You will have those outliers that will make your flat fee structure seem devalued, however, you will also have the opposite end of the spectrum. In the end, as long as you set your fees appropriately, you will average out into a profitable flat fee model.
Need more guidance on how to accurately set your fees? We’re experts at it!
