Shomeya

Two web artists. One amazing company.

To hourly or not? How Block Billing is Changing EVERYTHING

from Sarah Prasuhn on August 4, 2015 11:55am

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Everyone bills hourly, and as it turns out just about everyone hates it. This process makes clients feel cheated, and agencies exasperated.

At the end of the day there's usually at least a hint of disappointment in both how long it takes to get paid, and/or how much it all came to.

You come to expect that you are going to be disappointed 99% of the time. So most of us just cross our fingers and hope the project doesn't become hell for everyone at the end of the month.

But this makes zero sense. There is so much more we can do to change the way that we run our consultancies, and so this summer I began experimenting. (Note: Blocks for September are starting to book, so if you think this is for you at all, get in touch.)

I've considered block billing for years, but thought transitioning would be some dramatic ordeal. You know tell ALL the clients, change ALL the forms, and it was some work...but the start...the start was so so simple...

A little column in a table of rate options. I'd heard that competing against yourself was a good thing. So, I decided to list three price options for some new potential clients. Block billing just happened to be one of them. I even did this for a well established client, and guess what it worked there too!

The client ALWAYS chooses block billing. It's been kind of awesome. Because it turns out client's like to have a general idea of what they're getting too.

Would this work if I only offered block billing? Probably, but even then I would give options, control is such a fleeting thing on a web-project for clients give it anywhere you can.

Would this scale? If you scale the size of the block, say a week, this works well for even larger agencies. In fact I learned it from watching @brenandunn who's advice is aimed at consultants, but scales quite nicely to agencies as well.

The goal of block billing is to make the focus on the features of the project not on the time spent. This way the website, the users, you, AND the client all win. If the focus is only on the time spent, it's very easy to lose perspective quickly.

So here's how it works, and the awesome results.

The Prep

First comparison shopping, a.k.a. competing against yourself. Here's how I layout options for the client (rates are examples.)

How to compete against yourself

By showing three options, I give the comforting, but problematic hourly option. Notice that all options require downpayment, and a very small percentage of payment is NET30.

This is intentional, NET30 is problematic for several reasons. The greatest being it separates payment from the value of the feature launch. Plus, unless you have infinite resources to follow up, reminding a client or their accounting department to pay your past due NET30 invoice is time consuming.

Then you are left with a bad taste in your mouth, and any future engagements with that client are tainted.

So make your pre-payment options the more appealing and pain-killing of the three and voila, NET30 disappears into the background!

The Workflow

Next you create a repeatable workflow that they only get if they choose block billing, or with pre-payment of your hourly rate in sprints.

The reason to break it down weekly or bi-weekly, is that some credit cards have limits and planning is better this way anyway. I work the credit card fees into my blocks, because the goal is simplicity. Anything that takes the focus off what work is being done is not worth it.

A big pain with web-development is that most people have no idea what it is you are actually doing. We've all used paper and pen to communicate since we were young, but the context of coding is barely in our early consciousness if there at all.

This means it's important to provide something that does make sense, that your client's can forward to their boss to show their progress.

We all hated those quarterly evals at our full-time jobs, and as a consultant they're one of the big reasons I build my own business. But our clients still have to face them, let's make it easy for them to get that bonus, raise, or at the very least kudos at the next evaluation.

Just like your favorite booking app, I send a Block Reservation Confirmation. With details like, how many blocks they've purchased, our general goals for the week, what they've booked for the week after, and anything I need from them during the week to complete my tasks. Now everyone has a summary to reference, and we can put our energy on building instead of billing.

Here's what a reservation confirmation looks like, the end of the week summary is much the same layout and information. It's a way to remind them of what's next and summarize any changes that might have occurred since the first booking.

Reservation Confirmation/Weekly Summary

I may end up merging these for repeat clients, but I'm on the fence because sometimes these items are separated by a day or two due to planning back and forth.

Built in flexibility in building

Block billing isn't fixed bid, and it's NOT hourly. In fact it has the best of both worlds.

It's billing based on feature, but sometimes a feature requires more than you thought, or wasn't very well scoped (almost always), so what happens?

I just tell the client, unfortunately we won't be able to fit this much of a change in, because of xyz. If it's a small thing and I don't mind spending an extra bit of time on it, I just do it.

Either way the client rarely pays more unless it's a big differential, and I can build the way that seems best without freaking out because it took me longer than I thought, or on an ideal day less time than I thought. Eight times out of ten you and the client get the value you agreed to on day one, which is a much bigger percentage than any project I've done with hourly.

The penalties that both parties face because of arbitrary time requirements are no longer an issue. So if I want to fix the UI thing that would drive me nuts, I can, and the client doesn't know I gave them a freebie and I don't have to ask permission to do the work right.

The power of flexibility is amazing, it is probably the biggest game changer at Shomeya since we founded eight years ago, and it all started by just having the courage to add a few columns on a proposal summary.

The Followup

So the cons, that aren't really cons?

With pre-payment you cannot trust your followup to the project management system. Your client's are expecting a higher level of service. You need to do a full weekly summary, every week, even if you are still going to send a reservation confirmation in a few biz days.

These bits help you and your client know what, if anything, is next, what they've received, and most importantly they give you an anchor in the engagement to trigger next steps.

A summary gives a consistent close at the end of your "reservations," and it makes it easier for your brain to switch to other clients. Plus your clients to feel like things are complete too, all of which cuts down on the post-project queasiness.

The more clients you can fit in during a week, the less likely you are dependent on one big client, the less frustrated you are, and the easier it is to make creative choices. Which makes business, life, EVERYTHING easier. Plus you don't have that feeling that you have to be available to them 24/7, they and you both know that if that time wasn't reserved in advance it can't be expected.

I'm serious. This CHANGES EVERYTHING.

The ripple effect

Mike and I have been on hiatus for awhile now, working as little as possible (outside of his fulltime gig). But this workflow changes everything.

It's possible to book work, meet our client's needs, get paid, and move onto the next gig without so much drama. Everyone breathes easier, and most importantly the web gets a few less rushed, and last minute angsty choices because of it.

Which means when there's an actual emergency we all can identify it because we all know where the boundaries exist.

We've only been doing this fully for the past couple of months, and I'm sure some modification will be necessary, but so far it's life changing.

It's still in the experimentation phase, but we have a few blocks opening in September, so if you want to try it now's a good time! Hit me up!

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