Sounds like a good plan. Let's say you don't deliver the project within alotted time frame and go way beyond it. What happens? Do they start subtracting the money from your $50,000 fee? They say here's $50,000 for the project to be completed no later than 16 weeks from now, no exception. You may deliver in 8 weeks which is good for you, or you can deliver 18 weeks from now. As a client I want to be protected. What do we do?
Steve
· 3 months ago
@Bubelah: I would imagine you could find a few different ways to deal with it. The easiest way would be to have a penalty for late delivery - $500 per day, or $5000 per week, or whatever. The client could pay half up front, half on delivery. Etc. But I'd imagine that if you want to be successful at all with that business model you'd have to deliver on time, or else you're not going to be very highly recommended in the future.
It's really the point about the post, though: if I'm paid hourly, I don't really care about the deadline myself (except as a reputation issue) and will actually make MORE if I run over the limit. If I have a flat fee and know that I'll be LOSING money if I miss the deadline I'm going to be exceptionally motivated. So it seems like the company would be better off with a flat fee, too.
GP
· 3 months ago
I think flat fees are a good idea... It's how some law firms charge clients for transactional work (patent law, immigration law, etc). Too bad law firms don't pay their associates the same way; flat fees are not really compatible with the traditional billable hour system.
Steve
· 3 months ago
@GP: Right - we pay attorneys flat fees for real estate transactions, for example. And the traditional billable hour system is just that - traditional. It's sortof like the insistence on signatures on paper contracts: resistance to the more sensible digitial signatures remains strong. It takes a long time for people to change, even when the need for change is obvious.
bargainr
· 3 months ago
A lot of people do it this way because of the freedom aspect, you bid the job and not the hours for the job. It also sets the client's expectations on how much it should cost. In the end, their risk is still the same (you either meet the milestones or you don't, the billing process is independent) but you get flexibility to work more efficiently. It's a closer marrying of priorities and incentives.
Drew
· 3 months ago
The other side of this is you have to have a very well defined scope of work prior to starting the contract. This must include all the things that are not included. You could say in the scope of work that you can work on outside projects, etc. for an additional hourly fee. The final thing is that you need to have strict penalties for them to do their work in a specific time frame. What I mean by this is that you need to say that you will have 3 day turn around from all formal documentation requests, etc. This will set the expectations, and also CYA if you are going to get penalized, you can charge more if they are notoriously late with providing evidence.
chadsentientmoney
· 3 months ago
"The world of audit, finance and accounting is a hidebound profession in many ways. Most of the time these kinds of professions are resistant to growth – but fertile ground for growth once the resistance is broken."
You must have worked for vastly different people than I have in those professions. I have seen successful non-traditional changes killed.
A major issue would be their responsiveness to your requests (documentation, etc.). In my experience this is not done well. Plus, they would have an incentive to not do it well if you monetarily penalized yourself for missing the deadline.
TheWealthSquad
· 3 months ago
Changing how companies charge or pay is probably one of the toughest areas to overcome.
If you can complete the job in minutes they feel upset because the majority of people think in terms of $/hr. They have a good feel for the wage per hour they are earning even if they are on salary.
I have seen this reaction even when giving free help. I have worked with Excel for years so many tasks only take a few minutes to get done that would frustrate most people for hours.
I had a friend who had been working on getting a spreadsheet set up for several days (spending many hours trying unsuccessfully to get it to work). He mentioned his frustration at lunch one day and i offered to fix it for him. It took me about 20 minutes to get cleaned up the way he wanted it.
The look on his face that is could be done so quickly is the same reaction you get when you complete a job using less effort than they expect you too.
For some reason a lot of people want to see you suffer to earn the money. I much prefer delivering good quality work and making it look effortless. The problem is they want to pay you like it was effortless.
Knowledge is far more valuable than people realize.
jeff
· 3 months ago
It sounds like a great plan. I'd love to know if you can get it to work. Sometimes, things just make too much sense to NOT do, but ohhhhh, the corporate world.
All Comments
They say here's $50,000 for the project to be completed no later than 16 weeks from now, no exception. You may deliver in 8 weeks which is good for you, or you can deliver 18 weeks from now. As a client I want to be protected. What do we do?
with it. The easiest way would be to have a penalty for late delivery -
$500 per day, or $5000 per week, or whatever. The client could pay half
up front, half on delivery. Etc. But I'd imagine that if you want to
be successful at all with that business model you'd have to deliver on
time, or else you're not going to be very highly recommended in the
future.
It's really the point about the post, though: if I'm paid hourly, I
don't really care about the deadline myself (except as a reputation
issue) and will actually make MORE if I run over the limit. If I have a
flat fee and know that I'll be LOSING money if I miss the deadline I'm
going to be exceptionally motivated. So it seems like the company would
be better off with a flat fee, too.
for example. And the traditional billable hour system is just that -
traditional. It's sortof like the insistence on signatures on paper
contracts: resistance to the more sensible digitial signatures remains
strong. It takes a long time for people to change, even when the need
for change is obvious.
You must have worked for vastly different people than I have in those professions. I have seen successful non-traditional changes killed.
A major issue would be their responsiveness to your requests (documentation, etc.). In my experience this is not done well. Plus, they would have an incentive to not do it well if you monetarily penalized yourself for missing the deadline.
If you can complete the job in minutes they feel upset because the majority of people think in terms of $/hr. They have a good feel for the wage per hour they are earning even if they are on salary.
I have seen this reaction even when giving free help. I have worked with Excel for years so many tasks only take a few minutes to get done that would frustrate most people for hours.
I had a friend who had been working on getting a spreadsheet set up for several days (spending many hours trying unsuccessfully to get it to work). He mentioned his frustration at lunch one day and i offered to fix it for him. It took me about 20 minutes to get cleaned up the way he wanted it.
The look on his face that is could be done so quickly is the same reaction you get when you complete a job using less effort than they expect you too.
For some reason a lot of people want to see you suffer to earn the money. I much prefer delivering good quality work and making it look effortless. The problem is they want to pay you like it was effortless.
Knowledge is far more valuable than people realize.