Accompanying your proposal is a SOW that says something to the effect of:
This project will be billed on a time/materials basis, starting Monday January 23rd and continuing for 10 contiguous business days through February 3rd. If additional time is required to complete this project, it will be billed at a rate of $1,000 per person day, provided that notice is provided within 1 week of February 3rd.
Presto, a proposal for a project that costs $10,000 billed time/materials at $1k/day (again, lowball figs).
Now, 2 weeks to complete this project is conservative. Also built into every proposal, whether you like it or not, is the collection of moments in every working day where you are not productive. So ask yourself, if I took 100 provigils† and eliminated ALL NON PRODUCTIVE TIME from my schedule for the entire next 2 weeks and completed this project in 7 days instead of 10, who should get that $3,000 of value I just generated?
The answer to that question is "you".
You don't generally want to rig your contracts so that they are padded out with unproductive time the client pays for; that's called "rustproofing" and it's bad business. But at the same time, clients actually value determinism more than they value any single billable day. If the client accepts a project for $10,000, they are going to be way more irritated if the project takes 15 days to finish than they are if you finish in 9 days instead of 10.
You have knobs to turn here too. Say you finish in 9 days instead of 10 because you drug yourself into working 18 hour days. Keep the $1,000. Say instead you finish in 5 days instead of 10 because the project turns out to be way simpler than you expected. Well, in that case, give the client their $5,000 billable week back. Think of this in terms of a minimum billable increment, where you don't credit partial weeks --- if you had to work at all in that week, that week is shot for other clients --- but will credit full weeks.
You see now how it's maybe not in your best interests to have your minimum billable increment be "one hour"?
OK, I gotta say that after many years of consulting, this is the first truly new, clever billing technique that I've seen. Better yet, it's a win for all sides.
This comes closer to per-project pricing from the client's perspective, which they prefer because they want to know how much they're paying. (As you put it, "deterministic pricing.")
I tend to time-slice my weeks, so I don't think that it would work for me. But it might well work for the people who work for me, who do tend to work complete weeks on projects.
I do have to wonder how Israeli companies would react to this sort of thing. My guess is that they'll do the math, and then complain about the high hourly rate.
But the only way to find out is to try, and you've definitely inspired me to give this system a whirl. Thanks so much for sharing.
Comments
This isn't complicated.
You do a proposal for a client. You give an honest conservative estimate of how much time it's going to take.
Say it's a Rails CRUD app with no special domain code. Ok, 2 weeks, broken out into 2 billable weeks. The proposal says something like:
Accompanying your proposal is a SOW that says something to the effect of:This project will be billed on a time/materials basis, starting Monday January 23rd and continuing for 10 contiguous business days through February 3rd. If additional time is required to complete this project, it will be billed at a rate of $1,000 per person day, provided that notice is provided within 1 week of February 3rd.
Presto, a proposal for a project that costs $10,000 billed time/materials at $1k/day (again, lowball figs).
Now, 2 weeks to complete this project is conservative. Also built into every proposal, whether you like it or not, is the collection of moments in every working day where you are not productive. So ask yourself, if I took 100 provigils† and eliminated ALL NON PRODUCTIVE TIME from my schedule for the entire next 2 weeks and completed this project in 7 days instead of 10, who should get that $3,000 of value I just generated?
The answer to that question is "you".
You don't generally want to rig your contracts so that they are padded out with unproductive time the client pays for; that's called "rustproofing" and it's bad business. But at the same time, clients actually value determinism more than they value any single billable day. If the client accepts a project for $10,000, they are going to be way more irritated if the project takes 15 days to finish than they are if you finish in 9 days instead of 10.
You have knobs to turn here too. Say you finish in 9 days instead of 10 because you drug yourself into working 18 hour days. Keep the $1,000. Say instead you finish in 5 days instead of 10 because the project turns out to be way simpler than you expected. Well, in that case, give the client their $5,000 billable week back. Think of this in terms of a minimum billable increment, where you don't credit partial weeks --- if you had to work at all in that week, that week is shot for other clients --- but will credit full weeks.
You see now how it's maybe not in your best interests to have your minimum billable increment be "one hour"?
† Please don't do drugs.
OK, I gotta say that after many years of consulting, this is the first truly new, clever billing technique that I've seen. Better yet, it's a win for all sides.
This comes closer to per-project pricing from the client's perspective, which they prefer because they want to know how much they're paying. (As you put it, "deterministic pricing.")
I tend to time-slice my weeks, so I don't think that it would work for me. But it might well work for the people who work for me, who do tend to work complete weeks on projects.
I do have to wonder how Israeli companies would react to this sort of thing. My guess is that they'll do the math, and then complain about the high hourly rate.
But the only way to find out is to try, and you've definitely inspired me to give this system a whirl. Thanks so much for sharing.