Project Management

Billing clients for communications: What do you suggest?

Help a TechRepublic member figure out how to transition clients from his current practice of not charging for communications to being billable expenses.

I recently received an email from TechRepublic reader Colin McRae, which read in part:

One headache I've only now decided I need to deal with is whether or not to bill for time spent on communications with my clients, or some portion of it. Let me clarify though: My clients are all long-term SMB clients (more S than M though) where I manage their IT on an ongoing basis, so I don't currently deal with clients where I do just one project for example. I bill for time spent, not for specific activities, so whether it's configuring a router or deploying a new PC, or just reviewing logs for some maintenance purpose, it's an equal rate. Consequently my rates are fairly low, but this gives me freedom to spend time, with my own initiative, on the types of tasks that high-rate consultants probably wouldn't have the leeway from clients to work on. The result is that I can do all tasks big and small with little hassle or requests for justification. Clients just see it as me taking care of them and I provide a monthly report on billable activity.

But one thing I do spend a lot of time on is communicating with them, providing updates on things in progress, asking questions, giving directions like "please reboot that machine when you can" etc. This is mostly done by email. What I don't do is track the time I spend on this so ultimately I communicate for free. Some days I might literally do two hours worth of typing with a client or clients, or more if it's one of those emails I try to carefully word and re-word ad nauseum, so as not to ruffle feathers. I'm sure you know the type.

But it's getting to where I need to stop doing only 1.5 hrs a day of billable time and start being profitable; I need my clients to respect my time but I'm concerned any sudden change in billing practices will gain unwanted attention towards the freedom I currently have. I don't abuse billable time, in fact they get a lot more than communications for free, but I also don't want to have to constantly justify things.

So i find myself at a point where I don't want to give away my time in such high amounts. Probably having a baby has prompted this. I know a certain amount of communication is good and should perhaps be free, to maintain the relationship, but I really think I need to start clients thinking that my time is more valuable. For example if a client asks me to clarify something for them about work I've done, or makes a comment that compels me to respond (example, blames me for something not working when it has nothing to do with anything I've done), what should I be billing for?

I've considered having a "blanket" expense, so monthly I would say 1 hour (or whatever) billed for communications and other small hard-to-track time expenditures, so I can just lump it all in there and not have to really track the individual things.

Or, just raise my rates but doing so without an explanation to the client concerns me as I don't want to appear to just be raising them for the hell of it, I'd rather they have some appreciation for why (especially since it is prompted by my giving time away for free - I guess that's the sticking point for me, to ensure they understand just how much freebies I've given).

Or option 3 is to just cut the time spent considerably so this isn't such an issue, but that changes my pattern of communication and might be perceived as something other than me trying to save time.

This is a common problem for consultants who bill by the hour. The one thing I would not do is adopt option 3. You can hardly ever communicate too much with your clients, so it would be a sad day indeed when communication becomes the casualty of your billing policy.

Ideally, you want clients to pay you for this time, and you want them to like it. That means that they need to perceive the value of the service that communication provides. Don't tell them, though -- show them. Concentrate on making your communications concise yet complete. Tell them everything they need to know (but no more) in a way they can immediately comprehend. Why did I say "but no more?" It's called TL;DR. Too much information is just as bad as not enough, because if they don't read it, you may as well have not written it. The same goes for oral communication, perhaps even more so.

If your client thinks to themselves, "Whenever I hear from that consultant, I get something useful from it," then you are living up to the name of our profession: a consultant is one whose primary value is in consultation. If that's the case, your client won't be likely to balk at paying for it as part of your invoice. Once you've eliminated that objection, you have lots of options about how to ask for it.

If, unlike Colin, you bill by engagement or retainer instead of by the hour, then this issue never comes up. However, you still must account for it within the contract price. It's an easy value for your client to overlook, and one of the reasons why consultants have a reputation for being overpriced. I prefer to sell it as a benefit rather than trying to bury it in my fee. You could also specify a certain number of hours for this kind of activity in your contract, and then bill hourly for any overage.

Personally, I make sure that my clients know ahead of time that I bill hourly for such communications, and that even a brief interruption will incur a minimum charge. Then, if I decide not to bill them for something that only took five minutes, I'll put it on the invoice and offset it with a credit. I want them to know that I'm being generous, without making too much fanfare over it. It's more pleasant for everyone if I start from the position of being entitled to remuneration, rather than having to make that argument on each occurrence.

The gray area for me is when a new prospect contacts me for the first time. I generally don't charge for that initial contact, but once we seem to be a good fit I get them to sign a contract before I give them too much help. The hard part is to know when it's too much. I tend to err on the side of generosity, and write it off as marketing (if they don't engage) or cost of sale (if they become a client).

The hard part for Colin will be figuring out how to transition his clients from what he has been doing -- giving them a lot of free time -- to one of the options above. How would you suggest that he address this with his existing clients?

About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

34 comments
GuardianOZ
GuardianOZ

This is an area that I really struggled with too and its funny (but not laughable) that you can see the larger IT companies bill for their time without issue or prejudice, however for the smaller IT companies such as yourself, the fear of loosing a client by introducing new costs to them, especially when your saying they are now paying for something that they have enjoyed in previous engagements for free, becomes very unnerving. Based on what you have said and some good feedback to put into your thought process from Chip, PMPsicle, yaronstern and CACASEY, I think that you have a great opportunity to look at introducing a new process in how you promote your business expertise and the professional services that you deliver to you existing and new clients. The first thing you need to do is write a standard engagement agreement for your business and there are plenty of templates out there for Managed Services that you could use as a framework to develop your own. You can and should write things in that allow you to even sell your consulting services on a monthly retainer: (EG: Pay “abc consulting” 1 hour per month retainer @ $xx.xx per month and abc consulting will provide “xyz company” with 4 calls/emails per month, up to 30 mins per incident/call, maximum 2 hours per month (or something along those lines that better suits you). You can wrap things in like for troubleshooting, planning, administration etc, but also make sure you have a fair use policy in your agreement too, so that you do not get caught out with difficult clients whom may abuse the agreement. Also state that the hours are non-accruing, as I am yet to have a client that does not need excess from one month to another, so you then have the flexibility to give them a little more in one month, look great and know that in previous a month/s that they may not have utilised all of the time allocated from the agreement; so it works in swings and roundabouts. You may also consider adding in something like a discount for your services outside of the agreement (for project work / travel etc) so that they have a reason to signup/accept the change; after all, you want your clients to see the value you deliver. With a bit of luck, you may have a few clients that you are close enough to and request from them that they view your new business model and get their feedback before you present it to the rest of your clients; in fact, if you have the time, you could do this for the majority of your clients (if not all), so that they feel that they have been part of your process and as such, your getting their agreement and buy-in as you bring in to effect this new standard engagement agreement. Once you have transitioned your existing clients across, you will be in a position to bill accordingly and when discussing this with new prospects, you will have an existing database that proves you have a fair standard engagement agreement that benefits all parties and delivers value. Lastly, use free time tracking software or an app, so that you can make simple notes of all contact (calls/emails etc) and then issue an invoice for the services delivered free (under the agreement) and also add in any additional billing.

gechurch
gechurch

I work for a company very similar in size and seemingly in outlook to the person that asked the question. We were in the same situation a year or so back. Our guidelines are: * Don't charge for the quick 5 minute emails/phone calls. If I send multiple 5 minute emails in a day though to the same client I will bundle them into a single timesheet entry and bill it. * Don't charge for the quick follow-up emails ("Did you get that done?", "I've had an urgent job come up. I'll be an hour later than I suggested" etc). These tend to (and should be) quick anyway * Do charge for sending out answers. If I'm emailing instructions for doing something that the client doesn't know how to do then charge it. That's what the client pays you for - your expertise. It doesn't matter whether you are physically on-site, or whether you documented something for them in an email. The expertise is the same. I found I cut my communication quality ever so slightly when we implemented this. I certainly still send the same number of communication updates and still take my time to thoroughly research and think about what I'm going to say. I no longer fret about exact wording as much as I used to though. My advise on those hard ones where you have to be careful about your wording - charge a reasonable amount of time, not neccessarily actual time spent. If you sent an email that should have taken 10 minutes to write, but it took 20 because you re-read it 5 times to make sure the tone was right - wear the other ten minutes. At least initially - you don't want to change overnight to charging for every minute spent. We wanted to remain reasonable. To me, this is just a cost of doing business. Something else we formalised around the same time was documentation and planning. We generally weren't charging for time to document stuff. We now do charge a reasonable amount of time. Some of the documentation is for our own purposes so we don't charge that. We do charge for writing up environment configuration documentation though. We then provide a printed copy of it to the client each year when we re-sign the contract, so they can see where that time was spent. Project management time is another area we weren't good at billing for. By this, I'm including things like calling a vendor to ask questions on the clients behalf, or calling their ISP etc. We now charge that, but are careful to let the client know in advance what the likely cost will be. We also try to be reasonable - if the vendor makes us wait on hold 30 minutes we would generally not charge all that time. Make sure you're doing something else while you're on hold though. And also make sure you mention the hold time in your timesheet entry, so the client can see that you spent that long but did not charge it. That's my final suggestion - document your time better. I have a spreadsheet I have open all the time. It lists client, job details, start time, end time, auto-calculates total time and has a column for billable time (which defaults to total time, but can be overridden). Every time I start or end a job now I note it down in the spreadsheet. When you start seeing just how long you are spending on each task it will become clearer what you have to bill for and what you don't.

kdburger
kdburger

Billing for communication depends on the purpose. If a client phone call or email topic is to enlighten them or share your hard-earned knowledge, it should be billed. If you are simply clarifying processes for a completed project, and you feel that communication is part of the project cost, you can always 'no charge' the time. When a call or email is initiated by me or one of my clients, a phone or email record is started. A timer runs automatically. At the conclusion, the timer is stopped, and a bill item is created. At that point, I can decide whether all, some, or none of the time should be billed at an hourly rate. I frequently review that decision during my billing cycle, so I can see the overall time spent with the client. If the time is 'no charged' the client sees it on the bill and knows how much I value their business. AND, I can determine an effective billed rate, something you cannot do if you don't enter the time.

www.indigotea.com
www.indigotea.com

The first challenge is to get your customers to appreciate the fact that your communication time is as valuable as any other time-based service you provide them. The second challenge is to get paid for that time. Here's my suggestion for the first challenge: have some "gift cards" (use business card stock - it's cheap enough to design and order online) made up to send out to your client base, entitling the recipient to a set amount of time, regularly (your hourly rate) value, to cover a communication session. Include these in a letter to your clients, explaining your new policy - it's a means of transitioning them, while still showing your appreciation for their business. I suggest doing this in a physical space, rather than an e-mail, because the tangible visual/tactile experience will linger longer. Good luck!

dennis
dennis

The time you spend in your business is your primary cost of doing business. If you spend 40 hours a week, you can expect to bill about 20 hours. The other 20 hours is administrative (including some of the 'free' communications), travel, continuing education. 20 hours at $100/hr (a nice round number for this example)= $2,000/week = $50/hr Gross Revenue from Services. The difficulty is in calculating the true cost of your time; all 40 hours of it. If your cost is $50/hr, you're not making a profit, and that's bad for your business. You can calculate it in two ways, and you should use one method to check your results of the other. Total your business & living expenses, including Workers Comp, E&O insurance, health and life insurance, retirement fund, and vacation time. That's your cost, and when you add 20-30% for profit you have an estimate of market value for your time. The second method is your Opportunity Cost; what could you get in a salary and benefit package from a 'real' job? (I believe consulting, or IT Service Provider is more real, usually.) Add 20-30% for profit (it compensates you for the risks involved with owning your own business). You can also compare your rate with others in your area, but beware that they are their rates, and not exactly indicative of your value or the value you bring to your clients. If you take very good care of your clients and they appreciate you, as seems to be the case with Colin, then if you need to raise your rate some of your clients will understand and be OK with it, others may complain, and you might have one or two leave you for lower priced service. Those are the ones you don't need. The best way to raise your rates is through other changes that add more value for your clients. If you can simplify your fees and your billing, that's a big value-add. Billing hourly for IT services for multiple clients is actually rather complicated for us and our clients. Consider going to a fixed fee basis for billing. This will make it easy to raise your hourly rate and add more value through your billing process. You're already adding value though your services, why not get paid for it. With fixed fees for common services, the client knows what they are getting, and what it costs. And they know they aren't getting billed for time you spent on the phone troubleshooting another client's email. It will also be easy to bill for those 5, 10 or 15 minute communiques for things like How-To questions. Clients don't mind getting bills here and there for $10 or $15. Categorize services into groups: Admin, Network, Hardware service. Itemize common tasks within each group; Installation, Configuration, Upgrade. You can get as detailed as you want and a billing program like QuickBooks makes it easy to organize and maintain your services and pricing. Provide details in your description of each service ("Windows Update: ") and when you issue your invoice add specifics to the description about that particular service event ("Windows Update: updated Joe's computer with Service Pack 1 for Windows 7"). Anything that doesn't fit a fixed fee model is billed hourly, and any fixed fee item that has more (or fewer) requirements or complexities can be adjusted up or down accordingly. When you provide enough detail in the description of each line item of your bill your clients almost always have no questions about it. And QuickBooks can help you find historical charges for when you need to look something up. To establish your fixed fees, use your experience. Take your newly established hourly rate and multiply by the amount of time certain common tasks are expected to take. Most things can be done remotely. It takes 5 seconds to change a user's password, but it actually takes 1 minute to get remote access, another minute to log into the server, 1 more to open ADUC, find the user, right click....So, 5 minutes, plus 30% (profit) for your knowledge and resources to do it quickly and efficiently, and don’t forget about admin and other internal overhead – you still have to create the invoice for the service too. If you fix a price for this service based on 10 minutes at $100/hr it comes out to $16.67. You can easily demonstrate to your client that it’s a 10 minute task for everything involved and to your client it's worth 10 minutes of your time. If you set your price at $15 your profit will exceed 30% most of the time because, with a little efficiency, you can probably do it all in 5 minutes or less. Sometimes not, but it all averages out to profits for you, instead of losses. Now, consider what you should charge to set up a VPN/FireWallRouter, which only takes you 20 minutes. Is that only worth $33?

medfordmel
medfordmel

First off, I just can't say enough good things about Chip's "IT Consultant" blog posts. I always learn something valuable. Back to the topic, though - I do as Chip suggested. I charge for all time spent, but I often offset certain activities with a credit on the invoice, clearly crediting a specific occurrence of a specific activity. This way, they recognize both the value of my time and my willingness to work with them. Time spent on a detailed report is clearly billable. Just ensure that the level of detail meets the client's needs. Too much information takes too much of their time, and yours, and increases expense for both of you.

Ron_Ellis
Ron_Ellis

My consulting practice is rather simuilar to Colin McRae's and what's helped me address this issue is to manage these two items together. I routinely find E-mail communications and increasingly texts messages to be a useful start for billing and occasionally the reverse. So I try to use a little copy/paste/editing to get double duty from the content. Separately I also try in tracking time or preparing invoices to also be sure that I'm not charging for too much of the small stuff by showing credits for the items that I don't think merit a charge. That makes everything eligible for at least an appearance if not a charge on the monthly invoice.

archer103
archer103

Client "communications" are associated with a service or product; "communication" is an inherent part of that. A consultant needs a tracking system that links all activities to the product or service and bill accordingly by service or product without the gory details. If there's a product involved, the client may want a breakout of parts and labor, but they rarely want a detailed labor breakdown. The two times you want a detailed breakout are when a client insists, again that's rare, or when a client has a habit of calling to "chat" or emailing whatever, which is fine if they want to pay for the time. In that case though, you bill for the calls and emails so they know you're not their new best friend and your work time is professional, not personal. In college I worked for a car mechanic who billed his clients for cleaning his tools at the end of a job and putting them back in their proper place. His rationale was that they got dirty on the customer's job; no argument. It never occurred to him to itemize for cleaning his tools. That would be irritating, but the client does not mind paying say, for the tune up.

cpetrou
cpetrou

I would have to agree to give your clients a heads up prior to any billing changes, but I also don't think you should have to ask for permission. Worded correctly every single client has understood, agreed, and even welcomed the change. We named the line item as the subject line above, billed it as INCL and rounded the hours billed to include another 30, 60, 90 - however many minutes we needed to. On their invoice, either copy/paste the communication OR added the support ticket print out that shows every step of the support including the communication. Clients love it for full transparencies of what we provided and accountability internally for them.

pdegroot
pdegroot

I'm more a procurement, licensing and SAM consultant, but I've always called my work "advisory services," and that's not a bad description of the work that the letter writer does. It's what's in your head, not your muscle power, that they're paying for. I don't bill clients for pre-engagement calls, but neither do I give them advice on pre-engagement calls, other than "hire me and I can help you out," (or not, if I don't think I'm the right person for them). Whether they get it in person, via email, or via the phone, they're using my services. I don't bill for absolutely everything, such as a quick follow-up to confirm something I've already told them, but if they schedule a call with me, send a calendar item, etc., it's billable. I've never had a client complain about it.

nyong2012
nyong2012

I fully agree with - 1) Treat your clients as humans, 2) Engage your clients with respect NOT fear In addition 3) Start 'communicating from now, you'll be raising your rates as of January 1, 2013 4) Start communicating from now, 'Any new clients you'll be taking on will be charged X per hour AND/OR X for a menu list of services' 5) Give a cost breakdown for what a full-time employee in your area would cost - a line by line summary ESPECIALLY if you're not getting any health benefits. For example, itemized lines would include salary, cost of benefits, cost of training, cost of employee insurance, cost of 401(k) contribution - etc. This demonstrates to them immediate cost benefits AND to you where and how much you're NOT charging 6) Create a customer service package for each client - break them into levels bronze, gold and platinum and respective benefits of each (for old clients say that they've automatically been enrolled into the 'bronze package' -- they'll automatically want to know the difference between bronze, gold and platinum packages) 7) Evaluate which clients are costing you the most in time AND which clients you're not billing for that time; these are the clients that you'll have to decide whether you'll want to keep --- rule of thumb: we teach clients what to expect. And they always expect more. 8) You're not performing favors for your clients; and they aren't performing favors for you. They're paying for outstanding service, ability to solve their problems and your ability to speak with them in non-technical language. Clients will respect you for being upfront with them. The ones that give you a hard time are the ones who really don't value your services and KNOW that they're taking advantage.

cloudnavigator
cloudnavigator

This isn't that tough of a call to make. If you are creating a report to your client or explaining something about what you did you should not charge for that work. It would be like have your auto mechanic charge you to explain what he or she did to your car. If your client needs instructions that take more than a few minutes to explain in a message or over the phone, then you need to remote the PC or server in question and do what needs to be done with the client observing if that would be important for the future. You do charge for remote assistance and the customer should have no objection to paying. As for "this is how most attorneys work" is not a good comparison to IT consultants. Most attorneys have a reputation for "nickle and diming" their clients, which is understood by their clients, so they don't call them unless it is really important. Customers call their IT consultants at the drop of hat and expect you to do something immediately. Attorneys never do anything immediately, except record the time spent on your call.

loren.saunders
loren.saunders

If I'm merely setting up an appointment, I don't bill for that call. If it is only 5 minutes, I don't bill for it. Everything else should be billable or I'm wasting my own time (and probably my client's time as well). I'm either: having an initial needs conversation with a client (up to an hour and not billable) having needs conversations about projects with a client (requirements gathering or analysis, all billable) doing the work (solving problems, making recommendations, writing up results etc. all billable) providing a conclusion (same as the one above) sending out invoices (not billable of course) everything else I do... blogging, standardizing things so I can re-sell them etc. is all on my time b/c it's product development or marketing. If I'm not doing something that falls into the above issues, then I'm either losing money or wasting time. The one exception is when I am fixing something that was a fixed price and already paid for... then it's losing me money. I try to avoid fixed prices when possible. I also keep a lower than market rate because a lot of my work is not well defined at the outset and I spend a lot of time helping my clients figure out "what needs to be done."

sparent
sparent

This is certainly a challenging question. I have dealt with similar issues in one shape or form over the last thirty years. Some of the lessons I learned over those years. * Communicate any change in your practice early and often. Your customer may need lead time to get approvals for new or higher fees * Avoid mingling customer activities. Don't read all your emails from all your clients together. Group your emails by customer and, if possible, by activity. * Charge communication to the relevant customer activity. When you have to attend status meeting for a customer project, the time belongs to all the relevant customer activities. If you're lucky, you'll only have one activity at a time. If not, you will have to split the time. * Consider indirect activities for billing. Do you charge your clients for the time spent tracking time or preparing invoices? There is no pat answer. One rule of thumb I use is similar to the "done for me" vs. "done for them" explained above. I ask myself, if I did not have that client, would I need to do this? While you may not want to charge the activities directly to your customer, you should make sure that your rate covers your time. (Your rate does cover your absences, vacations and training, right?)

JohnMcGrew
JohnMcGrew

...and I faced the exact same problem about 15 years ago. Up to that point, I never charged "phone time" with clients. Most of my work was programming and on-site support, training, etc. Billing was straight-forward and I considered talking on the phone a "courtesy". But then I noticed some disconcerting trends: Hardware was becoming more reliable, requiring less hands-on-site time, and frequently I could talk clients through simple problems over the phone. I stared having weeks where it sure felt like I had worked 40+ hours, but was billing out a dozen or so. How could that be? Time spent on the phone! Also, I had a few clients who figured out that it was much cheaper for them to spend a few hours working out issues over the phone that it was for me to come down and fix it myself. (usually in 1/10th the time) That certainly had to stop. But what finally broke the camel's back was my first cell phone. My first plan gave me all of 20 work-day minutes per month, and you paid dearly after that. Clearly, I couldn't afford free chit-chat with that. [b]I wrote a very polite letter[/b] to my clients stating that due to changes in their needs, my business, technology and IT in general, that for the first time I would be charging for time on the phone. To make it more palatable, I even charge a slightly lower rate for time on the phone. The upside to them was that because of the cell phone, I was now far more accessible to them and was able to solve most "crisis" issues almost immediately no matter where I was. Amazingly, [i]absolutely nobody balked at this[/i]. They all knew it was reasonable, and were thrilled to have better, faster access because of the cell phone. There's a certain flexibility I use in billing for "communications" time. I rarely charge for calls of only a minute or two. For the bigger clients that I bill out dozens of hours a month, I usually do not charge for "short" calls or messages". But you do need to account for this time somehow. In a business sense, spending an hour writing an e-mail is no different than spending an hour writing code, researching a specific solution to a specific problem, or consulting on the phone. You are selling your time, and your clients need to respect all of it. As for the case at hand, personally at this point I'd just start charging for the time (unless you've got a contract that would preclude doing so) If you're already charging for time on the phone, you should certainly charge for time responding to e-mail. Otherwise, write a simple 1 or 2 paragraph letter explaining the situation. They will respect this, or they won't. Either way, you can't afford to do what you've been doing. That's a lesson that it took me a good 15 years to learn a long time ago.

BudHartley
BudHartley

I agree that a retainer fee will be the best solutio. And yes, five minutes here, and five minutes there adds up over the month. I typically bill when the project is more that a few minutes handling a "One Dee Ten Tee" user question or simple direction like reboot, or click here then there to change a setting. Customer Satisfaction is key, and when billing for an activity showing support that did not include a charge assures there isn't a thought that you are taking advantage of them - assuming of course that they value your services.

yaronstern
yaronstern

This is a great topic: Inspiring Change. Two issues seem to be the challenge: 1. overcoming your fear of losing clients; 2. successfully recruiting your client base to adopt a new policy. You might straight away notice that these are two sides of the same issue. The approach is to address your clients as human beings, possibly as colleagues, or just people you know and respect. I'll try to make my proposal short. I think you should set a date in which billing of communications-time starts and send a message/letter to all of you existing clients to let them know about it. This broadcast needs to be constructed in a way that is on the one hand informative and on the other conversational, meaning open to discussion. What comes to mind as I write this are a few basic principles. Below you can have a look at them and see if they make sense to you and if you have other ideas. Inform: Describe in brief the implementation of your new billing policy. Explain: Let people know what it's all about i.e. background, your intentions, your promise etc. Invite: Encourage feedback, questions and comments. Frame: Date of implementation, definitions of billing, deadline for feedback, should all be clear so that a conclusion be reached efficiently and to most people's satisfaction and mostly yours. Disclaimer: I am a designer with a limited client base. My response here is based mostly on experiences with others and time based insights. Feel free to address my ideas with questions but bare with me if I don't follow up in a time sensitive fashion. Good luck.

CACASEY
CACASEY

This is a simple problem and Chip explained it well. If you are billing your clients by the hour (or fraction thereof) for your time, then bill them for your time. This is how most attorneys work. Pick up the phone and talk to your lawyer for ten minutes and you'll get billed for those 10 minutes. If that seems like too much trouble to keep track of, then you probably have other "leakage" areas where you are not tracking, and thus not billing, for your time. To make it simpler for everyone (you and your clients), figure out what your average communication bill per month (or week) would be and start charging a flat administrative fee. Some months you'll "win" and others you'll come up short, but the customer knows they're covered no matter what. Most clients are understanding when it comes to being compensated for your time. Those that aren't should probably be replaced.

PMPsicle
PMPsicle

I agree Chip ... pick some of your clients and ask them how they would prefer to deal with the issue. The other side of it is to establish a test for the result. You will need to identify some key metrics, then measure them before and after the change. This will tell you if the change is affecting your sales negatively enough to try another tack. As a PM, 80% of my job (or more) is communications. I absolutely have to charge for time spent in communications. Although like you, I try to seperate the communications into done for me (no charge) and done for them (charge) buckets. Glen Ford, PMP http://www.vproz.ca

Sterling chip Camden
Sterling chip Camden

The approach might need to be client-specific. You might have a relationship with one client that allows you to frankly tell them whatyour problem is, and how you would like to solve it: "I've been putting i too many hours without billing you. I'm going to have to change that in order to stay in business." With another client, you might have to adopt a different approach. What are your thoughts?

dennis
dennis

Time is money, but it's not always the client's money. Most of us agree that what we charge should be a fair exchange of value. If you and the client agree on a fair value for a service, charge them that price, whether it's $50 for some new technology that took 1.5 hours of research and 15 minutes to implement, or $200 for a router install that takes you 15 minutes (because you're THAT good at it). I think the most important part of the result is consistency in the billing. The best ways to accomplish that is with a clear process for delivery. Parts of the process: - Documentation. I like a speadsheet for this; fast and easy, once your laptop is running. I use the Android App, TimeClock. Same functionality as a spreadsheet on a laptop, but more portable. Syncs with it's Web account (included) for easy access from your office or anywhere. - Consistent pricing; same price for the same tasks (why I like fixed fees). Sure, there are variations depending on circumstances. - Timely billing, whether it's weekly, monthly, or same day as completion. I bill same day, which is really within 2 or 3 days of completion, though usually same day. All my clients get 15 day terms unless they need 30 due to their internal processes. Terms like that demonstrate trust and loyalty. The day I send the bill is the day the term starts, so the 2 or 3 day delay is on me.

gechurch
gechurch

+1 from me. I definitely agree that you have to start by tracking your time well. This is something I've always struggled with because I get a lot of calls every day for smaller tasks that I attend to immediately. Most days there is a 30-60 minute job that I started at least 4 times. Like yourself I do quite a bit of reviewing before I decide how much to charge. I ask myself questions like: * What type of work was I doing? * How important was it to the client? * How long would it have taken if I had one contiguous block of time to devote to it? * How long would they have expected the task to take? * How long did I expect the task to take? * Were there hold-ups because they didn't explain themselves clearly, or because I had to chase them? * Were there hold-ups because I had to do some general learning to get the job done, or because I made a mistake? I'm sure many people will say I'm over-thinking it, and perhaps I am. But it generally only takes a second to determine most of the above because its already in your head, and I like to be careful about what I charge. I don't want my company to be one that has a high rate then charges for every conceivable second. We're tripled our number of maintenance contracts in the past three years by providing good service and being reasonable about how we charge for it, and most of our new clients have all said the same thing when we signed them up... "We moved away from the old provider because they charge for everything, even to fix up their own mistakes, and they weren't clear about what would be charged in the beginning". (Actually there's a second common answer too - "They didn't fix our issues in a timely fashion"). Our most recent new client told us what tipped them over the edge. Their current provider sold telecom gear as well as doing IT work. They spoke to the client and said "Are you happy with your current phone plans? We'd like to do a quote for you on a new system". The client was happy with their phone system and didn't want the quote, but gave them the chance to quote anyway. The quote came in a few weeks later, and it was much more expensive than their current system so the client said no thanks. Later they received a bill in the mail for $1,200 for "consulting" on a new phone system!

gechurch
gechurch

I like this too. It shows that you're not out to gouge the customer which is a really important step. The main thing I like about it is that it will set expectations. The client isn't likely to know how much this new 'communication' charging is going to cost them because they don't have historical data to refer to. If you give them this gift card and they chew through ten hours in a month then they know what to expect going forward which they can either account for, or if they consider it too high they will find ways to minimise the amount of your time they use. Either way is a win.

gechurch
gechurch

I like your suggestions for formula's for determining your costs and worth. It's such a simple thing to do, but many individuals don't take the time to do this and seem to just pluck their charges out of nowhere. I'm not so sure about the fixed-rate billing. We used to just charge for time spent, but are now starting to do fixed price for most decent-sized projects we undertake (these are quoted individually, with contingency built in to cover the risk. I say most projects because we don't do fixed-price for things that are a bit out of the ordinary for our shop). Anyway... and perhaps this is just the way we do things, but I can't imagine fixed-price working for the small 5-60 minute jobs. There's just too much variation in IT. To take your example of "installing SP1 on Joe's PC" - that could cover just clicking Install then leaving it, or it could be you tried installing it, had it fail 15 minutes in, you found the log files and checked the error code, researched it, determined it was probably the anti-virus software getting in the way so you disabled that, but then you found that it was partially installed so gave you a new error... etc etc etc. This sort of thing happens ALL the time for me. I walk in to most jobs expecting it to take 5 minutes, and am often still sitting there an hour later either because of complications like this, or noticing a different error and fixing that at the same time, or being asked to do different work whilst there etc. I understand you can add multiple items to the invoice for each of these, but it starts to get messy. We just fill in a job report and put the time spent. That's what gets charged, and the client can see the work that was done. When there are complications like the imaginary example above we spell them out on the job sheet so the client can see why it took 3 hours to install a service pack.

Ron_Ellis
Ron_Ellis

I like the tools analogy and agree it makes sense for the mechanic, but a basic tenant of our consulting practice is that clients deserve an invoice that's detailed and comprehensive. And philosophically I'd elevate communications with clients way past tools of the trade to being an essential part of how we deliver our service. So I see communicating and calling attention to those communications as the essence of what we do and therefore deserving of inclusion, even routinely making up the bulk of our invoice.

BrokenEagle
BrokenEagle

I created a Telephone Consultation Rate that was 1/4th of my full non-discounted hourly rate for 15 minutes of telephone consultation. My clients were happy for the lower rate and were happy to get their problems fixed immediately. When done, I just told them to mail a check, unless I was going to be on-site soon, when I'd add it to that bill. I actually started doing that when one appreciative client insisted on paying me for the my time on the phone.

Sterling chip Camden
Sterling chip Camden

I particularly like the point about engaging your clients in a conversation as humans. The one thing you don't want to do is alienate clients by seeming heavy-handed and uncaring. Soliciting and recognizing their input not only grants them status, it also provides an opportunity for them to be gracious.

dennis
dennis

When things get messy, and they do a lot, the line item gets billed hourly. In your example when a Service Pack install goes awry, I keep the fixed price line item for the SP and add a line item for Virus scan/fix as a fixed price, or hourly, or sometimes it's as simple as the fixed line item x2.

gechurch
gechurch

I certainly think this would make it easier to "sell" to clients. I'd be concerned about doing this for a few reasons though. My main concern would be that with such a discounted rate, that clients would try to avoid having you come on-site and would try to get you to do as much phone support as possible, even if it wasn't the best way to deal with the situation. Did this happen at all? My other concerns would be: - Adding complexity to the pricing structure - Charging based on type of communication, instead of type of work done and the value of the knowledge you provide - Encouraging phone and email work. I prefer face-to-face, and there are lots of issues that are quicker to sort that way. Email in particular is bad - it takes much longer to write than to speak - As you mentioned, phone support is immediate. You have to stop what you are doing to devote your attention to the phone call. I'd consider this a strong reason not to lower the rate Perhaps you would be kind enough to respond with whether you've found any of these to be problems, and to what extent?

gechurch
gechurch

Fair enough. Thanks for the response.

Sterling chip Camden
Sterling chip Camden

I can write faster and more effectively than I can speak. Maybe I'm just a visual person. So I prefer email over telephone -- plus, no interruption.

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