Comment by dymk
7 years ago
I'm gonna disagree that hourly billing makes no sense for the contractor. He clearly just didn't charge enough per hour; $75/hour is way too low for contract work, and his $21k could have been $56k at $200/hour.
What if the project was billed at a fixed cost, he negotiated $21k, but the project took a year to complete because the company moved so slowly? That'd be a terrible salary. He'd have to quit and somehow bill even with no deliverables. How hairy would a contract covering that be to defend when you sue?
I don't think that the parent means that you shouldn't be structuring your billing to be per hour/day/week of work. Rather, their point is that you shouldn't be doing math like this:
1. "I think I'm worth $75/hr"
2. "the job will take 40 hours"
3. "I'll charge $3000 for it"
but rather, like this:
1. "I think they would be willing to pay me 40k for this, and I think the project should take 40 hours"
3. "Therefore, I'll negotiate for a $1000/hr pay-hourly contract with a projected end-date of two weeks."
Well, the problem is you have to estimate how much they are willing to pay and this varies wildly.
> What if the project was billed at a fixed cost, he negotiated $21k, but the project took a year to complete because the company moved so slowly?
Simple: Charge $21k per month. If the company drags it for a year then you make $252k.
Okay. Why not charge $X per 2 weeks? Or X per week? Or X per day? Or X per quarter?
The granularity here is entirely arbitrary. Hourly billing is by far the industry standard. That's why we default to it. It's easy to justify in court, it's easy to reason about contracts which use it.
But the granularity isn't arbitrary!
If you're billing hourly, and the client chooses not to use your time, you don't work any hours and you don't get paid. If you then billed them for 100 hours without working, you've committed fraud.
If you're billing monthly, you've set aside the month for the client. If they choose not to use your time, you still get paid, because in your agreement you specified "use my time it or lose it".
There's no reason he should have charged more. The website was not worth $21,000 to the employer. They made a mistake and threw away money.
If he had tried to quote $21,000, he would have gotten thrown out the door.