Time is Money. It’s like we’ll never stop hearing this. Probably for good reason.
Because it’s true. Nothing makes that more painfully obvious than being self-employed or owning a business. It becomes particularly obvious ever time we waste a few hours tweaking or updating technology simply for it to do the work. Or every time we spend on unnecessary meetings. But one of the worst times is when we work outside the scope of work of a project, burning otherwise billable hours.
Some will say: “Well, then, don’t work like that.”
Cute. In an ever-increasingly competitive market, in a service industry, this can be quite difficult to put in practice.
The Fixed-Fee Project Model
Take the fixed-fee project model: We’ve been doing this for a long time. We spend time trying to define a scope of work, and produce a detailed proposal that is fair to all. This effort, in and of itself, may add up to several hours we’ll only be able to recover if we get the job (assuming, of course, these hours have been added to the proposal).
The problem with this model is that it relies on all the information about a project to be available from the get-go. But, in practice, custom solutions include a process of discovery. This discovery may very well be the difference between a successful project, or a unprofitable one.
Sure, contracts are made to allow for these overages and change orders. But this opens up almost infinite possibilities for disappointment or even confrontation, as the parties argue about the boundaries of the original scope and their interpretation.
The Value-Pricing Model
This particular model is very popular among the speaker’s circuit. It certainly applies to celebrities and celebrity-level professionals, but this model requires a very specific kind of client. Namely, one that is already buying based on value.
Unfortunately, the perception of talent and creative services as a commodity is so pervasive, most business are buying in a mindset that does not allow the kind of conversations needed for value-pricing models to be effective reliably.
The Subscription Model
Originally, Ally Digital pioneered a subscription model for websites and hosting. This model attempted to solve the anxiety of defining scopes and the perception of high production fees for new websites. It also spread the cost in a cashflow-friendly way for both us and the client. Unfortunately, it didn’t take long for us to realize that for the majority of the market, the commoditization of websites and related services would make them quickly forget about the value and benefits of the offer, focusing solely on the monthly cost. Since the subscription model is highly dependent on the customer lifetime value, losing clients after anything less than five years proved too costly.
For that reason, our only recurring billing is for our Truly-Managed Hosting services.
The New (Old) Model
Ally Digital’s new billing model consists of an hourly, ongoing design and development consultancy.
The hourly billing model allows us to best define the scope of work your business needs.
Design is only limited by your budget, but we remain sensitive to our client’s financial concerns. The hourly billing model encourages participation or only relevant stakeholders, and a fluid iteration and approval process.
We then identify how to best satisfy the scope of work and, with your approval, we’ll work on the implementation of the solution(s).
One of the biggest benefits of the hourly billing model is that it allows for the kind of agile design and development process that better conform to the actual needs of software development. What this means for you as a client is that you only pay for the expertise you use, measured in hours.
The way it works, we present our understanding of the scope of work, and an estimate of the time required to complete it.