Dashboard: The Problem with Charging by the Hour

[Music] welcome to another 21 hats dashboard I'm Lauren Feldman I'm here with Gene marks to talk about the things we think business owners should be following this week welcome Jean hello Lauren great to have you here as usual you've been writing about all kinds of stuff that matters to business owners uh but this week I want to start with something you didn't write it's a a Twitter thread I highlighted last week in the morning report and it was written by someone named Rich Webster who pointed out the dangers of charging by the hour which a lot of people do the problem is you kind of end up punishing yourself for doing your job well uh the faster do you do it kind of the less you get paid um you you're a consultant I thought you might have some thoughts about this I do you know I've been dealing this has been an issue that goes back to the time of Jesus uh you know do you charge by the hour you're not that old Jean or do I'm not a religious guy but do they charge do you charge by the hour or do you charge like by project you know and by expertise Yeah by expertise and people um you know for years I've grappled with this and there was a time Lauren when I started back in the day I was selling this product called Gold Mine software which is still around um you know your older listeners will might may recognize it and there was the company that was selling it was trying to build a whole consultative approach to their you know their contact management and CRM projects and trying to get people like me to like you know to make more money so we would sell more of their software where we should sell it based on projects like don't build don't charge by the hour you you you degrade your value by doing that you know and um and I get it and I get it and I get it and yet it all comes down to by the hour you know people always are like you know what's the you know charged by the value of the project you know if you're G to sell something you know that's going to make them $10,000 then you should charge $5,000 even if you're only spending an hour on that you know that was the that was the the basis of it you know right cuz you have this expertise that you've acquired over years and you know you might be able to do it quickly but that's only because you have that expertise it never flies dude it never flies because any SMART Bus I sell B2B so any business person is like I know this is only going to take you an hour there was no [ __ ] way I'm going to pay you $5,000 for an hour's worth of work do you know what I mean like in the and you know you know what the proof is in the pudding I'll tell you would you agree that the partners at the world's largest law firms I was going to say that yeah it's working fairly well for lawyers yeah I mean they're like they're pretty smart people to be you know at at you know in that profession loan let alone at the at the highest levels and they're charging by the hour they've all tried same thing with the big four accountants you don't think that they want to charge by project these are like the greatest you know the best Minds in the profession theoretically and they um you know they can't figure it out they can't do like you know Project based it's nice it sounds nice but there's just reality have you actually tried it Jean you know what I've tried it and failed I've never been you know what it is I've never been able to sell it because it doesn't it's not um when I sell something it's got to make sense to both me and my customer do you know what I mean I'm tempted to think it would make sense to some customers because you want to know what it's going to cost if it's if you're paying by the hour especially if it's a lawyer you have no idea how high that bill could go if there's a project cost it's defined well that's the thing so number one is defining the value of that cost is a hard sell so that's number one number two is you know it's it's a matter of do you charge by the hour or excuse me do you just have like a fixed price contract type of thing like uh you know a project fee and I've always shied away from Project fees projects that that way because then I start taking the liability and the risk on my own right like we have we've had some clients I mean not not irregularly say to us like we don't want to pay by the hour because we don't like you know just give us a cost what's this project going to cost you know and I I shy away from that stuff if I if I'm asked to do that I will bump up my my estimate 30 to percent and it's not based on value it's like just based on a reserve a cushion in case we go over the amount of hours are going to be spent on that project do you know what I mean so to me like the most honest way of billing of of doing a project is by billing by your honest day work or the hours that you spend and if you want to make your money and you want to say that you're so valuable then you charge a higher rate and that's why people at large law firms that have been practicing law for 30 years can charge what Couple Grand an hour because they're like all right that's that's my value you know what I mean it's it's built into my hourly rate and I think that's what makes the most sense I I hear you and I suspect that's why lots of people do exactly what you just described yeah it's hard and it's going to be It's Always A continuing issue it'll never end but I'm just telling you from 20 I've tried for 20 years to do this and failed to do like Project based or you know consultative based billing it's always an hourly thing it does seem like a good idea I'd love to hear from anybody out there who has done it successfully um if you want to shoot me an email with your experience i' I'd love to hear those examples I will tell you one thing before we end that you know end on this topic um a good example you know I do as you know I do a lot of speaking you know like about 50 times a year I speak to associations and I we I have a fee for that and I base that fee kind of based on the audience you know if I'm speaking to a small group you know I know what their budget's going to be versus if I'm speaking at a large conference you know so a higher fee if I'm speaking to a thousand people versus if I'm speaking to you know 30 people sure um but it's the same hour you you know what I mean so it's not an hourly thing there's an example of like that's just a fee that's like you consider travel if you have to go across the country yeah I do so it's funny that you say that because when people ask me like oh well then you know can Jean speak on Tuesday and Wednesday my fee goes up and my rationale saying well now you're asking me to spend two days of my time so now it gets back down to an hourly type of calculation do you know what I mean y it it all comes down to the amount of time that you're putting in interesting all right next topic uh you did write last week about hiring ex offenders something that you feel you you believe in and is is a good idea but you have one concern tell us your concern well this concern came out of um Lauren what my what my wife does I think you met Angela once or twice yes so she runs a nonprofit outside of Philly and or in Philly and um it's called reading aloud guys if you're Shameless plug reading aloud. org and um what she does is she provides a structured literacy tutoring to kids um that can't afford it so you know you have all these kids that are so far behind in reading and the pandemic made it so much worse and if your kids going to private school or if you grow up in a nice neighborhood uh your parents can afford to hire a a certified instructor to teach them how to read um but if you you're not then you're kind of [ __ ] out of luck and her organization has gotten a ton of you raised a bunch of money from different sources and pays for these certified tutors to go out and teach these kids out to read it's really really good and they've got like a few hundred kids and like 50 or 60 tutors and it's all that great stuff but you know her whole thing is like a social justice thing it's a it's a uh it's a thing about crime because you know when you look at people that are in prison there is like these enormous like 70% of the prisoners like are read at like a fourth grade level um they never got the education and because they never got the education they can't get ahead in this world and they get frustrated and they steal or commit crimes and they wind up going to jail so it gets back to like what about hiring people out of prison there's all these different programs um out there on government tax credits the work opportunity tax credit the status tax credits trying to encourage employers to hire felons to work for them and I would love to hire I have no problem hiring an ex-felon I I mean I'm a Believer in you know you commit your crime you do your time you pay your penants and you know if you're coming back into society I you know I fair enough I think you you know should be hired um but the problem is that they're just not prepared to enter the workforce they they're not only do they not have skills but you know the biggest skill is what they're missing which is reading they are still you know exons are not coming back into the workforce with with a ability to read even at a high school level and we're talking about 70 to 80% of them and as an employer I'm like listen you can give me all the tax credits in the world I I can't teach this guy how to read you know like you know even if they're operating a machine they have to learn to do a manual or fill out a time card or do you know you got to learn how to read to do a job I mean it's just what you have to do particularly in my company where we're doing technical stuff you know and that's a big problem to me and so I'm like don't stop giving us the tax credits take that same money that's costing for all these tax credits and funnel it into literacy programs and prisons that's to me that's what the answer is that's an interesting point because especially at a time of a labor shortage you probably don't need the tax credit to give employers the incentive you just need to give people give them people who are qualified to do the work yeah that's exact ly it I mean if if I knew that people were graduating from prison like knowing how to you know you know that that had skills at that but and again I know it's skills skills skills skills skills but it all starts with reading um you know if the government paid for that and they they sent tutors to prisons or had you know training programs to teach them those Basics I think employers would be hiring you know ex-felons regardless of tax credits or not it's just the money's misspent and that's why I wouldn't hire an X felon that's the reason why interesting point all right last topic and Jean this is the moment you've been waiting for your weekly opportunity to slander employees you wrote a piece last week in which you said remote workers are stealing from their employers want to explain all right first of all tongue and cheek everybody calm down everybody CM down not completely tongue and cheek Jean well not completely so you know you know that I always like to I feel Lauren that as you know most employers really can't publicly complain about their employees first of all most employers love their employees but they can't they can't complain about when people take advantage in the workforce because it's just not good PR so I feel it's my duty to bring these you're providing that service yes I'm providing this service thank you to you're welcome everyone and here's we pay you by the hour here's another here's another part of that service so I I stumbled on new research that was published recently from the Bureau of Labor Statistics they spent the they spent all of 2021 doing time studies analysis and surveys of workers working from home and working in the office and Lauren guess what they found the Bureau of Labor Statistics so this is not this is the government okay they found we know they never get it wrong well okay right but they found that on average employees working from home worked on average 5.5 hours a day and they found in comparison on average that workers working in the office are working 7.5 hours a day this is all exclusive of commuting time which is a 40% difference their conclusion was workers now by the way there are plenty of workers out there that work their asses off and work you know many hours at home but on average the Bureau of Labor Statistics is basically saying to employers if you're going to send your employees home to work they're going to work 40% less now are those employees giving 40% of their paychecks back to because they're doing wait wa wait before we get there I I gotta I gotta admit go ahead here we go I'm a little skeptical of those numbers I I've worked in offices uh the idea that everybody's working you know 7.5 or whatever hours uh out of the day I I don't know about that I mean maybe it's some offices but if it's an eight hour day that's a very high percentage going into actual work do you know how they calculated this uh you know what Lauren I I'm I'm still looking into the methodology I was so I was so um giddy with excitement over the uh actual results that I really didn't bother to look you don't want anything to blow this up for you I understand I didn't bother to looking how they came up with them but it was but the workers themselves you know you're right in the office that the the theory is that if you're in the office there are ways to waste time in an office there are certainly plenty of ways but then on the other side it is an average and then also there is also you when you're you're around other people if you're in the coffee room you're still maybe chatting about TV shows but you could also be chatting about customers and clients as well there's some the collaborations being done it all kind of considers to be work maybe it's not a 40% difference but that's a pretty significant number and I guess you know the takeaway the takeaway to me is that if you're going to let your employ employees work from home which I think is an essential benefit which you've been doing for a long time yeah we're all virtual you know I mean but but if you're in a company and I know a lot of clients are struggling with their work from home because they want to look snap just said last week they're requiring their employees to come into the office obviously we know what Elon Musk at Twitter is saying you know Jamie Diamond you know there's a lot of people out there you know at you know you know at Chase is saying you know you you we require people to come into the office it's a real contentious point just just know that if you're going to have a work from home policy and let people work from home they're probably going to work less I mean that's what the numbers are showing so how do you how do you count for that like what do you do you know I mean do you pay them less do you pay them less do you you know give them less benefits does it does it figure into their PTO plan you know it's an issue well you know I've asked quite a few business owners about this and most of them have responded to me along these lines if they do the job that's all I care about if they can do it quicker and spend less time on it more power to them I just want to know that the job is getting done that is fine uh and and I and and I I actually agree with that point of view um does the employee who has to come into work every day because they're Manning a machine or they have to be in the office um do they feel that that's Equitable um that's another you know another point of contention do you know what I mean um so it's an issue I will say yeah I've worked at home a good bit and I know a lot of people who have a lot of people struggle with something that I've definitely struggled with which is there's no natural end point to the day and I think I've actually worked way more hours when I've been working at home when I've been in the office I've always had a train to catch or something or some reason to to get out the door um at home you don't have that natural break it's easy to just lose track of time and keep going yeah do you miss working in the office do you miss going to the New York Times um I yes and no uh there are certainly aspects of it that I missed I do not miss commuting and that just you know that outweighs everything yeah yeah no I I agree the community thing is a it's a big deal um look listen there's mental health there's free time there's balance in your life there's more time with your family there's a lot of benefits you get from working from a home um but they and they do come as a cost to the employer it this did this change your thinking you've had people working remotely for a long time did you read this do you feel the need to take any action not at all no absolutely not absolutely not I mean I'm not changing anything with the structure of my company do I because you believe your employees are getting the job done I do yeah I mean I've I've always had that attitude since 2005 when we went total virtual it's just listen you've got your clients to take out care of and as long as I'm not hearing any headaches I don't really give a [ __ ] when you're working or how many times you're working so do your thing so you know I guess that you're right that does have to be the attitude of the um of the employer it's just it's just a mindset because that you have to accept the fact that less time is being spent you know what I think like the the telling um uh data is is that I think we've talked about this before there's been like something like 15 million new job applic new uh startup applications filed in the past three years you know Y and like I you I think that it's because of this I think there's a lot of work from home workers starting up side gigs on their employer time that's what I think well a lot of that happened during the throws of the pandemic and the lockdown and people were losing jobs and um you know I think a lot of that was people who were forced to try to find something else you're describing people who are taking advantage of an opportunity to work yeah more than one job at once which we know has happened uh there have been stories out of Silicon Valley of you know tech people working for three different employers at once yeah and I guess you know that's the whole point I mean I like to take the extreme point of view and be like you know remote workers are stealing from their employers you know and it is it's you know and some are some are and and I think that it is a uh I think it's something that that employers need to be aware of when they're coming up with their work from home policies like this is you know they're they're people are working less when they're working from home on average and that's just seems to be what I still want to know how they did that study I'm not sure I'm convinced about it but I'm just following the science I'm all about the science and I'm just following the science what are you working on Jean anything we should look for in the coming week yeah I'm going to write um over uh I'm writing a piece for the Chicago Daily heral what who's that um you mentioned them last week I did yes I'm gonna start writing for those guys I like those guys so I'm gonna start uh you know a little bit on them and then um I'm up in the air what I'm going to write about for the inquire next week I've got uh you know I talked to a lot of people maybe you can help me with this decision about producing the right kind of videos for your business some tips on that because I talked to some video people about that I talked to some people I got some really cool tips for using office 365 that you probably don't know um and then I also talked to a few people about deferred compensation plans Lauren and why they're a really cool tax strategy uh that will help you entice higher paid workers but save you a little bit of money and them money over time what do you think is most interesting I think they all sound interesting I think the one that if if you've got some a lot of people struggle with the video thing and I think a lot of people know that's something they should be paying more attention to and they don't know how to get started with it if you can be helpful with that I think that would be of value to a lot of people God damn it Lauren that's what I'm gonna do I'm gonna rate about video that's exactly I've got like two or three interviews and they taught me a lot about doing videos you know you know for your business you marketing purposes yeah you know and like you know things like you know lighting there some recommendations of microphones how to behave when you're in front of a camera that kind of thing for marketing purposes and uh just some like technical advice that you would get from video producers uh that's what I'm going to do and and where to hire that Talent can you you know if if somebody's just exploring this and they don't want to spend a ton of money for uh you know a a really big outfit how think how do they find somebody who can help them uh affordably that's kind of kind of be my takeaway is that you get what you pay for and if you hire an outside video firm because there a lot of good ones out there if you find r one they're going to cost but the quality is just you know you can't even compare it to compare it to doing on your own period but then you have to know for sure what you're doing it for and what value you expect to get out of it before you spend that kind of money It's Tricky that's right that's right you want to write this if you want I'll edit it send it to me you can edit it that's right you do a great job with that actually Gan marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times Forbes entrepreneur and the Chicago Daily Herald Chicago Daily Herald Lord you can also hear him on ABC radio's eye on the world with John Bachelor Jean hosts two small business podcasts with paychecks Corporation and the Hartford thank you Jean thanks Lauren see you next week have a great week everyone