What to bill when billing hourly

John Reeve | September 2nd, 2008 | , ,

When starting up a new freelancing gig or small business, billing hourly for your services is a good way to keep your workload and cash flow consistent. To get started, you’ll need a few steady clients and a good time tracking system. Once you’ve set out running, the next thing to figure out is what to bill. You are selling units of a limited resource called time, so the more of it you can account for, the better. There are three factors to consider when deciding how to bill for your time.

1. Billable types of work

To start with, you’ll need to decide what types of services you provide and how much you want to charge for each one. These work types will become the primary categories for approximately 85% of your billable work. These work types will depend on the nature of your business. At Pelago, a web development agency, we have categories like HTML Production, Javascript Production, Web Design, Server Side Engineering, Site Architecture, System Administration, and Database Design & Development. Because we track each of these work types, we are able to accurately bill clients based on the level of service we provide and quickly estimate projects for new clients.

2. Project management

Roughly 10% of your efforts on each project will go to project management, a billable type that can be difficult to track. Project management encompasses the time you spend keeping the project going; receiving and sending deliverables, assigning tasks, keeping tabs on subcontractors, and maintaining a vigilant watch over deadlines. Project management may not seem to have a direct impact on the final deliverables, but it is a crucial component and if you don’t bill for it you will bring down your overall billable rates by 10 to 20 percent.

3. Miscellaneous debris

A smaller percentage of the work you do will fall between the cracks. It is up to you to decide if you want to track and bill for it. For example, you may spend a few minutes each day corresponding with a client via email, providing your professional expertise in the process. If that time spent emailing adds up to an hour a week, a year will net you fifty-two hours of unbilled time. At a rate of $100 per hour, that’s $5,200 in lost time over the course of a year. At some point, the seemingly small things reach a tipping point and need to be billed. The tricky part is finding that point.

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7 Responses to “What to bill when billing hourly”

  1. Mark says:

    Good tips. I struggle with many clients who email like crazy. I have one who I don’t hear from for a couple of months and then I’ll wake up one morning and check email and sitting there all of a sudden are 10 emails sent in the wee hours of that morning…

    mark
    http://www.elearninglive.com

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John Reeve
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John Reeve

John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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Jennifer Payne
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Jennifer Payne

Jennifer is the Director of Quality and Efficiency at Pelago. Her blog posts are based largely on her experience working with teams to improve harmony and productivity. Jennifer is a cat person.
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Braden Jones
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Braden Jones

Braden is a co-founder and strategist at Pelago. His blog posts draw from his worldwide business travels and forays into the retail apparel industry. Braden loves to surf and recently adopted a Doka named Moose.
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Michael Payne
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Michael Payne

Michael is a co-founder and product architect at Pelago. His contributions stem from experiences managing the development process behind web sites and web-based applications such as Intervals. Michael drives a 1990 Volkswagen Carat with a rebuilt 2.4 liter engine from GoWesty.
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