If we allow time for trivialities like eating, sleeping, and loving other people, it is clear, as a simple matter of arithmetic, that we are getting close to the absolute limit of how far this system can take us economically…We have created a zero-sum game in which we are selling our lives, not just our time. —Scott Turow
Hours x Dollars: The Tyranny of Selling Time
Lately, I’ve been pondering work and life and the ways we divvy up time.
Specifically, I’m feeling a bit conflicted about the billable hour.
The billable hour is a blessing and a curse. Every hour that you work, you and your firm get paid. So when you spend an exhausting week working around the clock, the benefits show up in the form of a bigger check. And those extra zeros make the missed family nights and lost weekends, somehow, a little bit easier to swallow.
But here’s where the curse part comes in: if you aren’t billing hours, you aren’t making any money.
There’s a guilt thing happening here. Because of the billable hour, I’m constantly weighing the opportunity cost of doing something—this article for example. I could have billed another hour of my time. I’ve also been spending a few hours a week trying to learn a new language. More lost billable time. A few weeks ago, my wife and kids went out to lunch on a Saturday without me. I lost a little time with my family, but at least I got a few billable hours in.
Sometimes I feel like I’ve become a slave to the billable hour.
There are more problems, too. If you don’t have billable work, you aren’t generating any income. No income + no cash flow = problems. The math doesn’t add up. Which is why, when there’s plenty of work to do, I feel a certain pressure to bill every hour I can…in anticipation of the fuzzy math times, the dry spells.
While the billable hour model is great for owners, it’s not particularly fun for employees. A former colleague from a firm where I previously worked said the thing she hated most was the weekly billable hour requirement. From an employer’s perspective, a weekly billable hour minimum makes perfect sense. But for employees, the required hours loom, and the whip cracks.
There must be a better way to measure productivity than by assigning monetary value to time. Time is a finite resource, and billable hours vs. family/beach experiences are a zero-sum game.
Needless to say, I’ve been giving the concept of the billable hour a lot of thought lately—especially, how to break the vicious cycle, like offering other services, products, e-books, training courses, webinars … anything to get off the billable hour treadmill.
I enjoyed reading Mike McDerment’s Breaking the Time Barrier – How to Unlock Your True Earning Potential (seems like a complete contradiction, but it’s a free ebook). McDerment, the co-founder of FreshBooks, chronicles the story of a web designer who comes to appreciate why he was going broke selling his time vs. selling the results of his work.
What McDerment learned was that selling a result was much more profitable than selling your time. While he could easily build a website for a few thousand dollars, selling the value of the website was a much better way of doing things. By changing his mindset, he started selling $30,000 websites, because the value of his services (in revenue, awareness, etc.) was several times more than that.
Sounds like a brilliant concept. But as I got to thinking about how this might translate to the investigations business, I noted some inherent problems:
Predicting results is impossible.
If you are an accountant, you deliver the tax returns. A web designer delivers a website.
An investigator? We provide information. At the end, we deliver our findings of fact. What if those findings are not what the client was hoping for?
A spouse may think that her husband is hiding money. What if nothing is found? Or what if he is, but it’s cash literally buried in a suitcase? (Good luck finding that!)
You can’t predict results in this business. In fact, in some cases, we can’t even promise to get you anything. So how do you charge based on that?
What is the value of a fishing expedition?
You hire a public relations person to get publicity. A software consultant to deliver a piece of software. In many cases, investigators are hired to go fishing.
A few years ago, a wealthy family called, concerned that their daughter was about to marry someone that she’d only met a few months earlier. Within a couple of hours, I found that their concerns were completely warranted. Not only was the person passing bad checks and had an open warrant, he was married and had a kid.
So what was the value of my services? I probably saved the family several hundred thousand dollars, between a wedding, legal fees, and whatever money the “beau” would have made away with, not to mention the emotional and physical heartache.
I invoiced for a couple of thousand dollars.
If I were using the value-based model, I would have made out like a bandit.
The truth of the matter was that I was fishing, and I just happened to catch a fish (a pretty big one). So, how do I invoice that?
What is the value of peace of mind?
A former colleague called last week, suspicious that his new tenants might have something hiding in their past. Last month, a hospitality company asked us to conduct a background investigation on their new CEO.
Clients easily see the value when you uncover a CEO with a shady past or a tenant with a history of credit issues.
But in both cases, we didn’t find anything to be concerned about. Was our service of value?
Peace of mind is pretty valuable, but does anyone know what the going rate for peace of mind is?
In part, I’ve gotten beyond what some other investigative firms do. My services are not a commodity. I don’t have any blue light specials.
Anyone can run a few Google searches, subscribe to a database, or run a criminal record check these days. The way to provide value is to offer an innovative approach to the set of circumstances for each client, not a commodity driven by the lowest price.
But I haven’t gotten away from the billable hour just yet.
So there is my dilemma. Writing it all out has percolated some ideas, but I’m still far away from breaking the chains that bind me to the billable hour.
What do you say? Do you think investigators can use a value-based approach? Are you trying to free yourself from the billable hour model?