Independent Contractor: Pay Dilemma Part2

ouestque
ouestque used Ask the Experts™
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In one of my previous questions an expert mentioned the fairest way to bill a client is exactly for the hours worked. That's what I do, but when you do that both the client and contractor lose out. See below...

Example:
*A client calls and you quote the project will be complete in 20hrs, which is the lowest bid. (I.e., everyone else says it will be complete in 40hrs, so the client knows you aren't  making a quote that is too high.)

You have 2 options:

1) Work super hard, stress your body/brain, finish the project in 10 hours and bill the client for 15 hours. The client wins because he got results for cheaper and faster than the quote. The contractor wins because he got to charge for 5 free bonus hours.

2) Work at a steady pace and finish the project in a little less than the quoted time. (I.e., 19 hours)

In option 2 there is no incentive to work faster, but in option 1 both parties benefit.


Assume the quality is the same for both scenarios.
My question is which way to bill is fairer and why?
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Good, fast, cheap; pick any TWO. Also, depends on how you define "lose out" and I question your assumption quality can be maintained under a "super hard, stress your body/brain" environment.

In:
# 1. I question whether the quality can be maintained which means you lose on quality of life and the client has a higher chance of losing on quality.
# 2. If you know this can be done easily in 20 hours, even though "everyone else" says 40, this is a win, win. Quality of job, quality of life and done under budget.

Above all, do it honest and fair without sacrificing your sanity / income / quality of life and all else will take care of itself.
JohnBusiness Consultant (Owner)
Most Valuable Expert 2012
Expert of the Year 2018

Commented:
You should quote for what it will take you at a steady pace and stick to that. That is fair to both.

If competition undercuts you, you will then have to examine that and determine (a) if you wish to compete like that or (b) perhaps find other clients
Value is only what the customer is willing to pay for. When contractors and customers don't define value the same way, it tends to be the beginning of the end ... or the end of an anticipated beginning.

For example, if a contractor defines value primarily around quality and the customer defines value primarily around price ... either face it together and come to agreement or agree to disagree and do as John says; find other customers.
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David FavorFractional CTO
Distinguished Expert 2018

Commented:
You're making this too hard... to me...

Just set your rate + quote your rate for number of hours of expected work...

If someone else low balls you (quotes at some crazy low rate or crazy low number of hours), chances are the project will fail horribly + you'll get their business eventually.

Just quote correctly + move on to your next client.

If you start haggling (negotiating) with clients + second guessing yourself, this becomes very complex.
David Favor just said it bluntly ... PS: "Fair" is a week in August!
David FavorFractional CTO
Distinguished Expert 2018

Commented:
With gnarly clients... Blunt is usually best... :)
Technology and Business Process Advisor
Most Valuable Expert 2013
Commented:
Example:
*A client calls and you quote the project will be complete in 20hrs, which is the lowest bid. (I.e., everyone else says it will be complete in 40hrs, so the client knows you aren't  making a quote that is too high.)

Or the client thinks you're an amateur or incompetent because if everyone else says 40 hours, what are you not taking into account?  You COULD have a secret trick that helps you work faster without issues of quality... or you could be misunderstanding the project which can cause both you and the client problems - you when you realize you've made a mistake and now have to work twice as much to get the job done (or worse, you realize you don't have the skills needed for the other 20 hours!)

When you quote, you quote a scope of work.  If you're too specific to the client in terms of how long each phase will take, you're cheating yourself as others can undercut you (who is to say the client won't go back to others for a counter offer?)  Certain things can be ranges and certain others can be fixed (depends on the client and project).  Promising to migrate 10 GB of email to Office 365 in an hour over a T1 line is foolish... The length of time depends on the resources the client provides and the tasks to be completed, combined with the your skill level at those tasks.

You have 2 options:

1) Work super hard, stress your body/brain, finish the project in 10 hours and bill the client for 15 hours. The client wins because he got results for cheaper and faster than the quote. The contractor wins because he got to charge for 5 free bonus hours.
You lose because you stress your body/brain.  Burnout is a real thing.  If there's something you should have learned working in IT it's that nothing ever takes as long as you expect it to.  It either takes 5 times longer or is done in a minute.  Ok, that's an exaggeration.  But - and how much can vary on the type of project - how long things take depends on a variety of factors and if you don't build in sufficient time you're either cheating yourself or your cheating the customer (giving them inferior results)

2) Work at a steady pace and finish the project in a little less than the quoted time. (I.e., 19 hours)

In option 2 there is no incentive to work faster, but in option 1 both parties benefit.  
There's always an incentive to finish work faster if you have other work lined up.  Finish faster and you can start another project and make more money sooner.  I'd rather have a reputation for providing reasonably accurate estimates and QUALITY work than a reputation for providing problematic work that gets "done" faster.  I'll get more referrals with the first reputation than the second.

Author

Commented:
Thanks so much everyone for the great feedback. Going forward it seems like a good baseline to  quote what it will take at a steady pace and maybe add a 20% buffer. Then try to beat it without burnout so I can move to the next contract. In the past, I was always moving at extreme speeds with no breaks to impress the client, but you are right, I would burn out pretty bad at the end of the day. Thanks again everyone!!
No problem. Happy Consulting!

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