Do you bill your clients based on time? Do you ever find this to be frustrating, messy, and unpredictable? Do employees sometimes forget to track time therefore creating fire drills to catch up and reconcile billing (which takes even more time)? Does it ever cause issues or disagreements with clients? Do you wish you never had to worry about it again?
I’ve been having some interesting conversations recently with other professional services firms that bill their clients based on time. It’s interesting to me because a few years ago, SpinWeb made two very significant changes:
- We implemented ROWE
- We eliminated time-based billing
Yes, the two are related.
Pre-ROWE, we billed our clients based on time. We would do the old-fashioned dance of “hmmm… I would estimate this project at 70 hours” and then hope we magically hit that target. We all knew we were simply making up numbers out of thin air and hoping it was remotely accurate. It was a huge pain. Every time we did this, at least one or more of these things would happen:
- No matter how many times we called it an “estimate,” our clients would hear a fixed price
- Once the invoice was sent, we would end up arguing over money (see #1)
- Employees would forget to track time, which caused us to lose money or spend time going back to find the hours
- We would be penalized for being efficient (less money)
- Our clients woud be penalized if we were inefficient (over-billing)
- We would fudge and edit time reports to avoid arguments
- We would spend 10% of our productive time just dealing with all the minutiae of tracking time
As you can see, time-based billing is not much fun. However, it is such an accepted norm in professional services that not many people really question it. They just accept it as “the way things are done” and continue to trudge along with all the lost productivity and pain that comes with it.
However, when we implemented ROWE at SpinWeb a few years ago, an interesting thing happened. As we eliminated time as a measurement of productivity and started focusing 100% on results, we also began to extend that mindset to our services. It became more and more ridiculous to apply time to our internal results and so we began to see how we could revolutionize our billing, as well.
Soon after implementing ROWE and using the tools from that experience, we moved to a 100% value-based billing model. No more time tracking.
It has been one of the most tremendously positive changes we have ever made at SpinWeb.
No more making up numbers. No more arguing over money with clients. No more babysitting employees to remind them to track time. No more answering questions like “how much time should I bill for this?” five times a day. No more making up different prices for each project. No more scary “estimates” that leave clients fearful of over-billing. No more being penalized for being efficient.
All these issues: gone.
Clients are happier. Employees are happier. The company is more profitable. Everyone is more productive. Best of all, we have not had a single argument over money since the switch.
I cannot stress how much of a dream it has been to move to a 100% value-based billing model. If you are still billing based on time, let me assure you that it’s possible to make the switch. If we can do it as a web services firm with lots of moving parts and complexities, I’m confident that anyone can do it.
Have you moved to value-based billing? I would love to hear your experience.



