We were recently reminded of the days we used to bill by the hour. It’s pretty standard for service providers, but in our opinion there is a much better way.
It took years to make the graduation from billing by the hour to billing by the project. Then it took a few more years to go from billing by the project to a set monthly amount for ongoing services. Erik refers to it as a graduation because it was a graduation of sorts. Billing by the hour was time consuming and irregular. Sometimes clients would get upset if an invoice was significantly larger than previous invoices because we billed more hours that period. Project billing was a bit better, but it had disadvantages too. Trying to calculate how much a project would cost could be time-consuming and once you gave the client that estimate it was sometimes hard to justify any overages.
It was about two years ago that we decided to move to monthly recurring revenue and we’re glad we did. Clients like knowing how much they’re going to pay every month, without any surprises. It also makes it much easier for us to project things like revenue and profit when we have a set monthly amount we can count on. If switching to recurring revenue is an option for you Erik highly recommends it.