BillABLE Hours Versus BILLED Hours
I have become poignantly aware that there is a difference between logging billed hours, and billable hours.
I have been looking at how much I work, and how much money I make. If providing a service, there’s some relation between time spent, and money earned. (Even if you’re churning out widgets, there’s some relation.)
There’s this funnel—at the top of the funnel, is all the time you spend, on anything related to your work. At the bottom, is the number of actual, billed hours you spend, on any given day, that lead to you earning your living.
Between the top of the funnel, and the bottom of the funnel, are a dozen things that can get in the way; dilute the percentage of your time that you actually get paid for.
sleep, and recreation, and food, and personal maintenance lead to …
A smaller percentage of time spent focused on your work, where you plan, schedule, organize (email, get back to people, market, reply to proposals, etc.), which leads to …
A smaller percentage of time spent on billable work, which leads to …
A smaller percentage of time spend on billed work.
billable work: Direct work for a client’s project, where you are applying your skill to meet their needs, whereby people would be willing to pay you whatever professional rate you charge.
billed work: A subset of billable work for which you are actually paid.
Why aren’t they the same thing? Why wouldn’t you always get paid for every hour you work? Here is a partial list of reasons I have encountered:
- You under-bid the project, which was a fixed-fee project. Rather than alienate and disappoint the client, I’ll “eat” the costs of the project, watering down the amount I am actually earning per hour.
- You under-estimated the project, which was an hourly project. Same reasons as above—just because I’m charging the client by the hour, doesn’t mean I want to shock them, by charging way more than they expected.
- You feel guilty for charging for something, because “it seems too little,” or—again—you want to upset them.
- You wanted to be nice, or get the work, or otherwise “deliberately” asked for less than your real rate—than you knew it would take.
- You do little bits and pieces of work for the client—five minutes here, and ten minutes there—that actually add up to a lot, without your knowing it.
So my current goal is: Increase the number of billed hours in a day. There are a number of ways to do this. Instead of the funnel analogy, you could look at it as a stream—the rich strong stream of time comes down from the mountain, and trickles through various channels, until at the end, what remains ends up in the pool of billed hours.
Along the way, all sorts of things dilute it:
- Necessary planning
- Important down time and creative time
- Lack of focus or confusion
- Miscommunication about what the client actually wanted, causing unnecessary work steps
- “Switching costs” due to multi-tasking between projects
Towards the very end of this stream, you have this precious resource of hours usable for actual, billable, time.
Can you see what a precious resource these few hours of billable time are, in the ecology of what you do to make a living?
If you say you charge $70 per hour, but half your billable time actually isn’t billed, then your real rate is $35 an hour.
The percentage of these billable hours that are actually billed represents a major area where you might be able to improve your earning power.