Old Joke: Assembly line breaks down and a repairman is brought in. After looking over the machine, he pulls out a hammer, strikes the machine and it begins to run. The shop foreman is amazed until the repairman says, "That will be $500." Caught off-guard the forman replys, "You want to charge $500 for hitting the machine with a hammer? My CFO is going to need an itemized invoice."
The invoice comes in the mail:
- Hitting machine with hammer: $5.00
- Knowing where to hit the machine: $495.00
In a way, an hourly rate is the way to control the costs. What is an application worth that saves a company from having to hire a full-time minimum wage employee? Total annual costs for this person including salary, benefits, vacation, sick leave could reach $20,000. It has to be worth 15,000. If the solutiion turns out to be an import into a database that can be created in 30 hours or less, I doubt the going rate is $500/hour.
The client can control the cost throughout the life of the project.
Many projects that have a fixed fee ususally ask for half up front. The client can pay as they go with an hourly rate.
Charging by the hour just seems wrong to me. I want to be valued for knowing where to swing the hammer.