Gini Dietrich

It’s Time to Rid PR Firms of the Billable Hour

By: Gini Dietrich | May 5, 2010 | 
29

Yesterday Martin WaxmanJoe Thornley, and I were recording our second podcast for Inside PR and our topic was the evil billable hour in PR firms. It’s live today and you can listen to it here.

But, because a podcast is so one-sided and because we went off on a tangent that I want to explore further, I thought we could discuss it here.

Exactly one year I blogged about this topic (see it here, but read the comments; that’s where you’ll find the good stuff) and I hate to say we’ve not come to a better conclusion in 12 months time. We don’t actually bill by the hour so the evil billable hour isn’t as prevalent as it once was. We bill for projects; that changed more than a year ago. But we still have to track our time and that’s what I want to get your thinking on today.

In our business, no matter if you’re doing traditional PR or digital communication, you are selling time. And, people who don’t bill their time don’t understand everything that goes into what we do…mostly because it’s not tangible. Sure, digital communication has made our services more measurable and less expensive, but we’re still selling our brains.

I know if someone asks to pick my brain and I’m not going to get new business out of it or it’s not going to turn into a good referral network for me, it’s not worth me giving that person my brain for free. My brain = money. And to know how profitable my brain is, I have to sit down daily (or weekly) and enter my time.

But the idea that we have to track our hours to know whether or not the time we are spending on a client’s account is profitable for our business and to show the value of what we do to our clients seems very archaic. Problem is, we don’t have an answer.

I was thinking about this while pounding out the bike miles this morning. There has to be a better way.

If you were me, how would you change the financial model to be rid of billable hours and tracking time?

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

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29 Comments on "It’s Time to Rid PR Firms of the Billable Hour"

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Abbie S. Fink
6 years 1 month ago
I don’t really have an issue with tracking billable hours. It is more about explaining what that means to a client. Some pitches are successful with one phone call, others need a lot of follow-up. Some clients need more face time, where others are just fine with written reports. So when you talk in terms of hours, it doesn’t necessarily equate to the strategies and tactics at hand. We’ve addressed the issue a couple ways — we talk in terms of monthly investment or monthly fees rather than a retainer. We provide detailed accounts of what we’ve done for the… Read more »
Brian Meeks
6 years 1 month ago
Gini, I am not terribly familiar with how PR firms work, but my gut tells me that a TOC financial model would work really well. I am not sure I can do a throuough jog of explaining TOC (Theory of Constraints) and the approach of analyzing business and making decisions based upon a throughput model, but I feel like Eli Goldratt’s methodology would solve a lot of the issues. Eli Goldratt has written several books, most notably, ‘The Goal’, ‘It’s Not Luck’, and ‘Critical Chain’. I am extremely well versed in his methodology and if you (Gini) or anyone reading… Read more »
Andy Donovan
6 years 1 month ago
I agree with you Gini – the days of “picking one’s brain” especially when there’s no chance of a project in the workings have to come to an end. I started out saying that opinions are free but advice should be on the clock – then realized everyone started out saying “Can I get your opinion on…” I typically bill out on a pre project basis and work out a monthly consultation fee for those who simply want advice on an ad hoc basis. I think we have to demonstrate that our time is worth what we bill out and… Read more »
Brad Farris
6 years 1 month ago
Gini: As you well know, I am an enemy of billing for time. It’s not a renewable resource, you can’t make more of it, so why would you sell it at any price? Of course what you are selling is your brain, so why measure the time it takes? If you work on something all day long and don’t find the answer, but then the next morning suddenly gain a breakthrough on your bike, how do you bill for that? Do you bill the bike time? Do you not bill the unproductive office time? It’s crazy. If we determine our… Read more »
Susan Maxwell Stevens
Susan Maxwell Stevens
6 years 1 month ago
I used to work for an executive that purposely withheld key strategic information from consultants. She would say, “If they are really that smart, let them figure it out.” Clearly she had a disdain for consultants, but still hired them for a certain level of project because her staff didn’t have the expertise. Then, when they almost hit the mark, but not quite, she would belittle their expertise. Really, she just set them up to fail and it made her feel superior to do so. Even in large corporations, there are pockets of office politics that relish information control and… Read more »
Bart Butler
Bart Butler
6 years 1 month ago

One logical rationale for tracking billable hours, especially since hours are a finite commodity, is to define the time one is devoting to client A, which is, then, not available for sale to clients B, C or D. Your time has a value, and if you’re going to be in business, you need to apply it wisely.

That said, though, the ideal would be to bill for a combination of the time you spend AND the value to the client of the work you’re producing.

John
John
6 years 1 month ago

So essentially you’re picking our brains to get your answer for free?

Paul Roetzer
6 years 1 month ago

Gini,

I started battling with this exact topic in 2004, and launched a PR firm built around standarized services and set pricing in late 2005.

It is absolutely possible to run the vast majority of services on a set pricing model; however, tracking time remains essential to report on your efficiencies. Even if you stop charging by the hour, there still must be a target hourly rate you are trying to achieve for your time.

Be glad to share some additional thoughts and lessons offline sometime.

Paul

Craig
Craig
6 years 1 month ago
I’ve seen this from both sides of the fence (corporate and agency), and I have a feeling too many people are looking at this purely from an agency management/margin/resource standpoint. As *the client*, I compete for dollars/budget with others in marketing. My counterparts in, say, SEM/SEO can tell you that if we double the spend, this will be the outcome. If we half it, this will be the consequence. You see where this is going. I think it’s great — perhaps noble — for my agencies to say, we’re going to do this project for $X, even if that means… Read more »
Gayle
6 years 1 month ago
It took me ages to realize how much expertise I was giving away for free by responding to constant requests to meet for coffee, lunch, etc. to “pick your brain.” Expertise is my PRODUCT. Then there was the time involved taken away from other client work. Even a “half hour” for coffee ends up being an hour or more, plus driving and shut down time. That’s two hours just for a start. I can’t afford to give away several hundred dollars of time for free to everyone who asks. I began using one of several tactics, depending on the request.… Read more »
David
6 years 1 month ago
I’m with Gayle, 100%. This is why I rarely take “cold calls” from people seeking my business anymore. I prefer “referrals” because I can get pretty impatient w/people with “too lofty” goals who haven’t done their homework. The “I’d like to pick your brain” ruse only goes so far with me, particularly with people with whom I have no previous collegial connection. With true pals, I’ll give general advice but at a certain point, I’ll genuinely sigh and shrug and say, “to explore this any further requires a plan on how you plan to integrate PR into your business goals,… Read more »
Roger Wohlner
6 years 1 month ago
Gini, geat post and great discussion among the folks who have left comments. When I left the world of corporate finance/accounting I first went to an accounting firm that did financial planning. Everything was based upon hours and I just never “got it.” Ever since going out on my own about a dozen years ago I bill a flat rate for one-time projects such as a financial plan, a portfolio review or a 401(k) plan review. For ongoing clients, the fee is either a percentage of the assets under advisement or a flat ongoing fee. Either way, the ongoing fee… Read more »
Martin Waxman
6 years 1 month ago
I enjoyed talking with you about this on the podcast and still feel the same way I did a year ago – i.e. I hate billable hours. But, I think I’m starting to mellow a bit when it comes to tracking time and understanding why we need to measure hours spent to help determine profitability. I think the biggest question for all of us in creative services is: what is our value? Is it the idea, the high level counsel, or the time we spend on tactical executions. Personally, I see the idea/strategy as having the highest value, but often… Read more »
Roger Friedensen
6 years 1 month ago

I’m kinda partial to Joey Reiman’s model. “You want us to work for you? We’d love to. That’ll be a million dollars up front.”

And he gets it. Learn more about his firm here (http://www.thinkbrighthouse.com/brighthouse.html) or read his book to understand how he built an ideation firm (http://www.amazon.com/Thinking-Living-Creating-Revitalize-Business/dp/1563524694/ref=sr_1_2?ie=UTF8&s=books&qid=1273114994&sr=8-2).

David Winch
6 years 1 month ago
Brad has got it right here. I won’t repeat other people’s thoughts but do as Brad says and check out the thoughts of Ron Baker, Ed Kless and the others at the Verasage Institute. OK, just one regurgitation:- The client doesn’t care how you did something they couldn’t do, or how long you spent doing it, as long as you delivered what they wanted within the elapsed timescale they were expecting. (In fact, if you deliver early, they can enjoy the value for longer!) Having helped them see the true value of having their problem fixed, before you ever got… Read more »
Richard Bosworth
6 years 1 month ago
We need to drop the 19th century machine driven culture and replace it with something more appropriate to the age of the knowledge worker. No longer do we have to stand over and mind machines for a 12 hour shift and get paid for just that. We have to be more flexible and creative, if you look at how and when you “add value” it doesn’t happen to order but it does happen however, there needs to be space / time for that to take place which should be allowed in your processes. So yes have a record of hours… Read more »
Samantha Scott
6 years 1 month ago
In answer to your boiled down question in the comments, Gini, we have developed an average amount of time or perceived cost associated with generic projects. For example, if someone just wants a press release developed and sent out then we average 2-3 hours and have a set cost associated. However, if there’s a project in mind that we’ve done before we will estimate it based on that. It’s lead to a “service menu” of sorts that we provide to smaller businesses. We still bill hourly and record our hours (in 15 minute increments), but it’s more of a checks… Read more »
Steve Haweeli
6 years 1 month ago
Charting our time – which includes charting time spent posting, monitoring or creating messages for soc med channels – has been the single most important managerial decision I’ve made as an agency principal. Is the system perfect? No. Do we have a reasonable idea of client profitability? You bet. Without that data, We are flying into the clouds without a radar. We have done a good job of teaching our clients what time management is and they all seem to appreciate the discipline. By the way, I have to constantly remind myself to enter my time. But I do it.… Read more »
Gini Dietrich
6 years 1 month ago

I was thinking more about this during my ride this morning (the wind was blowing 37 mph so I had A LOT of thinking time as I pounded each pedal down…not easy riding). I think Steve is right…without time data we’re flying without radar. So now I want to find a way to sell products vs. services. Where the product is our brain. Another blog post in the making. Coming soon.

Jay Baer
6 years 1 month ago
Coming at this from the digital agency perspective, and now helping a lot of PR folks make that transition, here’s how I’ve done it. Establish for the client an outline of deliverables and outcomes. What are you going to do? When will it be done? How will it be measured? And then charge a monthly/quarterly/annual fee for doing so. Certainly, you will use some sort of hourly rate calculation to come up with your fee, but that calculation doesn’t need to be shared with the client. Ultimately, if you get the job done in less time than you thought you… Read more »
Gini Dietrich
6 years 1 month ago

Thanks Jay! What I would love to get to, eventually, is even some sort of revenue share with our clients because, as you point out, we now can track results as they affect sales.

Am I seeing you in Asheville??

Abbie S. Fink
6 years 1 month ago

Gini — sounds like this wood be an excellent topic one night in Asheville. Get all our brains together 🙂

Gini Dietrich
6 years 1 month ago

Yeah Abbie…while we’re at Club 461.

George Rosenberg
6 years 1 month ago
I often recommend to agencies I advise that they consider a hybrid model — retainer plus time. The retainer helps with cash flow (cash is still king in most firms) and the “plus time” kicker commits the client to paying for time above and beyond the retainer — but only with their prior approval. The key to successfully implementing this model is ongoing time tracking and frequent communications with the client about time spent against the retainer. Eliminating the billable hour is admirable and for some firms realistic depending on the kind of work they do. Selling products vs. services… Read more »
Demetri Dallis
6 years 1 month ago
Gini- Nice topic! A couple of different thoughts that I had on the subject and we have been internally testing. One includes, for digital marketing, the amount of time spent or “brain power” on a service. A monthly revenue model could be custom developed based on individual client requirements. The second, but most unlikely, could include working on a percentage, performance-based model. If our “brain power” is as good as we value, then the performance should materialize to expectation more often than not. The client wins since they only pay based on the outcome. The agency wins if a transaction… Read more »
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[…] Gini Dietrich points out in her blog post, “It’s Time to Rid PR Firms of the Billable Hour,” even though we know it’s a problem, […]

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[…] billable hours. Nearly two years ago to the day, I blogged about PR firms needing to be rid of the billable hour structure. You still have to track your time because that’s your inventory. But the idea that clients […]

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[…] billable hours. Nearly two years ago to the day, I blogged about PR firms needing to be rid of the billable hour structure. You still have to track your time because that’s your inventory. But the idea that clients […]

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