Away from hourly work to a prepaid package of hours

Question

I am working with a number of small clients that often request small changes, once every 2-4 months at least, and the constant task-switching of working 1 hour for this client and 2 hours for that client is not ideal. Invoicing and sometimes needing to follow up on late payments doesn't help either. There's more time wasted than I care for, and the late payments are especially infuriating.

To combat this, I am thinking of moving away from hourly work and offering mainly prepaid packages of hours. It could be a 5 hour, a 10 hour, and a 20 hour package plan. By buying in bulk, there would be a small discount, and bigger discount with more hours. When a package is paid for, it could be valid for let's say 3 months.

I would sell this new way by mentioning the discount, higher quality of work, and priority service. I would also raise my hourly rate at the same time, making the packages seem a better deal.

After a package has been bought, I would keep the client updated on how many hours have been worked after each task.

If these small clients had more work to do, I would definitely try offering a day rate, but that may be too much for these clients.

Has anyone done this or is doing this? Any advice or potential issues that could come up?

PS: I've been lurking here, but first post. All feedback welcome.

Answer 1

I used to do something similar for one of my clients. They paid in advance for a package of hours. I liked it because I wasn't invoicing for such small dollar amounts all the time, and they received a small discount.

Eventually however, I moved completely away from hourly billing. Now instead I offer flat rate monthly support. This support includes answering questions and troubleshooting (via email) and bug fixes. There is no hourly limit on the time.

The advantage to the customer is they know how much they are paying every month, and they get priority over my other work. The advantage to me is I know how much money is coming in every month, and I get paid whether or not they use the service. Many of my customers don't use it every month, but they feel comforted by the fact that when they do need it, it is available.

One of my customer also purchased a package that included "small changes". These were minor cosmetic items that didn't involve database changes. They used it occasionally, but it is often hard for a customer to know if something is "small" or not.

This will not work for all situations. My customers trust me and I trust them, so no one is worried about getting "ripped off". Also, I have a pretty good handle on how likely it is that my customers will have bug reports or need changes because I wrote the code and I've been working with the clients for a while.

Answer 2

As Avonelle pointed out, you are moving to a monthly support fee which has to be paid monthly, each month.

Now, in my case, small clients usually don't like the idea of paying if they will not use me. So for me, hour packages work fine.

The first thing I did is removed small packages so my minimum is 20 hours. 5 or 10 are quickly depleted and then we are again in the same problems. So if your client cannot get you work of minimum 20 hours for let's day 6 months or less, why do you work for him?! I avoid such clients.

Now, be sure to properly monitor each project and packages. It may take months, before you work again on it, and make sure that you are 500% sure how many hours remained. For this, I use a simple project on Assembla. As of recently, Assembla is no longer suitable for this as they now charge all things I need, so I recently moved to BitBucket (you can too if you're a programmer as well). I open a Git project with Wiki, where I keep track of packages he bought and time I spent from them.

The other way is to use some time tracking service, but I think most of good ones are not free for such a long period of time.

Next, always make sure that packages DO HAVE expiry date. Let it me 1 Jan since you start you tax year. If they find that they cannot spend 20 hours till 1 Jan, they can come back on 2 Jan and buy the smallest package.

To return to Avonelle again, aim to switch to monthly support package. You can still offer 1-month, 3-month, 6-month, 1-year packages with a discount in each of them.