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billable work vs customer service etc
flotsam




msg:783653
 3:18 am on Nov 13, 2004 (gmt 0)

How do others draw the line between free help and sales efforts, and billable work? Having come from decades in a job where all the work was "in house", I continue to struggle with where to draw the line.

I routinely do minor fixes (i.e., under 5-10 minutes) for clients as free "customer service".

I often visit a client on a presale visit, and many times visit again when the sale is made and I want to gather facts and impressions for their site.

How do others handle seemingly tiny requests that expand into hour+ tasks?

How about the client who wants progress review sessions at his office, 30-40 minutes away?

And of course, the inevitable scope creep?

Thanks much for any thoughts...

Bill

 

iamlost




msg:783654
 5:44 am on Nov 13, 2004 (gmt 0)

What does that client do for his/her clients for "free"?

The more you do for "nothing" the more you will be asked to do for "nothing". So I do nothing for nothing.

Anything and everything that falls within my "business" scope is billable. I will do work for registered charities in return for a donation tax receipt in lieu of normal payment but that is not doing it for "free".

I work by contract following an accepted proposal. Any additional request, however minor, generates a change order accepted and signed before work is commenced and an additional charge billed. A business like approach and a good contract eliminates scope creep and minimises attempted abuse.

The time to work out a proposal is "free" in the sense that I do not charge it separately (and do not get all proposals accepted) but the time is factored into the proposal cost structure and reflected in the quoted price.

Travel costs are costs and must be billed - call a lawyer to come across town to your office for a meeting and then view the itemised billing you get: the travel time will be there. Are you less of a professional? I'm not.

Yes you have to do visits to acquire the information needed - and it should/must be included in your pricing. I do not recommend "itemising" as it leads to conflict. An overall contract price for a specified project is the best, but if necessary an hourly rate must allow for all costs (including travel).

Some people charge for wages only, no allowance for any expenses while others bill at 2-5 times that amount - allowing for wages plus all business overhead/operating expenses. The first (wages only) person may have lots of clients but the second (wages plus expenses) will still be in business long after the first is forgotten.

You must take the time to determine all operating costs, for the business generally and the project specifically. You must take the time to write detailed proposals followed by detailed contracts. You must decide if you are a contractor or an employee.

johntabita




msg:783655
 6:47 am on Nov 13, 2004 (gmt 0)

What does that client do for his/her clients for "free"?

The more you do for "nothing" the more you will be asked to do for "nothing". So I do nothing for nothing.

I couldn't disagree more. I have a client that suddenly couldn't get to their website from their office. I probably spent 1-1/2 hours figuring out what I knew wasn't my problem (the DNS lookup on their in-house server somehow got messed up). This same client then gave me two more web projects and all of their print work.

Another client asked to meet with me because he had the chance to land a big account and needed to clarify some questions they had about his website's capabilities. I didn't charge him for the hour we met (although he did buy me lunch). The next week, he sent two referrals my way.

For me, it's a judgement call. Neither of these clients are the type that take advantage and they are always appreciative. On the flip side, another client called me into his office to discuss some site updates. I sat with him for over an hour while he printed out pages of the site and marked up the changes he wanted made. Do you think I charged him for the time I sat there? You bet I did.

I often visit a client on a presale visit, and many times visit again when the sale is made and I want to gather facts and impressions for their site.

How about the client who wants progress review sessions at his office, 30-40 minutes away?

Since you're already gathering "facts", how about gathering one more; namely, how many meetings they'll require and build that into the price?

flotsam




msg:783656
 12:16 pm on Nov 13, 2004 (gmt 0)

Thanks for the replies. Good points.

johntabita, when you charged the client you sat with while he printed out pages, did you just add the hour to your bill? Did/do you itemize such charges? Did you mention during the wait that the time would be billable?

That is exactly the sort of situation I am struggling with.

Thanks again,
Bill

PS: iamlost, maybe your location allows it, but the US IRS does not allow deductions for time donated to a charitable agency. I just reviewed that very issue last week in the IRS regs. I suspect a tax accountant might figure out a way to do so for a corporation, when they donate the time of an hourly or salaried employee, but the regs for individuals were pretty unambiguous. Bummer! I still do those, at about 7-8% of my efforts, but the tax benefit would be nice.

johntabita




msg:783657
 8:12 pm on Nov 13, 2004 (gmt 0)

johntabita, when you charged the client you sat with while he printed out pages, did you just add the hour to your bill? Did/do you itemize such charges? Did you mention during the wait that the time would be billable?

The total amount of time for the updates, if I recall, was 4 hours. I simply added another hour to the total, without itemizing it or even mentioning it.

iamlost




msg:783658
 10:28 pm on Nov 13, 2004 (gmt 0)

the regs for individuals were pretty unambiguous.

If you are treating webdesign/whatever as a business i.e. charging for what you do you should be a business.

Proprietorship or incorporated does not matter (which is best for you is best discussed with your lawyer/accountant). The taxes and tax deductions btween individual/company are very different (even I believe, in the USA). The business acceptance between an individual and a company (however few owners/employees) is often different as well.

flotsam




msg:783659
 11:37 pm on Nov 13, 2004 (gmt 0)

Sorry -- I said individual when I should have said sole proprietor. (and sorry for the thread creep...)

The rules are slightly different for the sole proprietor and other business types.

The IRS regs on "Schedule C, Profit or Loss from Business, Sole Proprietors" says you cannot deduct charitable contributions from the business, period. (Part V, page C-7, 2004 instructions for Schedule C.) (Cash and property donations would be deductible on the personal part of the tax return.)

For other business entities, charitable contributions are deductible at the lesser of depreciated cost or market value. (Miscellaneous Expenses, page 54, 2003 IRS Pub 535, Business Expenses.)

From a FAQ on deductibility of this sort of thing:

Q: Am I correct that the donation of labor/time, i.e. landscape companies that send professional workers to do a specific task such as installing irrigation pipes, cannot be counted as a tax deductible contribution, but that the donation of the pipe can be counted?

A: The IRS applies the following principle to deductibility of services: If an activity garners no income, then it is not subject to income tax. Therefore, it (the "value" of the activity should not be deducted from income tax as a charitable deduction -- it had no income "value" to the donor, since no income was received from it. Cash is deductible because cash is subject to tax. Materials on which a fair market value can be established are usually deductible because taxable income is typically used to purchase those materials. Labor is not deductible as a charitable contribution because no income is related to the activity.

A corporation will likely be able to get a deduction on its employees' time, since their wages are a routine and generally unquestioned deduction, whether the employees sit in the coffee room or provide some service being donated -- but that is just their actual wages. Sorry to say, lost income is not considered a cost by the IRS.)

I'm not saying it makes sense. I'm just saying that's what the IRS says.

Bill

iamlost




msg:783660
 12:29 am on Nov 14, 2004 (gmt 0)

RevCan is bad enough ... I will leave you the IRS.

How and what and when to charge a customer can be difficult choices. I have made a schedule of charges for each of the normal services I provide that I refer to to put quotes together. It took some time, some mistakes, and a lot of thought but has eased my life considerably.

If you decide that is appropriate to provide services at no charge you should take the time (ahead of time) to determine exactly when and why. It can be embarassing to be told "but you did it for them for free" or "you did it last time for free" - both of which I have heard and got very tired of hearing.

There are several threads in this forum that address charging. If you haven't searched/browsed deeply I would recommend that you do so.

beckie




msg:783661
 3:07 am on Nov 17, 2004 (gmt 0)

Depending on the client, I bill in 5 - 15 minute increments - sometimes for the full hour. If I have spent a lot of time with them on the phone or in person, I add it to their bill but never itemize it.

If a client asks for 1 simple thing and then adds on more items, I tell them upfront that it will be billed to them. I also tell clients upfront that I will update them through email or the phone with the progress on their site. That usually works for those who think you will drive 45 minutes one way for those kind of meetings.

I'm having a hard time with one client who wants updates for free. Every time he wants me to do a simple update, he asks if I will charge him for it. After telling him the same thing for the 200,358,304,058th time, it gets extremely tiring. This is the only client that I have a problem with - the rest know they have to pay me for my time. You will always have a few that will give you a hard time.

NatGeo




msg:783662
 4:38 am on Nov 17, 2004 (gmt 0)

For us... We used to do this and that for free for our clients. Upon review of our hours spent each month over a year - the hours lost each month cost us a lot of money.

Our solution in short:
We offered our clients who need our support for odds and ends type work a block of hours they can purchase for specifically those needs. As each client uses up their hours we keep track of the service requested and the time it took to complete the job and deliver a report on request or when they run out.

This has been a success and a solution and well received by our clients.

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