Hourly vs. Monthly

While we are building our proof-of-concept - and if anybody knows how to go from 32-bit images to 8-bit images please LET ME KNOW!!! - I will post some things on non-VC-related items. Today is all about hourly vs. monthly payments.

In the hourly corner, I have clients that blissfully pay me rather large hourly rates, completely screw up what they want and then pay me even more money to fix their mistakes. Based on these clients, the hourly game is a good thing.

On the other hand, I can get many more clients to sign up for a monthly retainer based on the number of hours they think they need from me - and this is what takes me to the next level. In the hourly game, I am limited to about 240 hours per month (60 hours per week) and at, let's say for this example, $250 per hour, that comes out to $60,000 per month. Good money but not the end game.

When I book monthly contracts I ask people how much work they want from me and then how many hours they feel this work will take. Now I have a great capacity to work significantly faster than most people so this type of negotiation really works in my favor. I then give about a 20% discount off of my hourly rate and then sign people up to 6- to 12-month contracts. Back in July, I had 5 such contracts each paying an average of $20K per month - MUCH better money!

Of course I gave all of those contracts up to build my new company because, in the end, even the monthly contract game has a low ceiling. While $100K sounds awesome per month, it fluctuates wildly and I have yet to break $600K for a year. To put that in perspective, most lawyers I know consistently make $800K to over $1M with much less experience in their field than I have in mine.

However, even starting up a single company is not really the end game - rather starting a company that generates companies is the final goal. To that end, I do have yet another patented invention that, once built, will automatically generated 12 spin-off companies (at least) without further effort on my part. While this is a good start, I am constantly noodling for better company-generating concepts as this, to me, is the ultimate money-generating solution.