Episode 306 | The Profit Answer Man I Featuring Nathan Collins
Imagine you finally take your kids to Disney… but instead of enjoying the day, every hour feels like it’s costing you $200—not just in park tickets, but in lost billable time.
That’s the trap of hourly billing.
In this episode of The Profit Answer Man, Rocky Lalvani sits down with Jonathan Stark—former software developer turned pricing coach—who’s been on a mission since 2006 to help expertise-based businesses escape the hourly ceiling and switch to pricing models that align incentives, improve client relationships, and unlock real leverage.
The “Hourly Ceiling”: Why Billing By Time Caps Your Income
Jonathan’s most self-interested (and most honest) argument against hourly pricing: it creates a hard limit on earning power.
Even if you have ~2,000 hours/year available, not all of them are billable—and even at a high rate, you’re still stuck trading time for money with no leverage.
Notable quote
“An hourly rate puts an artificial ceiling on your income… you’re not creating any leverage.” — Jonathan Stark
Why Clients Hate Hourly (Even When They Think They Don’t)
Some clients tolerate hourly billing because it’s familiar—lawyers, CPAs, developers—but Jonathan explains the real issue:
Hourly shifts risk to the client, because the client’s outcome depends on something professionals are rarely trained to do well: estimate time accurately.
When estimates are wrong (often), things turn contentious:
- clients start micromanaging time logs,
- trust erodes,
- projects balloon beyond the point where the value is worth the spend.
Notable quote
“In an estimate, the buyer is taking the risk. With the fixed price, the seller is taking the risk.” — Jonathan Stark
The Incentive Problem: Hourly Punishes Efficiency (and Rewards Slowness)
Rocky calls out something every buyer has felt: under hourly billing, there’s no financial reward for the provider to get faster—especially in repeatable work.
Jonathan adds a story that makes this painfully clear.
He quoted a fixed price for a feature he initially thought he’d build manually—but once he realized it would be harder than expected, a new thought appeared:
“Maybe there’s a plugin I can buy…”
One search later, he found a plugin (~$700) that solved the need quickly. Under hourly billing, he says he would never have looked—because finding a shortcut would reduce billable hours and punish him financially.
Notable quote
“I never ever would have had that thought if I was billing by the hour… why would I? That is just going to punish me financially if I found one.” — Jonathan Stark
The Core Shift: Stop Selling the Process. Start Selling the Outcome.
A major theme in the episode is that many business owners sell the mechanism (their process, steps, hours), when buyers actually want the result.
Rocky summarizes it cleanly:
Most business owners sell the process—not the outcome.
Jonathan’s explanation: when you only talk scope/deliverables (“features off a menu”), you never uncover why the client wants the thing, what success looks like, or what business outcome they’re buying. That’s what makes value pricing feel “impossible” in many industries.
He contrasts it with a doctor metaphor: a patient shouldn’t be able to walk in and order a “triple bypass”—the professional’s job is diagnosis, then recommending the best path to the desired outcome.
Positioning: Become “The One and Only” (So You Don’t Compete on Price)
Jonathan explains that when you’re meaningfully differentiated, you stop having exhausting conversations like “you’re twice as expensive.”
Instead, prospects come in already expecting you to be premium—then the discussion shifts to affordability and payment terms rather than haggling.
Notable quote
“You want to be the one and only for something that matters to the client.” — Jonathan Stark
A Practical Bridge for Hourly Billers: The “85% Markup” Fixed-Price Option
Rocky references a practical method Jonathan teaches for people who are not ready to jump straight into pure value pricing:
- create your normal hourly-based estimate (hours × rate)
- offer a second option: a fixed price that’s roughly 85% higher than the estimate
- explicitly explain what the client is buying: certainty and risk transfer
The key isn’t the exact percentage—it’s making the risk visible and giving the buyer a choice.
Handling Scope Creep: Use the Outcome as a Filter (and Say “No”)
Jonathan’s scope creep approach is simple and powerful:
If a request does not contribute to the stated project outcome, it goes into a “parking lot.” You revisit it after the main outcome is achieved—so random ideas don’t jeopardize the core goal.
Key Takeaways (for Business Owners)
- Hourly billing creates an income ceiling and prevents leverage.
- Hourly pricing makes the client bet on your ability to estimate—often a losing bet.
- Fixed pricing aligns incentives: faster delivery is better for both sides. Source
- Value pricing starts with the “why” conversation (outcomes), not a scope checklist.
- To avoid price pressure, build positioning so you’re the premium, differentiated “one and only.”
- Control scope creep by tying every request back to the agreed outcome and using a “parking lot.”
Meet the Guest: Jonathan Stark
Jonathan is a former software developer who now coaches expertise-based businesses. He’s been advocating against hourly billing since 2006, and published his book Hourly Billing is Nuts (2016) as a manifesto against time-based pricing in software and professional services.
He also credits earlier/value-pricing voices who influenced his thinking, including Alan Weiss, Ron Baker, and Blair Enns.
Links
LinkedIn: https://www.linkedin.com/in/jonathanstark/
YouTube: https://www.youtube.com/c/TheJonathanStarkShow valuepricingbootcamp.com
Stop billing by the hour. Start pricing for outcomes.
Explore Jonathan’s work at JonathanStark.com and ValuePricingBootcamp.com.
Listen to the full episode
Ep 306 Hourly Billing Is Nuts: How to Boost Profits with Value Pricing with Jonathan Stark: https://profitcomesfirst.com/ep-306-hourly-billing-is-nuts-how-to-boost-profits-with-value-pricing-with-jonathan-stark/
Watch the full episode on YouTube: https://www.youtube.com/@profitanswerman
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