What Kind Of Work As Salaried Professional Services

12 Contract Types for Professional Services and When to Apply Them

At that place are many unlike contract types and fee structures that can be used by professional services. This raises 2 questions: W chapeau are they and when should I use them? I'm glad you asked. Here are 12 contract types for professional person services and when to utilise them.

First, let's group these contract types into four major areas:

Fixed Fee
Hourly
Recurring
Non-billable

At present allow'due south take these a pace farther then you lot can meet where we become the 12 contract types for professional services, then we'll talk over when to use them.

Here'southward a fun little interactive app y'all can wait at to scan these (try the search box top left, after you lot click through):

12 Contract Types for Professional Services and When to Use Them

Fixed Fee
- Fixed
- Hourly Not to Exceed
- Per centum
- Recurring With Cap
Hourly
- Hourly
- Cost + Percentage
- Cost + Fixed Fee
Recurring
- Recurring
- Recurring + Expense
- Recurring + Hourly
Not-billable
- Marketing
- Overhead

Nearly of these are pretty straightforward.

Fixed fee is just that.

When should y'all use it?

When you agree with your client that y'all will get the job washed for a fixed amount. Flow. Make sure you're articulate on the telescopic and where the line is, after which change orders will be needed.

Hourly Not to Exceed is a hybrid. If hourly contracts and fixed contracts had a baby, this would be it! It's exactly as it sounds. You bill by the hour, upwards to a prepare limit.

When should you use it? Never! But kidding. My feeling on this is that, you might besides only become with fixed fee--this way if you lot wind up getting the piece of work washed more than efficiently, you reap the rewards. However, if the customer is balking and you experience very confident that you lot tin can get information technology done in few plenty hours (without exceeding the cap), then this might brand the difference betwixt winning or not winning the contract.

Per centum is easiest to think of equally a modified fixed fee contract. You lot base the fee on a percentage of a fixed contract corporeality.

When should you use it? One easy example is if y'all have a contract to work on a home that was in a fire. Your normal contract amount for the rehab job is $100,000, merely your client received an insurance settlement for only $75,000. So yous agree to piece of work on a percentage, based on the settlement. Now you lot have to increment employee utilization rates by 25% to retain the aforementioned profitability :)

Recurring with Cap is only a fixed fee divided into even amounts.

When should you use information technology? I run into this equally a cash flow play. This lets the client spread the payments out, and then it'southward less painful, and you take recurring cash period.

All fixed fee contract types in BillQuick will track your billing, compared with the contract total. Once your billing hits that ceiling, all billable time will exist automatically marked non-billable. You can override these settings on a projection past project basis if you need to.

Hourly

If I have to explicate this? OK, I will.

These have no stock-still contract amount. You work, You track the hours, and yous bill the hours. You tin record a contract corporeality for reference in BillQuick, but if yous choose hourly as the contract type, the contract amount has no implications, as it does with fixed fee contracts.

When should yous employ it? When the client is willing to hold to it? Every bit much as this seems bonny like you're covered because you lot get paid for the time you piece of work, you lot could actually exist losing money. Equally your firm gets improve at the piece of work, and y'all get more than efficient, information technology takes fewer hours to go the job done. At present you're getting paid less while the deliverables have not changed. Clients are getting the same value. You lot are getting a cutting in pay, for existence good at your chore.

Cost + Percentage

This is where y'all bill your cost plus a percentage of the costs equally a progress neb. If the total contract amount is $ane,000, and your fixed fee % is 10%, and the value of your billable fourth dimension and expenses is $500, so you lot neb $50. $500 x ten%. The total pecker would exist $550. Your cost plus the 10% of your costs.

When should you utilise this? When y'all feel that the costs of a projection are the major driver in terms of the piece of work that needs to be washed. This allows you to bill evenly based on how much of the total costs you've incurred to date (the value of the billable time and expenses).

Cost + Fixed Fee

This is just similar Cost + Per centum, only based on a fixed fee instead of a percentage.

If y'all ask me, the Cost + methods are overly circuitous. I would much rather but bill a flat fee, and come upward with a payment schedule. My favorite kind of payment scheduled is 100% upward front. If that doesn't work, then 50% upward front, and 50% on completion. Elementary.

Recurring

Presumably, this means yous beak a fixed recurring amount, indefinitely, until the job gets washed, regardless. If you can get a client to agree to this? Awesome. Exercise it! The less efficient you are, the more than money you lot brand.

When would you use this? In all seriousness, this is your archetype retainer type contract. I practise this with many of my clients. They pay me a fixed, recurring amount, each month. It is also clear what they are getting from me each month, X number of videos, weekly calls, reports, etc…

This is really a stock-still fee contract on a recurring ground.

Recurring + Expense

This is a recurring contract, where you beak your expenses dorsum to the customer, over and in a higher place the agreed upon recurring contract corporeality.

When should you use this? This is used in the same scenario every bit a recurring contract, but where y'all know you will have pregnant and unpredictable expenses associated with doing the work. When I am asked to speak at an manufacture effect, this is the kind of contract I use. It'southward based on a daily fee, plus travel expenses. And then I am at their disposal--equally many talks or panels as they want me to participate in, I am all in.

Recurring + Hourly

Let's say y'all have a fixed fee pricing model or plan with a cap on the number of hours. That'south really just an hourly model, just let's ignore that for the moment.

In these types of contracts, at that place is often a clause that says something similar, "...upwards to 10 hours per calendar month, plus $150/hour thereafter." This is recurring plus hourly.

When should you use this? When you desire to offering what looks like fixed fee pricing, but you want to hedge yourself against people taking reward of you lot.

This brings united states of america to our terminal group of contract types.

Not-billable

Marketing

Oftentimes we start working on the project earlier information technology becomes a project. From taking the prospective customer out to dinner to spending hours preparing a proposal, there may be pregnant time and expenses spent on a client before they always get i. This is good information to have. Using the marketing contract type on a project in BillQuick allows you to track exactly these sorts of things.

Overhead

This is how y'all can set up a projection or projects in guild to rails time and expenses spent on your own firm. All of your admin costs and anything you lot volition never bill to or acquaintance with a customer can go into a project like this. Information technology's a great way to create a cost center, to rails the costs needed to determine your burden charge per unit.

So at that place you have it: 12 contract types for professional services, and when to employ them. Cull them, and use them wisely. Don't forget to watch the video, so you can see how nicely BillQuick Online handles these 12 dissimilar contract types.