Why hourly rates don't mean anything for consulting work

So, you have contacted a couple of companies to get some programming or consulting work done. One company has quotes you $20 per hour, another, $100 per hour. Which is the better value?
Many people incorrectly assume that a company charging $20 per hour is a better value (a deal) than a company charging a higher amount, say $100 per hour. But is that necessarily the case? Let’s do some math.

So, company A is going to charge you $20 per hour to make you a shipping module for your e-commerce system. This company has done some work on your e-commerce package in the past with other clients. However, they have not really written a shipping module. They likely won’t mention that (unless you ask of course). So, they say they don’t know how long it will take and will bill you a mere $20 as they are a value company. What a deal, right? Well, you go with them and it takes that company 40 hours of work, costing you $800 and it mostly works. They may or may not continue to work on it for you once “done”. Best to be clear on this up front.

Meanwhile, company B which you also contacted seemed to know a lot, but charged an “outrageous” $100 per hour. This company has written many shipping modules and is extremely experienced in your e-commerce package. Still, you rejected them even though you could tell they were probably the better company for your job. As it turns out though, had you have gone with company B, they could have written the same module in 6 hours of work, costing you only $600. So, which was the better deal? Even if the cost was the same or close, company B also got your task done sooner and likely more accurately with fewer gotchas since they knew the software.

It’s best to ask a lot of questions from any company you are considering using to get some work done. This will likely give you a feel for how knowledgeable they are. While you can also ask for references, you probably already know that references are always a best case scenario and are of very limited value. If the company seems to volunteer info you only hinted at, then, they likely know what they are doing. However, if they can provide very limited info or ideas to solve your problem, you are either talking to the wrong person, or, they simply don’t know that much about the task at hand. Usually, you can tell who knows what.

It’s really not surprising to us any longer when many of our customers come to us having already used someone cheap to code their job, only to ind out they never got it to work. We hate seeing waste like this. Small businesses simply can’t afford to spend money in such a manner. In most cases, you really do get what you pay for.
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