Via this article , I learned about the following 6 reasons to stop charging by the hour: Reason # 1 It undermines your ability to be acquired. Reason # 2 It makes customers hesitate before calling you for advice. Reason # 3 It creates a negative cash flow cycle because you have to know how many hours were worked before sending a bill. Reason # 4 It forces employees to fill out time sheets. Reason # 5 It leaves your customers feeling “nickel and dimed”. Reason # 6 It provides a disincentive for your employees to work quickly and efficiently, ultimately peopling your company with a bloated and slow-moving set of clock watchers. To know more about challenges regarding compensation, have a look at this presentation .