Core Principles
Value Over Time
Clients pay for deliverables and value, not raw timesheets
Cost Certainty
Every task has a maximum cost cap—clients never pay more than quoted
Efficiency Rewarded
Faster delivery creates margin, incentivizing quality and speed
Transparent Tracking
Real-time visibility into hours used and remaining
How It Works
The billing system has three key components that work together:1
Retainer Plans
Clients subscribe to monthly retainer plans that define:
- Monthly hours: Allocated capacity for work (e.g., 60 hours/month)
- Monthly cost: Fixed retainer fee (e.g., £5,000/month)
- Day rate: Calculated profitability metric (cost ÷ hours)
2
Value-Based Billing
Work is estimated using t-shirt sizes (XS, S, M, L, XL, XXL) with time ranges. A billing formula determines what’s chargeable:Formula:
Billable = MIN(max, MAX(average, actual))This means:- Finish faster than average → Bill the average (keep the efficiency)
- Finish within the range → Bill actual time
- Go over the maximum → Bill the max (absorb the overage)
3
Real-Time Consumption
As work is logged, billable hours (not raw time) are deducted from the monthly allocation. Clients see their remaining hours update in real-time.
Example: How a Month Works
Here’s how billing flows through a typical month: Client: Acme Corp- Retainer Plan: Growth (60 hours/month, £5,000/month)
- After PM deduction (15%): 51 hours available for work
Week 1: Homepage Redesign
- Quoted: M (3-6 hours, average 4.5 hours)
- Actual: Completed in 3.5 hours
- Billable: 4.5 hours (formula: MIN(6, MAX(4.5, 3.5)) = 4.5)
- Result: 1 hour banked (efficiency gain)
- Remaining: 46.5 hours
Week 2: Product Page Update
- Quoted: S (1-2 hours, average 1.5 hours)
- Actual: Took 2.5 hours (over maximum)
- Billable: 2 hours (formula: MIN(2, MAX(1.5, 2.5)) = 2)
- Result: 0.5 hours overage (absorbed by agency)
- Remaining: 44.5 hours
Week 3: Blog Integration
- Quoted: L (8-16 hours, average 12 hours)
- Actual: Took 14 hours (within range)
- Billable: 14 hours (formula: MIN(16, MAX(12, 14)) = 14)
- Result: On target
- Remaining: 30.5 hours
- Hours used: 20.5 hours
- Hours remaining: 30.5 hours
- Efficiency: Net +0.5 hours banked
- Client pays: £5,000 (fixed retainer fee)
Key Concepts Explained
Billable vs. Logged Time
- Billable Time
- Logged Time
What counts toward the retainer allocationCalculated using the billing formula—this is what’s deducted from monthly hours.Example: Task quoted at 4.5 hrs, completed in 3 hrs → Billable: 4.5 hrs
Banked Time vs. Overage
Banked Time
When actual less than averageThe efficiency gain when work is completed faster than the quoted average. This creates profit margin.Example: Quoted 4.5 hrs, delivered in 3 hrs = 1.5 hrs banked
Overage
When actual greater than maximumNon-billable time absorbed by the agency when work exceeds the quoted maximum. Clients are protected from overruns.Example: Max 6 hrs, took 7 hrs = 1 hr overage (absorbed)
PM Deduction
15% of monthly hours are reserved for project management overhead. This covers:- Sprint planning
- Client communication
- Status updates
- Scope management
- QA coordination
- Raw allocation: 60 hours/month
- PM deduction: 9 hours (15%)
- Net available: 51 hours for deliverable work
PM time is deducted upfront from the total monthly hours, not added to individual task estimates. This provides predictable overhead without inflating task quotes.
What Clients See
Clients have full transparency into their retainer usage:Monthly Allocation
Monthly Allocation
- Total hours allocated
- Hours used (billable time, not raw logged)
- Hours remaining
- Utilization percentage
Task-Level Detail
Task-Level Detail
- Task name and description
- Quoted estimate (t-shirt size range)
- Status (in progress, complete, etc.)
- Hours consumed (billable calculation)
What They Don't See
What They Don't See
Clients do not see:
- Individual team member timesheets
- Raw logged time vs billable time
- Banked time or efficiency differentials
- Internal capacity planning details
Billing Scenarios
Scenario 1: Under-Utilizing the Retainer
Problem: Client only uses 30 of 60 hours/month What happens:- Client pays full £5,000 retainer fee
- Unused hours expire (no rollover by default)
- CSM should discuss:
- Reducing to a smaller plan
- Finding opportunities to use remaining hours
- Better scope planning
Scenario 2: Over-Utilizing the Retainer
Problem: Client needs 70 hours but plan is 60 hours/month What happens:- Work continues beyond allocation
- Over-allocation is visible on client profile
- Billable hours still tracked accurately
- CSM discusses:
- Upgrading to larger plan
- Prioritizing work within allocation
- Managing scope more tightly
There’s no hard cap—work doesn’t stop at 60 hours. Over-usage triggers conversation about upselling or scope management, but clients aren’t blocked.
Scenario 3: Mixed Performance
Problem: Some tasks efficient, others over budget What happens:- Banked time and overage tracked per task
- Net efficiency calculated across all work
- Month-end reports show:
- Which task types are efficient
- Which are consistently over
- Overall profitability
How It Compares to Other Models
| Approach | How It Works | Pros | Cons |
|---|---|---|---|
| Time & Materials | Bill exact hours logged | Simple, no estimation needed | Unpredictable costs, no efficiency incentive |
| Fixed Price | Single price for project | Cost certainty | High risk for agency, disputes over scope |
| Value-Based (CharleOS) | Formula with min/max cap | Efficiency rewarded, costs capped, transparent | Requires good estimation |
Why This Model Works
For Clients
For Clients
Predictability: Maximum cost is always capped per taskFairness: Don’t pay for the agency’s learning curve or mistakesFlexibility: Monthly retainers provide consistent capacity without per-project negotiationsTransparency: Real-time visibility into hours used and remaining
For the Agency
For the Agency
Profit Margin: Efficient delivery creates banked time that becomes profitBetter Estimation: Over-runs hurt, so the team gets better at scopingClient Retention: Happy clients with predictable costs stay longerSustainable Growth: Retainers provide recurring revenue for planning
For the Team
For the Team
Quality Focus: Efficiency is about smart work, not rushed workLess Admin: No need to justify every 15-minute incrementClear Goals: Task-based delivery with defined outcomesFair Compensation: Team capacity is protected by the max cap
Learn More
Dive deeper into each component of the billing system:Retainer Plans
How monthly retainer plans work, plan tiers, and client-specific overrides
Billing Model
Deep dive into the value-based billing formula and how it’s calculated
Efficiency
How banked time and overage impact profitability and day rates
T-shirt Sizing
How work is estimated using size-based ranges