Why professional firms should forget about hourly rates!
I was personally reminded today of the perils of time-costing so beloved of solicitors, accountants and many consultants. I received an unfathomably large bill from a lawyer who did some property work about 3 months ago. I was aghast, but immediately grasped the problem.
He had billed me for what the job was worth to him – the supplier, not what it was worth to me – the customer!
I have approached his firm with a proposal to help him move from hourly billing to value pricing. The proposition that “time is money” is over 250 years old, and attributed to Benjamin Franklin. However, clocks don’t write cheques, and you don’t attract and retain clients by selling hours.
You sell solutions, service and value.
For the benefit of any designers, SEO dudes, consultants, advisers, laywers or accountants currently charging clients by the hour, here’s why switching to value pricing could transform your business:
1: Pricing a job at outset gets any objections from clients on the table before you start; far better than arguing over the bill at the end!
2: Clients feel special, as you are calculating a bespoke value for their work. Hourly rates, by contrast, are applied at the same level for everyone, irrespective of the value you are adding to their business.
3: Sharing risk by quoting fixed prices projects experience and confidence in your delivery and performance. Clients will feel that you must know you can do the job, otherwise you wouldn’t have committed to it.
4: Clients will appreciate that you are not about to rip them off. Can you imagine how you would feel if an airline charged by the mile for your ticket? Maybe the pilot would deliberately take the long route to rack up the costs!
5: Value pricing forces internal efficiency. Fixing revenue ensures you will delegate and review work flows so you can offer service whilst ensuring you meet your own profitability aspirations.
6: Annual price increases are easier to factor in, as each job is costed individually. No firm likes sending out notices of hourly rate hikes, and no client likes receiving them.
In summary: value pricing encourages trust and nurtures long-term relationships with satisfied clients, leading to mutual profitability and success.
It’s time to ditch the clock and focus on value!
HOURLY RATE: ZERO!
And now, here’s something of incredible value to you, OFFERED AS A GIFT! Especially from me to you, as a loyal reader, I’m going to give you a HALF-HOUR OF POWER directly with me by Skype or phone. That’s right dudes and dudesses, wherever you are in the world, you can talk to me for 30 minutes about your business, and where you want to take it. Who knows, I might even be able to help!
Simply comment on this blog telling me in 140 characters or less (now there’s an idea…) what we’d talk about and why. We’ll exchange contact details and get busy!
Here’s to your success,