Time vs Value – Providing results for your client
July 9, 2009
I just read a thought provoking blog post by Alan Weiss, consultant, speaker, author and owner of Summit Consulting Group. Alan asks the question:
“If a client is best served by a problem being remediated quickly, or an innovation being implemented rapidly, or an improvement being installed momentarily, then why isn’t the consultant charging for the velocity of the work rather than for the duration?”
- Alan Weiss of Contrarian Consulting
This is a question that’s been in the back of my mind (and sometime it’s WAY upfront) ever since I went into business for myself. If you provide a service rather than a product, it’s not always easy to put a price on that service. Most of us just end up charging an hourly fee. That brings up several questions:
- How do you decide what your time is worth?
- How do you justify providing the same results to different clients and charging them different amounts because it took longer to achieve those results for one than it did the other?
- If I can do something for a client in 15 minutes that gives them a better value than something it takes me 3 hours to do, why should I charge less for the more valuable result?
- If it takes me 3 hours to do something that provides very little value to my client, is it ethical to charge them for my time?
My personal struggle has been with clients who request constant revisions throughout the course of website development. They tell you they want one thing but then they decide they want something else. If I charge a straight hourly fee, these clients end up frustrated because it seems like it takes them forever to get the results they want and I’m frustrated because I don’t like charging them a whopping fee for what I could have provided for them in a lot less time if they hadn’t been asking for constant revisions. What to do? What to do?
If you’re a service provider or consultant (especially if you’re a web designer/developer) I’d like to know how you bill your clients. Do you charge like a lawyer, or like FedEx?
Posted in Business Resource
content rss
July 10th, 2009 at 10:08 am
I don’t think you’re paying attention! Your time is worth nothing, only your results are worth something. If you do something for 3 hours that’s worth very little, why are you doing it at all? This sounds like something from IT consultants, just guessing. Lawyers are the dumbest business people in the world. Why would you want to charge like them?
Google Alerts told me you had posted this. “I don’t like charging a whopping fee” is something that you need to work on! Technical people seem to make excuses for why they can’t charge more. Self-defeating, low esteem.
July 10th, 2009 at 10:20 am
Alan, thanks so much for the comment! I’m flattered that you took the time to respond since I found your original post so thought provoking. “I don’t like charging a whopping fee” means that I DON’T charge a whopping fee. There have been many occasions where I have spent time working with clients to help them achieve the results they’re looking for and in the end, my hourly charges translate into less than minimum wage. I do disagree with you that my time is worth nothing, however. If that was the case, I’d do everything for nothing. I’m just trying to figure out how to provide value for my clients without gouging them and at the same time provide an adequate income for 2 Smart Chix that will allow me to continue doing what I love.
July 30th, 2009 at 11:21 am
Your time is worth nothing to the client. They are not hiring you for your effort, but for the results they hope to achieve by cooperating with you in a business relationship. It makes no difference if your time is valuable to you.
If you work with your clients to ascertain the value of the outcome (to them not you) _before_ starting on work, you’ll find it much easier to discover how much to charge. Sometimes you’ll discover the project doesn’t make sense for you… and sometimes you’ll even discover it doesn’t make sense for the client to pursue with you or anyone else!
Where your own personal value of your time comes into play is determining whether the clients outcome is valuable enough that you’ll be able to charge a sufficient enough fee that you are happy with. With this approach there’s no “guessing” (and hence uncertainty) about the value being delivered to the client. It also makes it obvious if the project is either (a) not a good fit for you (b) not valuable enough for the client to be considering [which offers an opportunity for you to help them re-group and direct their efforts somewhere more profitable for themselves, but that's a whole other discussion].
There are other important factors that should also be aligned to get this right: talking to an actual check signer (economic buyer, not just recommender) and digging into the clients desires (not guessing, not your own) regarding underlying objectives and measures of success. You also must get away from the poverty mentality (which, beyond changing your mindset, takes a strategic approach to marketing, namely client attraction) or you will find yourself making ill advised decisions to get through the short-run that end up hurting your business in the long-run.
I hear your frustration and can relate. I’m only just now “getting” all this (and, yes, my background is, in large part, in IT consulting).
I suggest reading several of Alan Weiss’s books. There are other folks too you may want to learn from (just a few off the top of my head): Jay Abraham (his most recent book The Sticking Point Solution is great), Fabienne Fredrickson (clientattraction.com), Dan Kennedy (dankennedy.com & nobsbooks.com), Joe Polish (joepolish.com), Robin Robins (technologymarketingtoolkit.com), Gary Halbert (thegaryhalbertletter.com), etc.
If you think this is just about setting fees, you may have a hard time accepting it. It’s about how you position yourself and that touches everything in your business. Recently I noted that Alan’s “Value-Based Fees” book should really be titled “Value-Based Positioning” or “Strategic Positioning” or some other broader title. It’s not just about setting fixed fees instead of hourly fees. Unfortunately, in my experience, that’s what a lot of folks come away thinking after reading that book (or reading or hearing a synopsis of it, more likely).
Alan does a good job explaining his concepts, but you still have to approach things with a very open mind. It’s not about just adding another quick-fix tactic to your arsenal. It’s about having a whole new strategy for your business. The other thing I’ve observed, besides some folks not really being open to the idea, is that most folks don’t really approach their businesses strategically (they may think they do but they don’t). Trying to explain to them how they should apply a completely different strategy is even tougher when they don’t actually have (or understand) strategy to begin with!
Not implying that’s your situation. Just giving you some context and some of my recent thinking in the hope that you might find it helpful.
(a shameless plug: I run a list @ http://www.ITConsultingLessons.com where I discuss these topics regularly. The aim is to introduce independent IT professionals (contractors, freelancers, consultants, etc.) to different perspectives related to marketing and success in their businesses. Feel free to subscribe if that theme interests you!)
-jr
July 31st, 2009 at 1:19 pm
Wow! I’m tickled with all the information my post has gathered. It’s such a struggle sometimes trying to find the right balance when it comes to billing. I agree with both Alan and Josh that the only thing that matters to a client/customer is results. I’m hoping to pick their brains more as guests on the podcast (hint, hint) so keep your fingers crossed. It promises to be a spirited discussion! How about it Alan and Josh? Are you game?