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Time

Not an Effective Measure of Value

Here’s a quick math problem:

You work 2,000 hours per year for $100 per hour. Quick, how much will you make? Easy, peasy…$200,000. I win, right?

Maybe not. Let’s take it further. What if I told you that the only way to make more money is to work more hours? You’d probably say, and I’m paraphrasing here, “Well, that sucks.”

The hourly rate is the most ineffective way to measure your value to a client, a close third to reading palms and throwing bones. It’s outdated, it’s a pitiful measure of what you’re worth, and it needs to go. In a knowledge economy, you should not be selling time. You should be selling solutions.

So, you ask, what else is there? How are you supposed to charge for your work? I want to introduce a new concept, a price based on value.

  • Step 1 – Price for Value: Your time is priceless. You can’t create more of it. But you can create unlimited value for your client. You can’t price for that value until you know what your client actually values, however. How do you do that? I recommend that you slow down your client intake process, and you have a Value Discussion. I mean, dedicate a couple of hours to this. And then go back to your abacus and slide rule and create a client investment based on value. With the right information, you can create an engagement that is client-centric and focused only on what the client values. They’ll love that!
  • Step 2 – Price in Advance: I heard a term once, “Duck and Cover Billing,” and it made me chuckle. That’s what an invoice based on time spent last month actually is. You send it, then you hide under your desk and hope the client doesn’t ask for a line by line assessment of the time you spent on their work. An invoice prepared by using hours and hourly rates is unexpected, every time. The client never knows what to expect. An invoice produced from a Value Priced engagement is fixed in many cases, and it’s already been agreed-upon. The client isn’t surprised, and you have predictable revenue. Not too bad, I say.

I’ve attempted to boil down a very complicated process into a few paragraphs, but it’s taken me 13 years of trying and I still don’t get it right every time. We would be thrilled to sit down with you and discuss how a new pricing practice could help your business. It changed my world, and it’s not even a perfect system! Think of how nice it would be to NOT have your revenue tied to the number of hours you work. Think of NOT having your worth tied to a ticking clock.

Think about that, and let me know if we can help you try something different.

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