Hourly Billing: Do or Don’t?
I will make a bold proclamation today: hourly billing (mark-up too) is a big mistake. In today’s world, it’s outdated, a waste of time for the person invoicing, and believe it or not: it disincentivizes creativity.
When we begin working with an Advisory Practice client, Product & Pricing is most often where we start. I checked our client portfolio; and with our current roster, we started here 73% of the time; the other 27% of clients began with People work that was more pressing to their specific circumstance.
The reason for this order of events is: if your product and pricing foundation has cracks in it, everything else we layer on top of it (Marketing, Financial systems, Operations, and People work) will seep through the cracks. Without strengthening this foundation, our other work will be less effective and cost you money, instead of make you money.
Even if you don’t care to make more money (I doubt that’s true, but let’s say: just in case…) my favorite thing about converting clients from hourly billing to value-based pricing, is that it pushes you to the edges of creativity.
Because time doesn’t equal value. (I know that the accountants and architects of the world are hating me right now). Instead, I offer to you: perceived benefit equals value.
When you charge for value (not time), you must really, empathetically study what’s important to your clients and customers. Then, you must find creative ways to deliver that value, closing the gap between the true cost and your price. To me, this is what it means to be a creative in business. It’s the utmost act of technical excellence and developing your craft. It means that you’re continuously pushing yourself and upping your offering.
The result? Your clients get the best service and product. And for you, dear business owner, you have the most expansive creative reign, which is the key to differentiating yourself in the market. Your clients and customers are more connected to you (they’re stickier). Your business becomes more resilient and recession proof. For a small business, this is the key to longevity. And I can’t emphasize this enough: it’s the ultimate act of creativity. You leave the trade-time-for-dollars game and you’re free to do your best work.
I feel passionately that eliminating hourly billing (markup too) is the most generous thing a business can do. And the win-win? It’s the most generous thing for its clients and for itself.
We have 4 Advisory Practice openings left in 2023. We’d like to fill them by September, so that our newest clients may receive the value <wink wink> of our marquee Client Appreciation Event!
If you’ve been wondering, “How do I get out of the hourly billing game?” Or “How can my business operate without me?” we’d love to schedule a consult to see if we can help.
