Tag: day rate

Value-Based Pricing: Breaking the Time Barrier [en]

[fr] En tant qu'indépendant, il faut absolument s'éloigner d'un modèle où l'on facture pour son temps -- et facturer en fonction de la valuer qu'apporte notre travail au client. Cela implique une toute autre approche de la relation client et du travail de l'indépendant, très bien expliquée dans le ebook Breaking The Time Barrier. Une heure de lecture en Anglais, un peu plus si vous êtes moins à l'aise. Mais elle va vous faire gagner de l'argent.

Today I read Breaking the Time Barrier. It’s a quick read, an hour or so if you take your time. If you’re a freelancer, you should read it. If you have an hourly rate and are selling your time, you should read it even more. Thanks a lot to Claude for sharing this e-book on the Going Solo Discuss group.

I was first introduced to the concept of value-based pricing by Martin Roell on the occasion of his introductory workshop on consulting at Lift’07. It made perfect sense: if your expertise can solve a client’s problem in 3 minutes, should you really be paid only for three minutes of your time?

As I was explaining to a prospective client of mine Monday morning, when you spend half a day doing an exploratory workshop with me (to try and figure out what the f*** to do with social media, if anything), you’re not paying for four hours of my time. You’re paying to have answers. You’re paying to know what to do. Why would I charge you less if I can help you get there in just four hours than if I dragged you along for two whole weeks?

Since way back when, I’ve tried as much as possible to price my services based on their value to the client, and not based on how long it takes me. Time-based fees make my skin crawl: the client wants to keep the number of hours down, the consultant wants them to go up. It’s a really stupid system. It also implicitly encourages an “employee/employer” relationship, with the client possibly breathing down your neck to make sure you’re making good use of this time of yours he’s buying.

After reading Breaking the Time Barrier, I’ve understood one of my missing links: not putting a number on the value my client will get out of my work — which is a necessary element to pricing my service as an investment.

I’m also always a bit torn about my exploratory workshops: I charge for them separately, because too many times I ended up doing a workshop, writing up proposals, and end up with the client walking away. I realize now that on some of the occasions my proposals were not adequate because I had not understood the monetary value what my client was hoping to get out of the investment they would be making with me. One of my issues is also that a lot of the value I bring is advice, and that is sometimes all my clients need from me. Sometimes all they needed was that initial workshop. I still haven’t really decided how to deal with this, but I realize I need to think about it.

I also find it hard to stand firm sometimes with clients who insist on counting in hours. Business is so formatted to function like this that even when you tell people that you have no hourly rate, also because all your hours are not worth the same, and how many hours you spend on something is your problem and not theirs, and that what is important on their side is the result and value they are going to get, the conversation still ends up drifting back to “ok, sure, but how much will you charge for a day a month?”

I’m also having trouble applying this model to training. Training typically is something with a day rate. How do I provide value-based training? Focus on competencies and outcomes — but then, there is the unknown: how well the student learns. It does not take a fixed effort to teach something to somebody. Some people learn fast, and with others… you can start again from the beginning next month.

So there we are… my questions-in-the-guise-of-musings to Karen in the story.

Do you still have a day/hourly rate? Do you apply value-based pricing for your business, or part of it? Do you have any answers for the points I still struggle with after all these years?

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