Sent by Jonathan Stark on February 10th, 2017
A reader sent in a question recently that raises a fascinating nuance of the difference between value pricing and hourly billing:
> I was just reading your proposal writing chapter in the independent consultant manual. Under “risks and assumptions”, I was wondering what kinds of risks you’d write? Since the proposal already states it’s fixed and the client doesn’t care about things taking longer. What else is there?
Contained in this question is a tacit assumption that the increasing costs associated with a project billed hours is the primary (or perhaps only) reasons clients want projects done as quickly as possible. In my experience with value pricing projects, this has never been the case.
My clients have ALWAYS wanted their projects completed as quickly as possible.
Even though I may have given a client a fixed price for a project, there are several other reasons why the client still wants it done ASAP:
The biggest one would usually be that they’ll start benefiting from the ROI once the project complete, so the sooner it’s done the better.
Another reason might be that they have devoted internal employees to the project, so the sooner it’s done, the sooner these people can get back to focusing on their normal day to day responsibilities.
Another reason might be that they are racing a competitor to market with a new feature.
Or that they’re losing customers because of a bad user experience on mobile.
So, in the R&A section, I would include any issues that I think might jeopardize the schedule, the planned approach, or the overall success of the engagement. i.e., anything that might negatively impact their satisfaction.
The shift that takes place when switching from hourly to value pricing ISN’T this:
The client no longer cares how long the project takes.
You now care just as much as the client does how long the project takes.