March 27, 2019
What do systems have to do with pricing?
For the past month, I’ve been a bit obsessed with systemization:
- I devoured The Leverage Equation by Todd Tresidder, which includes an entire chapter on systems leverage.
- Rochelle and I interviewed Todd about systems leverage on The Business of Authority.
- I ran the first 10-Day Systems Challenge, which was attended by more than 300 people.
But here’s the rub...
One of my private coaching students mentioned today that he is interested in attending the next 10DSC, but had this question for me:
It sounds really useful but... what does creating systems have to do with ditching hourly billing?
Excellent question! To me, systems leverage has everything to do with ditching hourly billing. But in my zeal to roll out this material, I recognize that I didn’t do a great job connecting the dots for people.
So, lemme back up for a sec to talk about the big picture:
The central theme of my work is that you should stop billing and start pricing. By doing so, you will escape the many horrors of trading time for money.
There are five related subject areas that circle around this central theme and that I talk about all the time (and that all conveniently start with the letter P):
- Positioning
- Publishing
- Productizing
- Proposing
- Pricing
These five subject areas work in concert to allow software developers and other independent professionals to race to the top instead of the bottom. To set higher and more profitable fees while delivering better outcomes to their clients. To become the go-to person in their chosen space. To escape the feast/famine roller coaster that is one of the defining characteristics of the hourly trap.
Okay, so... how do systems fit into this picture?
First off, systems are a key component of productizing your services. You can’t be very successful at productizing something if you don’t at least have an SOP for it. The more streamlined you can make the delivery of your productized service, the more profitable it will be for you. Things like templates and checklists and libraries and boilerplate and automations and so on will allow you to deliver more faster, and for the same (or higher) fees.
But even if you don’t offer productized services - heck, even if you are still billing by the hour - systems thinking can decrease your labor intensity on all of the boring, mundane, and repetitive aspects of running a business.
For example... here are a just a few of the joyless client-facing activities that are common to service businesses:
- Scheduling meetings
- Qualifying prospects
- Writing proposals
- Closing deals
- Invoicing clients
- On-boarding clients
(If I added in typical marketing activities, this list would be 5-10 times longer. You’re doing marketing, right? RIGHT?!)
As a service provider, your number one cost is your time. If you can get just as much done in less time for the same money, then you have increased your profitability.
This is true whether you’re billing by the hour or not.
If you are still trading time for money, systematizing your non-billable administrative activities is like giving yourself an instant raise.
If you aren’t trading time for money, you can systematize almost everything to some useful degree, including much of your client facing work. This is absolute rocket fuel for your profit margins.
Anyhoo... I hope that this additional context clarifies how I see systems leverage fitting into the overall ditching hourly universe, but sometimes it’s hard to tell from where I’m sitting. Did this help at all? Was it unnecessary? Please hit reply and let me know.
Yours,
—J