Sent by Jonathan Stark on February 28th, 2020
How would you feel if you walked into a lunch place and asked, “How much for a ham sandwich?” and the clerk replied, “Well… probably about five bucks, but we’ll let you know after you finish eating it.”
Now imagine how your clients feel when they ask, “How much will this project cost?” and you reply with, “Well… probably about fifty thousand dollars, but we’ll let you know the final price when we’re done.”
Here’s the thing…
With hourly billing, nobody knows the price up front. The price is revealed over time. This feels AWFUL to the client. They have to make a big risky purchasing decision based on an estimate. And by the time they find out whether the estimate was good or bad, it’s too late to do anything about it (other than call in the lawyers).
This is good news for you if you happen to be amazing at delivering business value with your particular skill set because it means that there is a big delta on any given project between the client’s perceived risk and your perceived risk.
In other words, you can take a big risk off their shoulders but only add a small risk to yours. This adds a lot of value to the client, without adding a lot of cost to you.
If you calculate your prices based on value, this means that you can potentially set a premium price that the client is likely to accept.
Which beats the pants off of hourly billing.