July 21, 2022
Regret vs Delight
Scenario 1:
Alice wants three pages on her website redesigned.
She imagines it’ll cost about $15k and take a few months.
She gets a quote from Bob who estimates that it’ll only take a month and cost about $7k at his hourly rate.
Alice is happy that she’ll get the pages redesigned faster and for less than expected!
She hires Bob.
Bob gets started.
Three months later, Bob is still not done.
Alice continues to pays him.
Bob takes a month to do a minor bug fix that wasn’t even part of the original scope of work.
Alice continues paying Bob.
Bob goes dark for two months.
Bob resurfaces and Alice fires him.
Bob feels bad about how things went and offers to finish at no additional charge.
A month later, Bob finishes the work.
At this point, Bob has been working for 8 months (i.e., 7 more months than the estimate) and Alice has spent $46k (i.e., $39k more than the estimate).
The site goes live.
In the first month, Alice’s revenue from the site jumps up from $45k to $72k.
She expects it to stay roughly at the higher level and to recoup her costs for the redesign, but she vows to never work with Bob again.
Scenario 2
Alice wants three pages on her website redesigned.
She imagines it’ll cost about $15k and take a few months.
She asks Bob for an estimate.
Bob asks her why she wants the pages redesigned.
Alice says she expects the new website to increase sales by 10-20%.
Bob asks what sales are now.
Alice says they’re about $45k/mo.
Bob asks, “So if sales go up by about $10k per month, that’d be a homerun?”
Alice says, “Yes, that’d be amazing!”
Bob is confident that he can deliver Alice’s desired outcome.
Bob gives Alice a fixed project price of $46k, tells Alice it’ll take at least 8 months, and guarantees her monthly revenue will increase by at least $5k once the site goes live.
Alice doesn’t want to spend this much but it seems fairly reasonable for 8 months of work.
And if Bob can really do what he promised, she would recoup her investment in about 9 months.
Alice pays Bob the $46k.
Bob gets to work.
Bob sends progress updates every Friday via email.
They don’t have any meetings.
Bob doesn’t send timesheets.
Bob never asks for more money.
Bob finishes.
At this point, Bob has been working for 8 months (i.e., exactly the estimate) and Alice has spent $46k (i.e., not a penny more than the quote).
The site goes live.
In the first month, Alice’s revenue from the site jumps up from $45k to $72k.
She expects it to stay roughly at the higher level and to recoup her costs for the redesign in three months (i.e., way faster than she had hoped for).
She gives Bob a glowing testimonial and vows to work with him again.
Here’s the thing...
Hourly billing is a major contributor to scenarios like the first one here because the financial incentives between the buyer and the seller are misaligned. They’re opposite, in fact.
In the second scenario the seller is incentivized to produce a high quality outcome as quickly as possible. Which of course is also what the buyer wants.
In both of these scenarios, Alice got the exact same outcome.
And in both cases, it was a great business outcome for Alice.
But in scenario 1, Alice was filled with regret.
In scenario 2, Alice was filled with delight.
Why?
Setting expectations matters.
Keeping promises matters.
The client experience matters.
And selling hours makes it really hard to produce a good client experience.
Yours,
—J