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Pricing. We either worry too much or too little about it. But it’s key to our success and to our clients’ satisfaction. Hourly fees, particularly for service professionals, are so standard that many of us adopt them as our pricing model without even thinking about it.
Do you charge an hourly rate? Simply changing from an hourly to a value-driven fee structure will raise your revenues and your clients’ loyalty. I guarantee it.
I’m a consultant and most consultants charge by the hour. I’ve been in business for myself for 11 years and I have never had an hourly rate. I’ve been asked for one. Pushed for one. Even chastised for not having one. But I’ve stayed with my value-driven pricing model (charging by the project or on a monthly basis) and it has served me, and my clients, better than any other business decision I’ve ever made.
My fees are based on the value delivered and not on the cost of doing the work. Let me repeat that. My fees are based on value, not on time.
And here’s why:
Reward Your Clients, Don’t Punish Them
You want to reward your clients with quality work. Likewise, you want to reward yourself for work done efficiently. It’s common to do similar work for different clients. Let’s say that the same project takes you more time for Client A than it does for Client B (for some completely unforeseen, yet legitimate, reason). But, both clients receive the same quality of work and experience the same level of value. Why would you charge Client A more than Client B?
A time-based model punishes or rewards your clients for something they have no control over: your time. They care about the value you deliver, not how much time you spent to deliver it. And if it takes you less time to deliver real value, then you should reap the rewards. That’s how you grow your business.
Deliver a Real Return on Investment
Buyers make decisions based more on perceived value than on price. With every buying decision, your prospects are doing a cost-benefit analysis, evaluating what they will get by hiring you. It’s your job to help them quantify this so they will see that the value received will outweigh the cost. You can do this by asking questions in the discovery phase to really understand why the prospect wants your help and just how your help will translate into results. It’s not always easy to quantify this, but your efforts will pay off. You will be surprised by how engaged and impressed your prospects will be when you show genuine interest in delivering a real return on their investment.
Expand, Not Limit, Your Earning Potential
With an hourly rate, you greatly limit your earning potential. There are only so many hours you can work, so you effectively cap what you can make. You can hire or subcontract others, who will likely work on an hourly basis, but you’ll spend billable hours managing them for an hourly rate that is below your own. It’s very hard to grow your business when you’re hemmed in by an hourly rate structure.
Don’t Become a Commodity
By having an hourly rate, you turn yourself into a commodity, encouraging prospective (and current) clients to price shop. Hourly rates are too easy to compare and contrast. Your clients will ask (if they haven’t already) why they should pay your rate when your competitor charges less and seems just as qualified. Your competitors can more easily undercut you, forcing you to consider a drop in your rate. And what if you want to increase your rates? Good luck with that.
Here’s how you can change from hourly to value-driven pricing:
I’ve been following this model for over a decade and can assure you that your clients will be really happy with a value-driven pricing model. And so will you! When you focus your clients’ attention on your value, they recognize it and appreciate you more. This translates into more work, higher pay and more referrals.
Watch for my next article on how to calculate fees and craft winning value-driven proposals.
Have A Great Day ,
Dennis 'DJ' Ford Jr.
Devine Financial Solutions
My Blog: http://dennisfordjr.wordpress.com
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