Are You Losing Money the Smarter You Get?

losing money
“We now have advanced certifications to serve you better!”

Companies pursue certifications as a top line revenue growth strategy. Websites for services companies of all kinds list all their certifications right up front. They hope these all-caps letters are differentiators and magnets.

The message is “We’re even more capable than we were before.”

Do these certifications attract more buyers? I am not sure. I am sure however that these companies lose money after attaining them. Losing money is the opposite of a top line revenue growth strategy.

Why Do Companies Lose Money After They’re Certified?

The answer is that companies do not build new and higher value into their offerings to customers and clients and therefore do not reap a return in the form of higher prices or fees.

The point of certifications and continuing education is to increase the knowledge, expertise and capability of practitioners. Unfortunately, once the certificates are posted on the wall (virtual or otherwise) the practitioner continues to do business the same way they’ve always done it: charging by the hour for their services.

Charging by the hour is exactly why they lose money.

Hourly rates are about time not value

Hourly rates recognize only one resource: time. There are 60 minutes per hour. Even in companies where different rates are charged depending on the person doing the work, TIME is still the one resource that’s measured and valued.

How do you justify raising hourly rates? There are always 60 minutes in an hour, so what is the justification for increases? It’s a new year? Expenses have increased?
People have gotten smarter or more capable?

This is the one you’d think would make sense following the certifications. But then a buyer challenges you: “Ms. X is now more highly certified. That’s great. Doesn’t that mean she can do the work faster? So that would reduce our total cost, wouldn’t it? If you can’t reduce our cost, then assign our work to someone without the certification.”

Charge for Value Delivered

Value delivered refers to the outcome to the buyer. The higher the value, the more the right buyer will pay. Buyers don’t care about the inputs required to deliver that value except if you make them care. This is exactly what happens when you charge by the hour. They want their higher value outcome and choosing the resources to deliver it should be your business not the buyers’.

Quantifying Value

Too many services industries get frustrated when they try to quantify the value delivered. What’s the dollar value of speed, of deeper insight, the leading edge, or imagination?

If you never try to quantify the value delivered, you’ll never be able to charge for it. There is always value to the buyer of speed, deeper insight, the leading edge, or imagination. It’s your responsibility to quantify these. One way to start is to ask your buyers how they benefit from your services.

Then you must articulate the value using every means possible.

Overcome Your Past to Make More Money from Certifications

Whether you’ve been in business for decades or months, the biggest barrier to charging for value delivered is your thinking. You like doing what you’ve always done; you like doing what everyone else does; you’re uncomfortable with change; the time needed to make the switch to value based fees will take you away from your day-to-day responsibilities. You name the objection, a business owner has it at their fingertips.

In our 20+ years of helping services-based businesses make more money and accumulate cash, we’ve seen companies dig their heels in on hourly rates and continuously struggle, or even go out of business. We’ve also seen companies create and implement a 90-day plan to transition to value based fees and exclaim afterwards “I only wish we’d done this sooner”.

The growing distance between your increased knowledge and capabilities and your hourly rates causes you to lose money with certifications and continuing education. Close that gap with fees based on the value to the buyer. Start today.

Need guidance? We’re long time practitioners of value-based fees. We’ve worked across industries and company sizes to help them make more money from their increased their knowledge and capability. Give us a call when you’re ready to stop losing money the smarter you get. 703-801-0345.

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