Hourly rates and other time based pricing practices give your firm confidence.
They’re simple and straightforward. and once rates are set, every client is charged those rates.
You have no worries! You:
- Don’t have to know too much about the client’s needs, wants, or desires. They told you they’re looking for X services. You tell them that you’ll do the work at Y hourly rate.
- Don’t have to worry about undercharging. If you work longer hours than expected, you bill for them.
- Don’t worry about things that are out of your control, such as third parties or schedule delays.
- Track every extra effort on the time sheet and bill the client.
- Can lower your rates to beat the competition and keep the business.
- Can’t fail to deliver value because you never promise to do that.
Thousands of Owners and CEOs will give a thumbs up and say “Yes, we have tons of confidence with hourly rates.”
How is It Possible This Confidence Limits Profits?
Note, I’m not saying hourly rates prevent profits.
However, they put a ceiling on profits.
I call it a ‘concrete ceiling.’
- You can only make profits from the hours you sell.
- You cannot increase profits from work that’s highly valuable to the client.
Value Based Pricing Gives You New Confidence and Higher Profits
When a firm phases in Value Based Pricing, it often experiences a temporary loss of confidence. Fortunately, this is quickly followed by a substantial gain that increases over time.
This is understandable, just as it would be with any other major change.
No one ever recovers their confidence by running away from the change.
They regain confidence by embracing the change and taking the steps to implementation.
How Do You Tell if Confidence is Holding You Back?
- Do a quick exercise: How much profit as a percent of revenue did your firm make in 2019? 2020? YTD 2021?
- How much growth in profit was there from one year to the next? None, less than or greater than 5%?
- If it’s none or less than 5%, time based pricing is limiting profits. It’s time to re-evaluate how your firm sets prices.
BTW-HOW you set fees and prices is the decision you make before you actually determine WHAT your fees and prices are.
Curious How This Would Work for Your Firm?
Hit REPLY or schedule a Starter Call here.
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It’s when we determine 1-2 actions you can start immediately to answer your questions, solve a problem, or overcome a barrier. You know what’s at the top of your list. Share that with me and we will open the starting gate together.
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