Have you ever thought or said one of these?
“I’d love to be a consultant, but I hate that clients can cancel, and you lose the billable hours.”
“They think since they’re paying me by the hour, they have the right to require me to work 14 hours a day.”
“They want 30 day terms. Clients don’t realize that I have bills to pay too.”
“Clients didn’t call when the problem would have been easy to handle. They waited and now the problem is much bigger and harder.”
“Clients delay sending their materials, which means I can’t work on their issues, which means I can’t bill them.”
I have heard all these complaints in the past year from the Owners and CEOs of professional and business services firms.
They reflect the top 5 problems caused by hourly billing.
- Lost hours: You tell clients that they pay for the time you work with them. If they cancel an appointment or zoom call, you cannot charge them for that time. Butyou can’t book other client work, so the revenue for those hours is lost and cannot be recovered.
- No control over your schedule: When clients know they’re paying for your time, they feel free to demand a lot of time, using the rationale “we’re paying you.”
- Negative cash flow: You can’t invoice until after you’ve done the work. Then the client expects terms such as payment in 30 days. Your own expenses and payroll do not wait; therefore you continuously struggle with negative cash flow.
- Small problems turn into costly big problems: Clients do not call because you’ll charge by the minute for that call. Being penny wise and pound foolish is terrible for client relationships and long term retention.
- Your invoicing is delayed by client delays: When you invoice for time spent, whenever the client delays doing their part, your invoicing and revenue is also delayed.
You can solve all these problems with one choice
The one solution to all of these problems is a pricing model that sets prices and fees in advance of the work. Your terms and conditions must require payment in advance or in monthly, automated installments on the first of each month.
IMPACT Based Pricing is that pricing model
Your pricing strategy or rule should be: “We price for the impact we deliver to our clients.”
The pricing model is IMPACT Based Pricing: “Our fees are proportional to the life changing differences we deliver to our clients.”
Profit is always included in the fee.
Advantages of IMPACT Based Pricing
- Cash flow is always positive. If you’ve been juggling cash in and cash out, and always feel the balls are about to drop, you can end the juggling. IMPACT Based Pricing, with predetermined fees, and terms and conditions that require payment in advance (or installments) ends negative cash flow once and for all. That’s right-it’s completely over.
- You earn your fees by doing the work, not by spending time. When a meeting is cancelled, or a client delays sending you materials, it may delay delivering the IMPACT, but it doesn’t reduce your revenue.
- It’s 100% ethical. Clients know that they will experience the life changing differences as quickly as possible, and you know you will earn a fee proportional to those differences.
- Unlimited access is priceless. Every IMPACT Based Pricing offer includes unlimited access to the provider during normal business hours. When clients know they can and should call you when something small arises, they will help you achieve the IMPACT sooner.
Never in the past 14 years have I had a client who “took advantage” of this access. I learned long ago that Owners and CEOs are busy with their own work. They don’t want to talk unless it’s vital.
- You control the schedule. You keep the client advised of progress, request meetings when you need them, never have to commit to X amount of time per engagement and manage the schedule.
New season, new Pricing Model?
Many people feel motivated to make a personal or business change when there’s an external change happening.
We’re just a week away from the official start of Fall, 2023.
Is now the time for you to turn over a new leaf? (I could not resist, 😊!)
If you’re ready, I’m ready to help you. Text READY to 703-801-0345
If you’re not ready but want to know more, text FALL to 703-801-0345.