It seems all is not cheery in the hourly billing world.
A talented and creative videographer launched an independent videography company. She chose to market to arts and culture non-profits. As a painter and musician herself, she feels a deep affinity for the missions of these organizations.
She got some outstanding marketing help and pretty soon had several clients booked for videos.
While she was ecstatic about the bookings, she was troubled by the financial stress she was experiencing.
Her time and materials pricing approach.
A former business owner advised that she charge for time & materials. She would assign an hourly billing rate to every person on the crew, including herself, depending on their seniority and skills. She would price some portion of equipment use. And there was the fee to the studio she used.
The causes of her stress
- Pricing this way took up a huge amount of time.
- Some clients needed a faster turn around time and there was no way to charge for that.
- Some important tasks may be highly valuable but quick to do, so there wasn’t much money in them.
- Seniority turned out not to be the best predictor of a successful crew member.
- Everyone was watching the clock at all times, in order to come in under the budget the client accepted.
Could she switch to IMPACT Based Pricing?
A business friend of hers and mine introduced us to each other. Her first question was, “Is there anything I can to do reduce the stress of T&M? Or is it too late and I’m stuck with it forever?”
No, you’re not stuck!
For the past two decades I’ve helped knowledge services firms make many changes to long-held practices and delivered profound impacts.
She could absolutely change.
The first three steps
Before you adopt IMPACT Based Pricing, you have to take three steps.
- You will succeed if you are entirely committed to the change. Commitment means you believe completely in the correlation between knowledge and expertise and fees.
- Study your current fee-to-IMPACT ratios. We do an eye-opening exercise that shows how your current fees correlate to (or don’t!) to the IMPACT you deliver.
- Learn how to talk about IMPACT Based Pricing to your staff and your clients. Use the Issue Assessment Chart and the Continuum for these conversations.
Decide to start
I don’t advocate for a dramatic “flipping of the switch” from time based to IMPACT Based Pricing. Companies who take a measured approach, with planned and steady forward movement, accomplish the goal in about six months.
You do need to choose a starting date. Anyone who calls from that date forward will learn about the life changing IMPACT you deliver and the fees that are proportional to that IMPACT.
Years ago, I posted a big note in front of my desk. It read: “From now on, IMPACT Based Pricing only.”
About an hour later a man called. He’d been referred to me by a client. After a free-flowing and enjoyable 30 minute conversation he asked how they would pay me.
I looked up at my note, took a deep breath, and said “I’ll write up a plan for the work and offer it to you for a fee commensurate with the IMPACT I’ll deliver. I’ll have that to you first thing tomorrow.”
The pause seemed interminable, although it was probably about 2 seconds. Then he said, “That will be great! Thank you.”
That’s how you start.
- Prepare for the conversation
- Pick a starting date
- Talk about IMPACT Based Pricing to the very next person that calls.
Need a confidence boost and some practice conversations? You could get exactly that in a Think Tank.
What’s a Think Tank?
A one-time, 90 minute session on your preferred topic(s). The cost is $425, payable upon booking.
What’s the IMPACT?
You’ll have much more confidence and an action plan for your own switch to IMPACT Based Pricing. It is never too late.
As the Videographer said “Susan, thank goodness I did a Think Tank session with you. The last few video projects have been so rewarding because we could be creatives, not time managers! And the clients are over the moon with their finished videos.”
Hit Reply or text/call 703-801-0345 if a Think Tank might be your next best step.