There are essentially two ways of selling your services – one based on time and the other based on solutions. Charging by the hour is fundamentally broken, but there is another option. Charging by the solution not only makes sense for you, it makes sense for the customer.
When you charge by the hour you will inevitably be asked: “What is your hourly rate?” If you are anything like us, you’ve no doubt heard an audible gasp, “that’s a lot of money,” “your competitor’s only charge half of what you’re charging,” or our favorite “my nephew charges $10 an hour to do the same thing.”
It’s both annoying to you and the customer. Both parties feel as if they’re being ripped off if they settle for anything outside of what they have in mind.
Solution based pricing, however, allows you to charge for your experience and doesn’t constrain you to hours committed. It’s also a great way of identifying your ideal customer.
Hours Watch Commits – Wrong For Both Parties:
The work you do shouldn’t be quantified by an hourly system. When you enter a contract based on charging by the hour, the person hired is usually under intense scrutiny and met with skepticism. This makes for less than ideal working conditions.
Likewise, hourly pay is the one system where you are punished for being good at your job. Think about it this way: the better you get at your craft the faster you get at your craft. This is only natural in virtually every job or profession. However, when this occurs it equates to you being forced to charge for less hours.
Producing better results in less time should net you more money, not less. Meanwhile, someone less skilled could theoretically make more than you by charging for more hours. It is a flawed system for the professional, but also flawed for the client.
Unless your client is intimately familiar with the work you are performing, they have no clue as to how many hours it will truly take. They don’t want to be beaten over the head and taken for a fool, so how do they truly know if the specialist is doing the work in the time they suggested? The honor system is faulty and shouldn’t be counted on when working with someone you don’t know.
This is why we suggest that costs are associated with deliverables and not with the number of hours it takes to complete a project. Instead of focusing on hours, you should instead sell solutions. But if you do intend on selling your services hourly, using a version control is a must to keep things honest.
Version Control and Commits:
For those of you not in the know, version control essentially allows you to track changes. With any project the following occurs:
- Create things
- Author new files and create the content
- Save things
- Edit things
- Make changes to those initial files
- Requested modifications
- Make changes to those initial files
- Save things again
Version control provides clarity as to when you created the initial content, performed subsequent changes, why you made the changes, and the contents of what the changes were. These changes are open to review at any time in the future.
Working collaboratively can be an extremely rewarding experience, however you and five other individuals working on the same project can also be a nightmare. It can be equally nightmarish for the client trying to track all of the changes.
When you work on the same file with others, you need collaborative history tracking capabilities. Your tracking needs to be more than just the single history of a single file for a single person. You need to be able to keep track of who changed it, when they changed it, and why they changed it. This facilitates simultaneous collaboration to the same or adjacent files.
When you are working with someone and paying them by the hour it only makes sense that you would want to see progress. Version control allows you track their commits (time committed to the project). Every time they make a change to the file – they place a commit message with an update of what they worked on and what changes they’ve made. With version control you can also come back to the commit and undue whatever changes were made.
Solution Watch Commits – Charging by Deliverables:
Solution based pricing works for both client and professional. To explore this even further think about the following scenario:
- A plumber quotes a client $500 to fix a leaky pipe.
- A plumber quotes a client $500 to fix a leaky pipe in 60 minutes.
Both scenarios offer the same thing and require the same amount of time, however the second commodifies the work. The second scenario sends the client into sticker shock, because who hires someone for $500 an hour? It sounds like a lot more money even though it is the same price.
The difference here is that the first plumber connects the price of their work with the solution they are offering. The second, meanwhile, associates the price of their work with the time it takes to fix the leak.
Again, commodifying your time punishes you for working quickly and efficiently. There will always be someone in every profession that prices themselves just a little lower than everyone else and undercuts the market. They not only hurt themselves but they also damage the profession.
Instead of charging by the hour, focus on attaching cost to deliverables. What is the service you are providing worth to the client?
How to Start Charging by Deliverables:
In every proposal we follow a basic guide that covers project objectives and deliverables. We break down each objective into straight forward morsels. Each task is a separate item with individual deliverables (ex. information architecture includes a sitemap and navigational structure).
Further project pricing breakdowns may fall into:
- Design strategy
- Theme and front-end styles
It also makes sense to include optional services that similar clients wanted, like newsletter design, social media marketing, copywriting, etc. These act as negotiation points as well since some clients don’t fully understand what goes into a service. Maybe they hire us for search engine optimization and mistakenly believe that we are going to also produce all of the content for their website. These optional pieces allow customers a better understanding of what they are receiving.
Timelines for Deliverables:
If it’s a large project occurring over months it is beneficial to lay out milestones and schedules, but for the most part how long each deliverable takes is internal.
One of the worst things you can do is under-deliver and over-promise. If you tell a customer one week for a newsletter design and it ends up taking you two weeks than you are unreliable and probably losing business. Instead, don’t indicate how long the project will take to complete but rather when you can deliver it.
If it truly takes one full week to complete a newsletter, do you really want to race your way to submission? Design it in five work days and quote them for 10.
This isn’t to rip the customer off, remember we aren’t charging by the hour, but rather bracing for an unavoidable delay. Sometimes other projects or life messes up your schedule and if you don’t pad deliverable dates than you’ll always be late. Instead, if you finish early you can sit on a project and the client gets it when you quoted them.
Pricing for Deliverables:
In a proposal the client only ever sees the price for each deliverable. The price varies on a number of factors, but the most important one is how long it took to finish past projects. From there you will learn how to price accordingly.
Your price also takes into account experience and years spent learning the craft. Chances are you’ve spent thousands of hours working with previous clients and learning from past projects and mistakes. You should be paid for what you know.Your price is not just for the task at hand but for all that you bring to the table. Click To Tweet
Minimize your risks by ensuring the value of your work. How does your solution benefit your client? They want results and the best possible end product, so don’t bog yourself down by charging by the hour. Instead, focus on your work and charge by solution.