Why I don't charge by the hour
Why I don’t charge by the hour
It is virtually impossible to run a business if you charge by the hour. You’ll always be chasing your tail, working 24/7 to fit everything in, and never having the time or energy to grow your business.
Charging by the hour doesn’t work. Have a look at the cold hard facts. Let’s be conservative. If you want to earn £50,000 this year and say you are charging £60 per hour long session. You will then have to run 833 hourly sessions over the year. Now that may be manageable as it equates to 16 hours per week (if you’ll never have a holiday!) But if you then need to seek 833 clients, well that’s where the hard bit starts.
If you package up what you do, it will make it easier for your clients – and certainly easier for you. Let me share my own experience.
I don’t charge by the hour because:
1. I want to make a difference
I can make a bigger difference when I work with a client over a longer period of time. We can get to implement the stuff that works rather than skim over the surface of something that might. I can get to the heart of the issues in your business and help you to do something about it, rather than changing something on a superficial level.
2. I can add more value
When I work one-to-one with a client it is invariably for a 3 or 6 month period. Over this time I am by their side every step of the journey. Clients don’t just pay for the time I’m speaking with them, they get my support via email, I’m there for advice when they need me, and I also help them out with things like giving feedback on web copy. My clients know my fees up front and they don’t have to worry about any unexpected costs later on.
3. I can offer multiple programmes
I like to offer other options for people who are not yet ready to work with me one-to-one. Items like my books, The Business Wow Factor members club, and events like the Star Biz Conference. But I’m aware that all of these take time to develop and I need to be able to schedule in the time to work on my business to make all of these happen.
4. I can plan my business and my cashflow
It may surprise you that I have a detailed plan for my business for the whole of this year. I also know how many prospective clients I need to speak with each month to reach my own financial goals. I can fit it around my other programmes and even have a break or two too!
5. I can build long term relationships
My business isn’t about creating a quick fix; it is about being there for people on a longer term basis. Who can I help in my community, what else can I do for my clients and how can I develop relationships with other people in my network? If I’m always chasing the next new sale, how am I going to be in the right place to do this?
Want to package your services?
When you are selling a service, it is particularly difficult to demonstrate your expertise. But you can package up this experience like I’ve mentioned above. Whether you are a coach, an image consultant, therapist, beautician, counsellor, VA or other service based business, what’s stopping you? Take a look at what you offer, how you can make a difference and how you can make it easier?
This is one of the subjects I’ll be teaching in week 4 of the How To Make Your Training Pay programme that starts on Tuesday 18 March. Go here to find out more and to join us.
Karen
I agree in principle but think there are other considerations.
My first paid consultancy was for an international advertising agency. They wanted a list of ideas I’d discussed with them and I charged them £1k. It took me 45 mins to type the list. So although rare these people are happy to pay a much higher hourly rate than most and you don’t need many like this each year.
In a sense the above is a value based fee and this is an option to a traditional package where most people charge the package based on a number of days times day rate. If you know, and more importantly the client knows, the value of what you deliver they will relate your fee to the value of what you give. For example I’m with a client today that wants to double turnover from £1m/yr to £2m/yr so my help will be “worth” £1m (simplistic I know but you get the idea). The point is they are anchored on the £1m and my fees are very reasonable against this. (Anchoring is a topic everyone should read)
Thanks for your reply and you are right. You need to consider the return on investment when setting your fees, but for many people it is pretty intangible and difficult to quantify. Lovely to get your input.
We completely agree- stepping away from the by the hour model helped us immensely!
Also wanted to let you know that you’re on our list of 50 solo business thought leaders to follow on Twitter 🙂