Many of us respond with an hourly rate. It’s what clients and prospects desire, you say. It’s clear and easy to understand. All parties know what they’ll be giving and getting. And that’s the way you conduct all your business engagements.
I’m just like you. I’ve quoted hourly fees for many services for over two decades. But I’ve learned during the last several years that there’s an alternative: selling the value you deliver. In other words, you don’t quote an hourly fee. Instead, you spend time with the prospect to determine what they need and the dollar value they attach to it. You base your fee on this mutually agreed upon value.
I find arguments urging consultants to sell the value they deliver, as opposed to the time they spend, very compelling. You can peruse them yourself by checking out my review of Breaking the Time Barrier here (or reading that entire work here). What’s the bottom line? You’ll be better compensated. You’ll be able to work less and earn more. You’ll have substantive, potentially deeper relationships with clients. Sounds great, right? Isn’t that what each of us wants?
So, what’s not to like about values-based fees? Nothing on surface—everything beyond that. It’s what we need to do to pivot from hourly to values-based fees. It’s the very thought of making such a change that explains why I’ve been reluctant to do so thus far.
I’ll admit it. The prospect of selling value as opposed to time terrifies me. Why? Because selling my value and not my time:
- Risks alienating prospective clients used to paying for services by the hour. I may lose business before I get out of the gate because prospects don’t want to have a conversation about my fee, they just want to know a number.
- Would require me to calculate the dollar amount of the potential impact of my services on clients’ businesses. I have no idea how to do so. I’m not aware of any book or formula that would help me. In short, I would need to understand far more than I do about how my prospective clients operate than I currently do. That demands I spend time and potentially call on other resources to do so.
- Would demand I assess prospective clients’ relative perception of my value. That means I acknowledge that I’m directly competing against other providers of my services. It means I need to know who these competitors are, how they work, and what they charge. I also need to know how I’m different. I thus need to be clear on why I'm worth listening to when I propose a value-based fee to a prospective client.
- Requires me to negotiate with the client to confirm the price and other terms of our engagement. It’s not a take or leave it situation. I need to ask for what I want but at the same time be ready to offer flexible options. I cannot be wedded to one solution but focused passionately on what I can do to deliver value for my client. This process can be messy, difficult, and time consuming.
- Puts pressure on me to deliver the value we’ve agreed upon. A commitment to deliver value in service to the client upends my thinking. I can no longer act based on the following beliefs: I don’t respond well to external pressure. I’m internally motivated. My standards are the only ones that matter.
- And, finally, this approach runs contrary to my belief that being liked, even loved, by the client would do far more for me than selling my value. In other words, my clients won’t necessarily care anything about me but rather what I can do for them. That seems rather callous, part of me likes to argue. But that’s business, right? It’s just more nonsense I need to jettison as soon as I can. That is, if I am to realize my potentially professionally and financially by focusing on values-based selling.
I know I’m selling myself and clients short by continuing to charge an hourly fee. But am I ready to confront my fears? Am I ready to make the change? To shed my old skins to bear new ones? Are you?