I would like to tell you a story. Several years ago I read a book called Million Dollar Consulting
I was at a stage in my business where I couldn’t make any more money. At the time was business was in the computer consulting field. I was charging my clients by the hour and I had three children. I just couldn’t work any more hours. My financial limit was capped, or so I thought.
I was trying to find a better way. I needed to make more money, but at the same time, I wanted to work less hours to spend those hours with my family. I just couldn’t figure out how to get it to all work. I stumbled across the Million Dollar Consulting book by browsing titles at the library. Alan talked about how to start charging clients by the project or program instead of charging by the hour. Now, I had heard about doing this before, but I never fully realized how much more I could make until he laid it all out for me. Alan also went into details on how he did this for his own business.
Now that I understood why I needed to charge a set rate for a given project instead of charging by the hour, I ran into my next obstacle. This one was the fact that every client I found to hire me was used to paying by the hour and was insisting on this. But I remained persistent.
I eventually found a client who was excited to pay a set rate. He was happy to know upfront how much he was going to be billed for the work. He was a new client and had been bitten by someone who overcharged on their hours. So this was a win/win situation. Finally I could test out my new pricing model.
The first project I ran into 2 problems: 1) I underestimated the number of work hours the project required and 2) more importantly, I was afraid to charge what the project should have been worth. I really wanted this client, so I set my sights too low. I lost a little money on this per-project deal.
However, the second project was with the same client. This time I knew how much the project was worth to the client. So instead of charging what I thought was fair based on the hours I would put in, I charged based on what I felt the client was willing to pay. I knew this project was going to be well worth his investment.
At the time, I was making about $100/hour on computer consulting work. The first project ended up netting me $80/hour; therefore, I had a loss. The second project I ended up getting paid $1000/hour. You could only imagine how I felt at that moment! In both cases, the client was perfectly happy with the price paid and the results he received from my work. So happy that he hired me for more work after that.
Are you charging for services by the hour? Is there someway you could turn your services into a product or program that would better leverage your time?
