Delivering value – should you bill by the hour or offer fixed rate packages?
Knowing how to price your services can be a real struggle.
Charging an hourly rate can feel less scary than quoting a fixed rate package because you have confidence you’ll be compensated for every hour you spend on a project.
But there are drawbacks to trading time for money – not the least of which is that it limits your earning potential. Charging by the hour can also lead to bills getting higher than clients expect, leading to bad-will for your interaction.
“In business we like absolute certainty,” Porters CA Director Simon Terry said. “Certainty for the service provided, certainty for the quality of work, certainty for the timeframe and certainty for the client that they are receiving the service they requested at the price they expect.”
Porters offers fixed-fee pricing for our full range of services. This gives clients peace of mind, an ability to plan and budget for Accounting costs and you have an itemised scope of services we will provide for that fee. With this certainty we recommend an option to include regular contact with your accountant to ask any questions on your mind, without the fear of adding to your fees. The great benefit of fixed fees is that clients can go through a list of services, add and remove services based on their needs and the amount a client wishes to spend on accounting and business advice.
“We know that the more we help a client, the faster they achieve their goals – for business clients it is a question of how fast they want to get there”
When you learn to package and price your services your clients will be happier and the certainty will provide both you and them with higher value.
Focus on results, not time
Here’s the thing about billing by the hour: clients will always focus on how you’re spending your time rather than the results you’re achieving. Hours that spiral out of control run the risk of your client being unable or unwilling to pay for your service.
At the same time, hourly billing opens you up to comparisons with competitors, who may charge a higher or lower hourly rate, this hourly rate does not indicate the quality of your service.
What you always want your clients to focus on is the value you bring to a project – which is why another term for fixed rate packages is “value-based pricing”.
Make life easy
We found a software solution at GoProposal that made our life easy to professionally and quickly quote fixed fees with clear scope and they align with our focus on delivering value to clients and a WOW experience.
We have implemented a payment solution with Apxium that makes it easy for clients to schedule and pay on a regular monthly basis.
There is a Make Life Easy solution out there for your business.
Relieve your clients of invoice anxiety
Your clients will, without exception, want to know what your services cost up front – especially if you’ll be working on a large project and the investment will be significant.
Offering a fixed rate package makes it easier for a client to say yes to your pitch. Knowing the final cost in advance allows them to more comfortably and confidently plan, budget, and invest in your services.
Ultimately, value-based pricing will also free you up to do your best work knowing you’ll earn a fair rate for your services with the potential to increase your earnings.
Why fixed rate pricing = higher profits
In some cases, freelancers charging by the hour don’t feel as motivated to work quickly and/or efficiently. With a limited number of working hours in a day, charging by the hour – even if you’re billing for more hours – limits your earning potential.
Not surprisingly, many service providers who trade hours for dollars eventually end up burning out trying to earn more money.
When you switch to fixed rate packages, it’s in your best interest to find ways to work more efficiently so you can earn more for your time – at the same time you make your clients happy by getting the job done expediently.
All pricing strategies have risks
The downside to fixed rate pricing is that some projects will be more profitable and others less so – depending on how much time is required to get the job done.
One way to reduce risk is to ensure you and your client are very clear on the deliverables included in the project at the outset and to always have your agreement in writing.
Inevitably some clients will try to expand the scope of the project and may forget the outcomes originally agreed to – particularly if the project takes half a year or longer to complete.
With a value-based pricing model, you’ll win some and lose some – but you’ll lose less with time and experience, and in the bigger scheme of things, it will likely be worth it.
If you’re ready to switch to offering fixed rate packages, the first step is to understand the value you already offer your clients.
Think broadly about your expertise, training, professional qualifications, and years of experience. Then create your first draft of your fixed rate package offerings.
Being able to communicate exactly how you can solve your clients’ problems will make it easy for them to see how valuable your work is.
Get this part right and your clients may even feel they’re getting a deal when they see the price tag for all you have to offer.