Why Hourly Rates Won’t Help us in 2009

We’re heading for a recession, there’s no question about it. Now the doom and gloom is out of the way, I’ve been thinking for the past couple of weeks that I might revise the way I do business in 2009. Hourly rates are great, don’t get me wrong, but they give us no incentive to work fast do they? Someone who has no idea what they are doing could theoretically get paid double/triple what we do yet we get penalised for being quick and efficient, that’s not right.

I think a lot of it is to do with mindset for the client. I’m going to use a really girly example here, forgive me but I hope you’ll see where I’m heading. When I book to have my nails done once a month (£25.00) I think of the service and end product I am getting – which are gel nails that last and look beautiful all month, I bet loads of you men notice females in meetings with chewed nails, chipped polish etc., which is more than worth £25 (in my opinion, anyway!). I don’t think of the beauticians time to complete that service, if I thought of it like that I might start being cynical that £20.00 per hour (£5 for materials) is a lot for an hourly rate for that service.

I think in 2009 we are going to be much better placing our services as products as much as possible,  sell the end product to the client rather than telling them how many hours it’s going to take to complete and what that will cost them in your hourly rate. A more techie example, if you say to a client “Hey, I can install that CMS system, fully rebrand it, it’s going to enable you to update your website as much as you want without the need for additional charges from us for maintenance, it’s going to cost £450.00 to complete” – you’ve sold them an idea, a solution and a money saver all in one. Against saying to them, “Installation will take me 10 hours at £45.00 per hour” for example. This suddenly becomes a questionable idea, I’m sure amongst other things, they will question whether it will really take you that amount of time to complete the project, suddenly you’ve put doubt in the clients head and the project has gone, or at least been put on the backburner.

Clients are of course a great breed who want to add to their projects as they go along, so I can hear you saying as you read this “but if we fix our prices and then the client wants extras, we’re screwed”. Wrong. If you have a plumber round to fix your tap and he’s quoted you for these works, then you decide you want your shower mended, you expect to pay more. Clients should be no different and we should treat our industry no differently. I think as long as we are upfront, honest and polite, of course you can ask for more money when they are asking you to complete more work. It seems such a simple solution but one that fills many people with fear for some reason.

The other fear with fixed pricing is if something takes you longer than anticipated. I’d suggest sitting down at the proposal point and thinking of the maximum time it’s going to take you to complete the project, place a limited amount of revision sets that come part and parcel with the project and then specify a price for extra revision sets should they need them. With no hourly rates to be seen. By all means use your hourly rate as a guide for pricing though but I would refrain from writing it on the proposal itself. The following example would be for a logo design project for a client, and this is how I always lay out my proposals – you tend to find you can cater for everyones budget a little better then.

A list of what I’m going to do:
1. Corporate Identity Development

Optional Extras
2. Stationery Design
3. Extra Revision Sets

1. Corporate Identity Development. Use this paragraph to explain exactly what you are going to do and how it benefits the client, followed by how many revisions you are including in this price.

Optional Extras:

Stationery Design. Another paragraph to explain what’s included in this package price.

Extra Revision Sets. Another paragraph to explain what consitutes one of your revision sets.

Place tick boxes next to the optional extras and let the client work out how much their budget can stretch to. By doing your proposals this way you will find your pricing becomes a lot more accessible to clients. They can see the benefit of what you are proposing and can clearly see the cost involved.

Daily rates would also be a great way forward, I personally would prefer this method, however there are times when you are going to need a solution for smaller projects, and that’s where I’d suggest, for 2009, we’re all going to be much better off placing our services as products as much as possible.