Values and work-time

Enjoy the fresh air

Enjoy the fresh air

This past year has been very challenging due to family illness. Despite this it has been a successful year on the business front from my point of view. I have worked less due to the non-business commitments, but have still found time to enjoy the fresh air on my walks, and with my wife.

How was this possible? Well, it has helped that the economy is improving. I have a lot of consultancy, and while I always bill this on the basis of value to the clients in what I do for them, my services have increased in value and people are prepared to pay for that value having less perceived constraints on cash-flow.

I should mention that my regular clients, although they value what they get, have not seen a big price hike They provide a regular basic income into my business.

So with the higher value work I can afford more free time and can pick and choose clients even more than I did. I also gain extra time by outsourcing the low value services with which I am less comfortable and which are, frankly, boring.

None of this is earth-shattering magic, but having a higher income but with more free time cannot be bad, can it? Do you value yourself enough?

 

“Dutch auction” clients

English: Julius Henry "Groucho" Marx...

English: Julius Henry “Groucho” Marx, cropped from group photo (Photo credit: Wikipedia)

Recently a prospect to whom I had quoted a fee in an email replied to that email after four months. She asked if I was still prepared to act for her. Naturally I said yes, and assumed she had accepted my quote. I sent her the usual “terms and conditions” email.

In reply she said that although I had the knowledge and expertise she required, actually she had obtained some other quotes. She effectively asked me to cut my fee in half.

Clearly she did not value me despite her comment and did not appreciate my experience, the cost of my ongoing training, my business overheads etc. Mainly though, she did not see value in me; only in saving money. Frankly, if she can get a process done for half my price, I fear for her as anyone in my field of work who was half decent could not possibly be relied upon if charging such a low fee. Too many corners would be cut. Instead of saving money, she may waste money.

I didn’t come here to be insulted, but I have got the tee shirt, so am not too upset. Very likely I was dealing with Rufus T Firefly’s daughter. She will land herself in the soup with HMRC; maybe Duck Soup.

The moral: know your value and charge for it. Clients worth having will appreciate the work you do and will be happy to pay for the comfort you give them.

 

 

 

Running your own business down

So often I meet earnest business people who work hard and are not making money. So often it is because they undervalue themselves and what they do. They offer a great service, and if you asked their customers they would say that the businesses really stand out in terms of service quality.

This is one of my favourite themes. You need to value yourself and your own business, and know that your extras and special care for your customers and clients warrant higher charges, and your clientele will not complain. You must not join the race to the bottom.

And if you don’t believe me, see that that Master of Marketing, Jim Connolly, thinks. Do you believe me now?

How much is a consultant worth?

Barclays on Queen Street, Morley, West Yorkshire

Image via Wikipedia

Naïve question

A consultant in my network asked what rates he should charge as he was looking for additional work. I guess he was thinking about a day rate, which is a really old-fashioned way of thinking. Our friend also has a serious disadvantage in having no on-line brochure or marketing material in the form of a website, but that’s another story.

My reply in part was as follows:

“You need to think about value rather than rates. How much value can you bring to the party, how much will you improve the client’s business, how much comfort will the client pay for to have you by his / her side? The old idea of £500 per day or whatever is outdated.

In my business I either quote a fixed fee for my assignment based on value to the client, or I assess the client as to how much he or she will pay for the comfort of having me, but still with an eye to what I can deliver in terms of value. You have to be adaptable.

A couple of days work might be worth £250 or it might be worth £2,250. It is for you to judge and sell on value.”

Bank on value

Of course a couple of day’s work might be worth a lot more than £2,250. It really depends how much value in terms of either profit or comfort or both the consultant is delivering.

Don’t think I am leaping to the defence of the bankers, but there is a row about Barclays Bank paying their chief executive, Bob Diamond, a bonus of quite a few million but the bank has just posted profits of over £6 billion. We may not like the bank’s charges and think they have let us down (although the bank was not bailed out by the Government). However, the bank, board and shareholders may credit Mr Diamond with being responsible for quite a slice of the profit, and that’s a big profit. Hence he has a value to them of a greater amount than most of us will ever see.

Consultants and indeed anyone offering a service should think in terms of what value they can deliver to the client when making a proposal. How much better off will the client be at the end of the assignment or how much value going forward will the client benefit from?

If a client will be £500K better off, a system to achieve this could be billed at £50K even if the setting up of a system or the work involved is comparatively little. If the client is £50K better off, he or she will be happy to pay £5K. It is not the work involved (and if you are selling a system you put in a lot of work at least once), it is always the value to the client which should be billed. If it is a one-off job it may deserve to be billed a lot more than the cost or a now obsolete normal day rate.

Small beginnings

The fixed day rate idea always was a bit absurd. If a consultant needs the money and is not busy, it would be sensible to take work at £150 a day or less (if that is all the value was to the client) rather than turn down a job and get nothing. Start-up consultants may turn down work because they think they are “worth more” but it is better to keep their hand in for when the big money saving or profit increase for the client brings the matching big money.

Perception

Of course to get the fee on a value basis it has to be sold to the client, but that will be a lot easier if the client understands what the value is. It is better to sell on that basis of “my fee will be £10,000 and will save you at least £50,000 this year, and next year and the year after”.

The day-rate basis (“my fee will be £1,000 per day”) will result in your being shown the door.

Value-billing is the way to go. What to you think?

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Value Billing v Distress Billing

If I am going to compare value billing to what I mean by distress billing, I suppose I should define the first and tell you about the second.

Value billing is charging a client based on the value of the information or service provided rather than invoicing based on time spent. So, if a negotiator gets a client a deal which saves that client a million dollars, it might be seen as reasonable to charge $50,000 because of the huge value of the deal to the client, even if the work of the negotiator only amounted to a couple of days work. After all, the client is happy to pay for something very valuable which she could not have done herself. Happy client, happy negotiator.

I define distress billing as a charge made to a desperate client which takes advantage of the client and leaves him feeling ripped off; indeed knowing he has been. One example might be an emergency call to a plumber in the middle of the night to stop a leak causing further damage. In the daytime, a fair charge in the UK might be £100 for an hour’s work and the stress relief. At night, it might seem reasonable out of hours to be charged £200 to £250 for the inconvenience of the call out. A distress-billing plumber might however get the customer to agree to £500 to £750 for the hours work because “you won’t get anyone else out at this hour mate” as the customer imagines the entire house being destroyed by the flood. Effectively the fee is being blackmailed out of the customer. The customer will feel very unhappy later on.

However, this piece is not about plumbers and if you are a plumber whose sensibilities have been ruffled, I apologise.

A few weeks ago one of our cats was taken very ill. We took the cat during normal working hours to our veterinary surgery which is now part of a chain. They pronounced the cat to be in critical condition, of which there was no doubt, and prescribed various blood tests to detect organ problems and for a viral infection. Of course my wife and I agreed, in our distressed state, and the tests were done. The results were very bad and the outcome for our cat was, alas, that it was his last trip to the vet. We paid the bill, which was enormous, and went home shattered.

Because of the virus diagnosis we needed to get the other cats the same tests to see if they were infected. We had started to smart at the bill, having recovered our wits, and telephoned other vets for some quotes. It turned out that we had been charged double the going rate for our sick cat’s tests. Of course at the time we would have been prepared to agree to almost anything. You cannot say this was value billing; it was taking advantage of our distress. Anyway, there was no value in paying a large bill in advance of losing our cat especially as the outcome was poor anyway.

It is unlikely we will return to the vet practice we have been going to for so long. There appears to have been a detachment from the caring vet practice as far as the animals are concerned and the morality of over-charging or blackmailing of their owners. This is not a way to run a professional practice.

What do you think?

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