Selling yourself by the hour is bad for business

Written by Karen Skidmore on - 10 Comments
Categories: Marketing Small Business

When you offer a service, whether it be in the form of coaching, consulting, support or training, coming up with the charge rates can be tough.

There are various ways of presenting your services but the one method to never use is by the hour!

Eeek! But isn’t this the easiest and simplest way of presenting your charge rates?

Perhaps, but here are some pretty good reasons why not to offer yourself by the hour:

1. You de-value your work. No matter how well you present your benefits, charging yourself out at £50 plus an hour just feels expensive. You will immediately allow your potential client to compare your services with services they are already paying for. For example, they may have a cleaner who charges £9 an hour and here you are saying that your coaching services are £110 an hour! Cleaning services and coaching services can not possibly compare but as soon as you offer yourself by the hour – it allows that easy price comparison.

2. Your client can get shocked by the final invoice. There is nothing worse than your client focusing on £40 an hour for the work you plan to do on their new website, only to be shocked when your invoice comes in at £800. The 20 hours you have spent on their website now needs to be justified and you have to itemise every step you have taken. Painful and a waste of time!

3. You focus on the activity and not the results. Whether you are offering a three day workshop programme or copywriting for a weekly newsletter, the more your potential client realises the benefits of attending that programme or sending out a carefully written newsletter to their database, the more likely they are to pay for such a service. If you sell the results of your work and provide a complete price for achieving those results, you will undoubtedly be able to charge more.

4. Hourly rates equate to annual salaries. This is especially so if your potential client is being paid an annual wage themselves. If you are quoting £250 an hour to facilitate a three hour workshop, it’s easy to think that you are expecting a salary of almost £500,000 a year. You know that you are not able to work 37 hours a week, 48 weeks a year delivering these kind of workshops – it’s just not possible. You know you have to factor in travelling time, preparation time, business management time, etc. And to try to explain this to a potential client, is just too tough a job.

So, avoid the hourly rate. Focus your charge rates on daily rates, project quotes, programmes or monthly retainers. Anything but the hourly rate!

How do you charge for your services? Add your thoughts and ideas in the comment box below

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10 Responses to “Selling yourself by the hour is bad for business”

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Mike Rogers

September 18, 2009 at 8:39 am

Hi Karen,
Thanks for a very thought provoking blog, well up to your usual high standards.

I think that it is tempting to fall into the “I must be the cheapest quote” trap in these tough economic times, but we must remember that when times improve and we want to start making a decent return on our efforts, it becomes more difficult to justify price increases. Hourly rates tend to magnify such moves because, as you say, they are easily comparable with other things.

As a practicing hypnotherapist I have the disadvantage of having to charge a ‘per session’ rate for private clients, so I either have to adjust price or length of session. The downside is that my sessions tend to end when the client’s therapy completes for a one-session therapy.

Corporate work is more flexible in that by charging a per session rate for group work I can focus on providing a good outcome that has value for the client in both tangible and intangible terms that compares well with my estimate of cost of putting a programme together, often a long term investment in terms of time, materials, etc., and leaves me with an acceptable return.

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Jean Davies

September 18, 2009 at 10:20 am

Hi Karen,

Very interesting blog, and one I’ll need to mull over a little I think. Absolutely get what you’re saying, but need to find a way to make it work for me and the various things I do………

[Reply]
Duncan Brodie

September 18, 2009 at 10:30 am

Hi Karen

Excellent article you really pull out some great points.

I think that there is something about transparency too. Take coaching for example. People say that one of the differences from training is that is an ongoing relationship as change takes time to achieve. Yet many still offer a per session rate.

Much better, as you rightly point out is to offer a package which you know is going to deliver on the promise.

Duncan

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Sally MacMillan

September 18, 2009 at 4:02 pm

Hi I agree with you comments in theory but if you are only going to a client for an hour at a time, how do you charge them?

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Alice Elliott

September 20, 2009 at 7:14 pm

I agree with Jean, it’s sometimes quite difficult to calculate an overall price for a piece of work, especially when you don’t know how long it will take – or worse, estimate a time and find it takes twice as long because the client is picky or doesn’t really know what they want, even when you extensively question them beforehand.

Is there a way of adding in a proviso to cope with any unexpected demands on your time and/or difficult clients?

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Ralph Smith

September 25, 2009 at 8:27 am

I provide management accountancy and cash flow consultancy services and I always end up charging by the day. On the plus side its indisputable whether you worked a day or not.

http://www.domybooks.ie/Blog

[Reply]
Karen Skidmore

September 25, 2009 at 10:42 am

In answer to Alice & Sally’s comments – it’s important for you – the business owner – to know how long you intend to spend with each client as you’ve got to think about your time in profit terms. But it’s how you package this to potential clients.

A simple example:

Offer A – £60 for a one hour session

Offer B – Starter Sessions start from £60 which will give you X,Y & Z

There is no need to focus on how long a session should last for – your focus should be on the results achieved as a result of working with you. This way, it doesn’t matter whether you spend 3 hours or 30 minutes – if your client gets results, they are happy.

And if they can get results from spending less time doing it – even better!!

Hope that helps, Karen

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Sally Macmillan

September 25, 2009 at 10:59 am

Hi Karen, thanks for your response. I can see what you are saying and for some your approach will work, but if I said Offer B to an individual and advised them what they would learn, they would always ask how much it would be, if I said from £60 as an example and it took 2 hours, there is just no way they would pay it. I know this all focuses on money and what they are prepared to pay which is tricky to get round. For businesses its easier, any tips for working with individuals on this?

Sally

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Hilde

May 30, 2011 at 12:36 pm

This came up again via Twitter, although it´s a rather old article. I´ve thought about this and read other articles along the same lines. I´ve tried to apply to to myself. I´m a PA and it would have all kinds of implications. I never know how many hours I work. It depends on the meetings, complex travel and such like. If I charge a day rate I need to work out a good mean rate (days can vary between 2 and 11 hours a day for any client). If I charge a monthly rate the clients would expect me to be there for them at any given time at any given day and I´d like to prevent that.
So, for now I´m sticking to the hourly rate. Any input welcome.

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Wendy

October 13, 2011 at 11:46 am

Hi Karen – thought provoking stuff, thanks!

Even more interesting as its the opposite to what a client/friend said to me the other day. I had quoted her using a day rate and what she would get for her job. Her response was that it was too expensive. We went on to discuss this and she said she felt an hourly rate makes it sound much easier to accept as a smaller bite size chunk. This could be because in her line of work, she also charges on an hourly rate!

It just goes to show that all clients are different, and what may suit one, may not suit another.

On the whole though, I think you are absolutely right, and I try and charge on a project basis most of the time. The challenge here is clarity in what will be delivered, and client expectations. I then find it really easy to over deliver and spend much longer than I have allocated!

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