Recently I read Value-Based Fees: How to Charge and Get What You’re Worth by Alan Weiss. I’ve coveted this book since I wrote Innovation by the Hour last year. After I worked through my rather large (and growing) stack of reading material, I finally was able to get my hands (and eyes) on it, and I am glad I did! (Thanks to Lisa for the recommendation).
Many, if not most, people in service industries bill for time and material. This is problematic in industries whose output includes ideas, for who is to say when (or on whose dime) ideas were generated? Who owns the idea formed in an employee’s head if it never sees the light of day?
Weiss argues that the problem is far more pernicious. Many of the headaches involved in consultancy or agency relationships stem from a systemic flaw in their billing methods. Weiss says it plainly: It’s “simply crazy” for consultants to base fees on time and materials. When you sell value and do your job correctly, you maximize your margin while ensuring the client feels like they got a bargain.
That is the definition of a “good deal.”
The book is well-written, memorable, and at times shockingly honest. Weiss says he’s glad his accountant hasn’t read his books, because he’d pay a lot more if he had to pay for value, not for time and materials.
He also practices what he preaches. The Kindle version of the book, which obviously does not require printing or distribution fees, is still $32, which is much more than typical new releases sell for on the Kindle, and not much less than the printed version, brand new. This is because Weiss is selling an idea and techniques to implement it, not paper and ink.
That idea in the book is worth the same regardless of the method in which it’s distributed. And if you’re currently billing by time and material, at $32 or $100, it really is a bargain.
The Supply and Demand of You
Weiss claims that “There is no law of supply of demand in the consulting profession.” What he’s referring to is that the fees you charge should have nothing to do with your supply of hours in a day, week, month or year.
However, as Weiss himself iterates elsewhere, there is only one person in the universe who is the product of your education, skills and experience. The supply of you is exactly one.
The question, then, is what is the demand for that product? It depends on what value you mutually establish.
- What are the client’s business objectives?
- How will success be measured?
- What results can you deliver against these objectives and metrics?
You, as a product, may be of significant value to a client, regardless of how much time you need to spend on a project, as long as you are willing to believe in your value enough to make yourself accountable to actual, measurable results. Do the work necessary to educate the client and establish agreement on what your goals are.
Then you can both come away confident that you’ve been successful at meeting those goals. The client will feel like they got a bargain, and you will come away knowing you’ve been adequately compensated for your expertise.
Pick up the book today. You’ll be glad you did. – Cam Beck