Goodbye billable hour

Moving away from the apparent relative safety of the billable hour may seem like jumping out of a plane without a parachute. But is this really something to be feared?  Is it possible to turn that fear into an opportunity?

Where is the fear?

If we agree to deliver a matter for a client for a fixed fee, how do we get the price right?  We may lose money – and exactly how much will we lose?  We don’t know.  It’s natural to be risk averse.

At the moment I arrive at work, start my PC and the clock starts ticking.  Every six minutes is money in the bank.  Really?  Well it is if we can bill it and the client pays.

If we adopt fixed price fees, I’ll have to be really careful with my time.  We could lose money.

The reality

The harsh truth is that your clients are risk adverse too.  They want certainty.  They want to know what they’re getting for their money, and how much it will cost.  Furthermore as clients become more savvy they shop around to get certainty.

And the opportunity

The opportunity begins with planning in advance.  Real planning, not just a five minute ‘let’s do this chat’.  Spending time with the client to agree exactly what they expect, rather than making assumptions and taking short cuts should be the first step.  Agree with the client their objectives and scope, the deliverables they expect, and their timescales.  Objectives help you, and them understand what they’re looking to achieve. Similarly for scope.  It’s amazing how often I attend meetings with clients to discuss assignments and during the meeting the client has a ‘light bulb’ moment when they see their situation in a different paradigm.

Helping the client clarify what they want may have taken a little more time than perhaps would be normal at the start of an engagement may seem like unproductive, non-chargeable time but it will reap rewards. The client will see this as a form of client care and added value.

With a solid appreciation of the client needs you can prepare a robust plan with firm costings.  You can identify what resource is needed for each task, how much time is required and the cost.  You should aim to use the least expensive but effective resource possible, remembering to factor in the appropriate quality controls and supervision.

Add the cost of these tasks together and you have a cost for the matter.  However these are not figures you’ll wish to share with your client.  As you’re going to offer a fixed price, the client only needs to be told the total.  But wait –  you need to factor in profit and overhead costs.  So that’s the minimum you should agree to work for.  However there’s another factor to consider, how much will the market and client stand? Market forces of supply and demand come into play.  This is where the pricing team should contribute with their analysis of the market place.

The return on investment

So you’ve invested more time than usual prior to the ‘clock’ starting to run.  Where’s the benefit?  Well, you know how much money you’re going to receive as a reward for your services.  The client knows too.  You’ve removed the likelihood of a dispute with the client over the service you have provided.  You’re prevented any possible argument caused by mis-match between what you’ve provided and what the client thought they were getting.

All this certainty is a win all round.   The risk of a disputed bill is gone and so is the risk of time written-off.

What’s not to like?