Whether you’ve priced your coaching services by the session, charging for consultancy by the hour or day or carefully creating bespoke quotes for each client, charging by units often means that you’re doing yourself a disservice.
And a disservice to your clients to boot.
You’ve probably heard this concept before. ‘Don’t charge by the hour!’ ‘Bundle it up into packages!’ But it’s easier said than done.
And, if you’re anything like some of the service providers I’ve spoken to, you may not be 100% convinced as to why charging by the hour is so bad anyway.
In this blog, I’m going to lay out all the reasons why high-touch service-based businesses like coaches, consultants and mentors would be better off moving away from charging by the session, hour or even project.
And, because I always like to see both sides of the argument, I’ll also take a look at why it might not be the right move for you. Horses for courses and all that!
At the end of this article, you should have a really clear idea of which approach is right for you.
So let’s kick off!
If you’re currently charging by units, you are putting yourself at a disadvantage in a number of ways because:
- Clients can’t see the value in what you do
- You commoditise yourself
- You’re more likely to feel obligated to compete on price
- You’re not motivating yourself to do a good (or efficient) job
- It makes it more difficult to put your prices up in the future
- It makes it more tricky to build in running costs
1. Clients can’t see the value in what you do
When you’re selling units you’re telling people that what they’re paying for is little packets of your time.
This makes it very difficult to then explain the full value of the service you’re delivering.
Consultants might have the reputation of being expensive, but even if you have a £1,000 day rate, when clients see that, they will be able to compare you to other consultants based on price and can easily forget what makes you different. Conversely, big firms might be used to paying top-notch consultants £5,000 a day and then assume you aren’t up to scratch because you’re not expensive enough! This can be resolved if you price up the end result, not the day rate or the process.
Coach frequently charge per session or in a package of sessions. Seriously, even if you have the best coaching session in the world, how likely is it that you’ll be able to turn those lightbulbs into prolonged improvement in your life or business after only one to six sessions? It’s better to take a look at a frequent problem clients present you with, take a look at how long people typically need to work with you to get the result they want, then ‘prescribe’ that length of working time. Otherwise you’re setting both of you up for failure before you’ve even got going.
2. You commoditise yourself
When provider A is charging £1,000 a day and provider B is charging £500, it’s nigh on impossible not to question; ‘is provider A really worth double the money..?’ It’s natural to want to save money.
Effectively you risk commoditising yourself.
And what do people do with commodities? When we need to tighten our belts, we cut down on commodities or find a cheaper solution.
You’re effectively incentivising people to use you LESS.
It’s easy to assume that clients always want the cheapest alternative.
But that’s not always true. In fact, it’s rarely true.
They want the thing that they think will give them the fullest answer to what they’re seeking. Whether it’s moving away from a horrible situation or moving them towards something wonderful. Or both.
We buy things to satisfy our desires.
Nobody ‘wants’ an hour of someone’s time. There’s always a reason behind it. Positioning your service to match that reason is way more compelling than selling by units.
Also, when someone says no to your offer sold by unit of your time, it can feel like they’re saying no to YOU. But when you’ve packaged up your services right, clients who don’t want it are saying no to the solution. They’re either not ready or not right for it. It feels less personal when they walk away.
3. You’re more likely to feel obligated to compete on price
Let’s say there’s a client looking for a new coach. They know exactly what they want* and have a list of 5 people who appear to do the same thing. Price becomes one of, if not the only deciding factor.
But what if, because of your experience, you’re able to help clients transform their life or business in a shorter amount of time than other coaches?
What if you’ve invested thousands of pounds in your training? Thousands of hours in your practice?
What if you have a particular flair for being able to spot issues that no one else can, and which often saves your clients hundreds if not thousands of pounds? Or months and years of their life?
What if what you do frees up your client’s time so they can serve more clients and earn more money?
What if by working with you they prevent burning themselves out and ruining their relationships?
How does charging by the hour illustrate those immense benefits?
Ok, I know what you’re thinking ‘but Janine, I’ll explain all that in the sales call’. There will be opportunities to explore the benefits with your prospective client, granted. But seeing a per-unit cost there will undo a lot of that good work.
*This is rarely the case by the way. Most people only know what they want when they see it or even experience it. But that’s a topic for another day!
4. You’re not motivating yourself to do a good (or efficient) job
“Janine! How dare you suggest that I don’t do my utter best with every client!”
I’m sure you’re exceedingly conscientious but bear with me on this for a moment.
Let’s tackle doing a good job first.
To get outstanding results you need to thoroughly understand the client and what they want. Correct?
But you’re not thinking about that while you’re working out what to charge when you’re automatically thinking ‘so how much would that make my day rate..?’ You’re thinking about what the recipient of the proposal with think about the price. And, they’re more likely to focus on the price if you put dollar signs next to your units of time…
Not convinced yet? Let’s take a look at the the time aspect in this scenario:
You’re starting out as a team resilience consultant. You’ve recently set up your business and you’ve only had a couple of clients so far. You set your day rates at £500.
You get great results. In fact, the more people you work with, the better the results and the quicker your clients see those benefits.
Now your clients only need 5 days with you to meet their goals not 20. But quadrupling your prices makes you feel ridiculously expensive.
What do you do?
A lot of people (I’m not saying you) might stretch out their sessions so it fills more sessions. 😱
Or at the very least you might try and help people with other things to make up those extra sessions. This would take the final body of work out of the scope that was originally agreed. Not great for either party.
Surely it’s better to offer them something that states clearly ‘I will get you from here to here’ and price it based on the value of the outcome they’ll get isn’t it? Yes it is.
Oh and while we’re at it, we’re all used to paying more for a speedy service.
A friend of mine runs a childminding agency. If you want her to drop everything and rush over to your house for her to look after your toddler because you’ve just gone into labour early, you’ll be willing to pay more.
If the Queen sends you a telegram saying she’s popping by for tea tomorrow then you’ll pay a rush fee to the local plumber to fit a new toilet pronto. (Apparently that’s a thing!)
I had a sudden burning urge to have a year-to-view wallplanner in March and needed it ASAP so paid about £6 for next day delivery. I then waited 3 months to put it up, but that’s beside the point…
The point is, if you can deliver an outcome quicker than others, that’s a benefit and you should be able to charge for it. You can’t do that very easily if you’re charging by units.
5. It makes it more difficult to put your prices up in the future
One of the stickiest of all sticky topics that I see coaches and consultants wrestling with is the need to put up their prices. A mere whiff of this topic and people become fraught with anguish.
Will people still want to work with me? What will people think of me?
It all becomes so much easier when you move away from charging by the hour.
And more easy for your clients to stomach.
Think of it from their point of view. If you tell them you’re going to be increasing prices from £200 to £250 per session and they currently have 4 sessions a month, they’re immediately getting their mental calculator into overdrive. ‘Hang on, that’s now an extra £200 per month!’ Perhaps I should move to someone who only charges £100 a session…’
Whereas when packaging up your services into a bundle that clearly displays the value, it makes more sense to the buyer.
For example, I had a client who was an extremely experienced, well-trained and content consultant. She came to me because, despite being very busy, working long hours 7 days a week, she still wasn’t making a decent wage.
When we looked at the value of what she was offering her clients she was massively underselling herself by charging by session.
This client of mine is extremely diligent. She would always spend an hour or two making sure she knew the client’s business inside and out. She would then undertake thorough research of their clientele; so she knew what their problems were and how to speak to them without using jargon etc. Plus SEO keyword research on top of that. Before she even had that first call, she’d already spent a huge amount of time. And of course, that prep work varied massively from customer to customer.
By the time we finished our work together she had a content consulting package that satisfied all her client’s wildest dreams and really spelled out why she was worth the zeros.
The process is called the Sizzling Hot Offer Creation Process and is now the back bone of how I help my clients. Once you have a sizzling hot offer that’s positioned as a must-have in the eyes of your ideal clients it’s then so much easier to promote and sell it. (Which I also help clients with #obvs)
6. It makes it more tricky to build in running costs
There are essential things you need to do to keep your business afloat that you can’t bill for.
- Insurance, software, hardware, tax
- Personal development like coaching and training
- Marketing inc. networking, conferences and advertising
We shouldn’t feel guilty about working these costs into what we’re charging our customers.
It’s how business works.
If you’re not covering your costs AND earning a decent wage, why even work for yourself?
Charging based on the value you’re delivering makes it easier to do this.
When it’s good to stick with unit-based pricing
Of course, there are lots of people out there who are perfectly happy with how they currently charge. This is usually why:
- They have clear boundaries and are more than comfortable enforcing them even if it means losing the odd bit of business here and there.
- All their clients respect them, they don’t have any issues with prospects haggling. If people want it cheaper they can go elsewhere.
- They never try and be the cheapest. They’re happy sitting towards the top of the hourly rates for their type of service.
- They’re not interested in growing beyond a certain point.
And there’s no denying that some service providers make more sense being sold per hour/ session. For example Virtual Assistants. It’s the accepted norm for VAs to charge by the hour or bundles of hours. If they were to package up certain services it would effectively be moving them away from their core business model and into the realms of being a specialist or consultant- albeit with done-for-you services included.
How to move away from unit-based pricing
I can’t think of ANY coach, consultant, mentor or strategist who would be better off with unit-based pricing.
It makes more sense for you to define what solutions your clients are looking for and present options that match those ‘wants’.
All people really want is for you is for you to know what they want and to GUIDE THEM.
They want you to say ‘Yes, I completely see what you’re struggling with, I know how to help you, we need to do XYZ and for you to achieve that total result it will take X time and my fee for that is Y.’
The price of something should be based on demand, desirability and demonstrable results. Why not start pricing your services that way?
Want a step by guide through the process of re-positioning your services based on value? Check out my blog The Ultimate Guide To Creating And Selling Service Offers.