6 reasons why charging by units of time could be harming your business .

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Janine is a white woman with brown mid length brown hair. She looks outraged and wears a blue cardigan and orange dress. The caption reads '6 reasons why chargin by units of time could be harming your business'

Whether you’ve priced your services by the hour, by the day or you’re carefully creating bespoke quotes for each client, charging by units of time or by work session 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 most service-based businesses would be better off moving away from charging by the hour, day 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 of time, you are putting yourself at a disadvantage in a number of ways because:

  1. Clients can’t see the value in what you do
  2. You commoditise yourself
  3. You’re more likely to feel obligated to compete on price
  4. You’re not motivating yourself to do a good (or quick) job
  5. It makes it more difficult to put your prices up in the future
  6.  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 of time, whether it’s an hour, a day or even a bundle of hours in a package e.g. a retainer, you are 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.

VAs (Virtual Assistants) are an example of this. It’s typical for a VA to charge between £25 and £40 per hour. That’s not much variation considering some VAs have 20 years experience being professional PAs in multinational corporations, or deep technical knowledge of systems and processes, while others might be just starting out and finding their feet.

This also applies to people who aren’t seemingly exchanging time for money, like writers. I’ve seen many copywriters quoting a ‘per blog’ rate. Presumably because that’s what clients have asked them; ‘how much do you charge per blog?’ But let’s face it, there’s a lot more to blog writing than just sitting there bashing your hands on a keyboard for an hour or two. Quoting a per blog price doesn’t give the copywriter the opportunity to explain all the research, the drafting, the editing and their efforts to get the tone of voice right. 

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.

I’ve also seen coaches charge per session. 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 session?

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 solving a problem or moving them towards joy. Or both.

We buy things to satisfy our wants and needs. 

Nobody ‘needs’ 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, while selling by the hour, day or retainer feels like people are saying no to YOU. 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.

Janine peers over a colourful notebook looking at the title 'get your positioning and pricing sorted in the package up your services course' Pink button reads 'let's have a look then'

3. You’re more likely to feel obligated to compete on price

Let’s say there’s a client looking for a service provider. 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 get more done in half the time as other service providers?

What if you’ve invested thousands of pounds in your education and training?

What if you’ve done hundreds of similar jobs which means you’ll be able to spot issues that no one else can, and which often saves your clients hundreds if not thousands of pounds?

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 that immense benefit? 

Ok, I know what you’re thinking ‘but Janine, I’ll explain all that in the sales page copy or on zoom to them’. 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 quick) 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 nutritionist. You’ve recently qualified and you’ve only had a couple of clients. You set your rates at £85 per session. 

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 10 sessions with you to meet their goals not 20. But doubling your prices makes you the most expensive nutritionist that you know of. 

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 when this happens.

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 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 small business owners 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 £35 to £40 per hour and they currently use you for 30 hours a month, they’re immediately getting their mental calculator into overdrive. ‘Hang on, that’s now xx!’ Perhaps I should move to someone who only charges £30 an hour…’ 

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 dedicated copywriter. 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 the blog. People would think ‘ok, a blog, how long can that take? 3 hours tops? Surely £50 an hour is more than reasonable, therefore how can it cost any more than £150? And what if I’m buying a package of 4 blogs. Any good business person would incentivise this by offering a bulk discount..?’ And so on. 

NO.

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 started putting finger to keyboard, 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 blog writing package that satisfied all her client’s wildest dreams and really spelled out why she was worth the zeros. 

The process I took her through is now available as a course called Package Up Your Services. Take a look. 

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. 

Things like: 

  • Insurance, software, hardware, tax
  • Outsourcers
  • Personal development like coaching and training; meaning that you’ll be able to deliver the best service possible to clients.
  • Marketing. We all know the astronomical marketing budgets that big businesses have. Whether it’s our time we’re needing to spend drumming up business or cold hard cash in the form of 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.

How to move away from unit-based pricing

The vast majority of people I speak to who currently charge by the hour, day or bespoke project proposal are better off packaging up their services.

The way this looks is that you define what solutions your clients are looking for and present options that match those ‘wants’. 

Here are some examples:

  • Instead of selling copywriting, you’re selling a content plan with 8 purposefully written blogs that will call to their ideal client bringing them more revenue with less time needed on the social media hamster wheel.
  • Instead of selling hours of your marketing services, you’re selling easier, quicker leads that’ll convert into loyal, well paying clients.
  • Instead of selling coaching sessions you’re selling the fr means that the focus is on whether or not the potential client is right for/ ready for your offer. 
  • And instead of selling days of consulting, you’re selling the likelihood that your client’s organisation will cut costs by 10% and increase revenue by 30%.

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 Package Up Your Services course.