BTerrell Group Blog

Some thoughts on pricing for professional services…

Posted by Brian Terrell on Mon, Sep 23, 2013

Pricing by the hourI give up on pricing services based on the billable hour.  What a challenge, as I have 22 years of practice doing it this way.  What’s worse is that some clients don’t want to make this change with me.  Why do some clients insist on paying for professional services by the hour?

I understand everyone wants to compare prices on prospective purchases.  And, for most of my time in business, the only comparable unit of measure I knew was the hourly rate.  It’s just like walking down the aisle at the supermarket.  I see a price for the store brand and I see a price for the name brand.   If I can’t tell whether I am getting the same quantity of each, I focus on the pricing sticker just below each item to quickly compare the per unit price.  All other things being equal (or perceived to be equal by me), per unit price provides perspective to my narrow definition of value, which, at least in the case of locally produced raw honey, is the quantity I am buying.

Fixed prices change the pricing unit of measure.  Instead of getting a price per hour, one receives - and must evaluate - a price per result.  And, when one professional quotes hourly prices and another quotes fixed prices, how is the client to compare?Pricing by the result

Because shoppers for professional services want results and not hours, clients should resolve the comparison dilemma by asking for fixed prices all around.  Who cares how long it takes to prepare a will or architect a house?  Both the document and the drawing, when properly prepared, give a desired result against which one can then plan the next desired result.  Once we pile enough desired results on top of each other, we start to get things done, and professionals help business owners and managers get things done.

Most clients appreciate pricing by the result as opposed to pricing by the hour.   After all, it is hard to be surprised by the total price of a project when a qualified professional establishes that price before the project begins.  However, some clients appreciate pricing by the result only as long as they appreciate the price.  In those cases, both parties have either yet to agree on the value of the result or both parties are not communicating well.  This, of course, leads to other topics which, based on this recent article in the Arizona Daily Star, I know many others are thoughtfully considering.

To start a discussion leading to a fixed price for small business ERP software and services, please contact our professionals at BTerrell Group. We love to help other companies implement software to help your business be more productive and efficient.


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Bonus material

If you have read this far, you deserve bonus material:

Check out the funniest video I have ever seen regarding pricing

Check out the second funniest video I have ever seen regarding pricing

Tags: professional services pricing