The first big challenge in your business is getting clients
The second is leveraging your time. Today we talk about time. That precious and often abused commodity.
I want to talk about selling hours vs selling deliverables vs selling outcomes.
How to sell hours
If you’re coming from being an employee when you start a business, you’ll likely default to selling hours when you’re starting out. That’s not the worst thing – no matter what you’ve heard. But only if you do it right.
I have a (mostly) hard rule, and it’s this. Never sell hours to a client directly. There are exceptions, like a consulting hour, or VIP day. On the whole? Don’t directly sell hours.
I mean never give your clients an hourly project rate and don’t tell them how many hours you’ve budgeted for their project.
Instead, you take your internal hourly rate, say $100, and multiply it by the hours you think the work will take, say 20 hours. That gives you a project fee of $2,000.
You really don’t know how long it takes
You should add 10% because everything takes longer than you think it will. If for some reason that buffer was too much? Sweeten the pot — throw something else in for the client. Just don’t shortchange yourself.
That’s how you sell your hours the right way. It’s a great way to start out because, as long as you track your time properly (more on that in a sec), you’ll turn a profit on every project.
Now let’s see how you can leverage this approach.
How to leverage selling hours
Selling your hours this way stacks the deck in your favor. The more efficient you get, and the more experience you have, the faster you’ll produce work. Billing by the project benefits you for improvement. (Billing by the hour is the opposite – you get faster and more efficient – you just produce more per hour and the reward is all theirs.)
If you’re selling the same kind of deliverable over and over, you can almost always refine your process. Maybe cut two or three hours off it.
If you deliver one project a week for 48 weeks of the year, that’s $96,000. Sweet. If you can cut 2 hours off each project, you can deliver 5.3 more projects, let’s round that down to 5 projects. That’s $10k extra, or a month off. Sweeter!
Let’s say you perfect a productized service and get that to 15 hours a project, now you’re bringing in $128k.
Raising rates is only one way to earn more
You don’t always have to raise your rates. You can make significantly more money by focusing on efficiencies. And, it’s a reason too, to do the same kinds of projects on the regular — they develop patterns and get easier to complete, again freeing up your biggest commodity — time.
Now, let’s talk about the fly in the ointment.
Track or be Damned – the necessary evil
Making money this way only works if you track your hours and hold yourself accountable, which are two very different skills.
We’ll start with tracking.
I use a nifty cube thingy called Timular, but there are several options out there. However you do it, track every minute of your time. You need to do this over the course of a full week.
Track Every. Single. Thing. It’s miserable. And. You will be shocked at what you find. And you’ll realize how delusional we can be about how long we think we’ll spend doing something.
Which brings me to the next point…
Be honest with yourself
We don’t show up every single day, day after day and do our very best work.
We have bad days. We have days when our brain is a fog, or our sleep and energy are off, or we’re just tired of thinking and doing and we just need to goof off.
Dragging ourselves to our desks is our greatest achievement on days like that. And from time to time, we never even make it. And shouldn’t.
That’s OK. Remember, we’re building a business around who you are, not some ideal. Not being at your best is pretty normal human stuff. For so many reasons.
Bake who you are into how many hours you say you’ll work.
If one out of every ten client days is a downer for you, just treat it like a half day in terms of productivity.
I can get more done in 90 minutes when I’m focused than I can in an entire half day where I’m just not mentally present. I’ve learned to step away instead of pushing through. It allows me to do more really good quality work.
An honest productivity system is more productive than a dishonest one.
And while we’re talking about good days and bad days…
Not all hours are created equal
I write well in the afternoon. Morning, not so much. It’s a great time to work with clients, though.
Your hours are not created equal. Identify your most productive times and protect those hours fiercely. Build strong boundaries. Ones no one crosses (you included). Those hours are sacred. Protect and exploit them.
Selling Value vs Hours
Selling hours done the right way is great. Selling value is better.
We’re not getting deep into it here, but it is part of the conversation so we’ll take a quick look.
In the selling-hours model, you base your fees on what you need as your internal hourly.
In value pricing, you base your fees on the potential value you deliver. This is the strategy you can use as you sharpen your chops and refine your processes. There’s more skill required to pull it off, but skills can be learned.
Now, be careful. Value pricing does not mean charging your value
If you deliver $20k of value and charge $20k, there’s no reason to hire you, right?
This is how to use value pricing…
If you want to raise the fees on your $2k project to $3k, either figure out a way to increase the value you deliver to your existing clients or find clients who will get more value from your work.
To repeat, do not charge your value. Instead, increase the value you deliver or find clients who get much more from your work.
As I said, that’s a very quick and rough look at value pricing. We’ll come back to it again.
Let me wrap up with how to buy yourself time.
Buying time
I paid someone to proofread this email. I don’t know how long they took, but it bought me at least an hour.
I regularly pay people to take care of tasks inside my business and I’ve hired subcontractors to work with me on projects. All of it buys me time.
I also do it because I really like working with other people. Working alone can be isolating, but more than that, I like more brains on my business. If I can see everything there is, I’m running a limited one-brain business.
You might not be in a position to do that yet, but start when you can. You will be so, so happy you did.
Another way to buy time is training. Acquiring new skills can bring a whole bunch of quality-of-life improvements and speed up your day. Especially with AI able to take on a lot of the grunt work in our business.
Don’t forget what this is all about
Leveraging time is not all about more money or how many projects you can manage. It’s also about you and what you want to do with your life. That’s why we’re doing this, right?
Maybe it’s a four-day week. Maybe it’s a five-day week with one of those as a pro bono for projects you care about.
It’s your business. Make it deliver for you as much as it does for your clients. Make sure time is on your side.
This was originally sent as an issue of my weekly newsletter, Breakthrough Beat.
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