Moving from hourly billing to fixed pricing is a big step towards pricing more effectively in your business. There’s a real fear that if you move from hourly billing to fixed pricing, you’re not going to charge enough. But when you’re billing per hour, you’re only billing for the hours you work - and that doesn’t cover everything!
One of the big problems with hourly pricing is you’re not billing for everything. There’s the time you’re thinking about the task, the initial client set-up call and emails, the background research work you may do.
And there’s another big issue. If you’re used to doing the work, you’ll naturally get quicker at it. If you then charge per hour, your billable hours may end up going down for each client you work with! Check out the podcast I recently did with Jonathan Stark for more details on how value-based pricing can help you bring in more revenue.
The client just wants to know how much to budget for. When you work with fixed pricing, you can easily let them know this. When you price per hour, you risk taking longer and then hitting them with a higher bill than expected. This introduces uncertainty into their budgeting and possible resentment and querying of the bill.
It isn’t your client's problem to worry about how long it takes you to complete the work. They just want clarity around the cost to decide if they can afford it or not. Fixed pricing ensures they know how much it will cost and what they’re getting for that price. There’s no risk of scope creep or unclear boundaries.
This will come with experience. You may quote for a job that takes you longer than you thought. Next time, you’ll know to quote more. It’s why it’s so crucial for you to record your time and how long tasks take you to do - including onboarding clients and the work itself.
You can then add in buffers because there’s a good chance that most tasks take longer than you expect! This isn’t about diddling your clients - it’s about the value you’re providing. It’s ensuring you're pricing for that value and not diluting it.
Moving from hourly billing to fixed pricing doesn’t have to be complicated. Here are the steps you need to take to make the switch.
Work out the easiest way for you to fix the price of your work. What can you group into a package? Add 20-50% to your initial price if you think it will be a tricky job or you’re not sure about the pricing. Because the price is just the price. If it doesn’t work this time, it can work next time. Don’t be afraid to put prices out there.
For your next new client, quote as a fixed price deal. Let them know what is included and what isn’t. Base your price on results, not the hours worked. Bill them upfront at the beginning of the month and if it’s pricing for a project, ensure you’re billing at least 50% upfront.
Next, you’ll want to gradually move existing clients over to fixed pricing. Let them know you’re moving to fixed package prices and talk to them about the one that best suits their needs. Let them know what that package includes and when you’ll move them over. If they can’t afford the package price you’re suggesting, offer them a lower-priced one.
People want to pay decent money for decent work. Don’t kid yourself that they only want to pay the cheapest price. Be mindful that you’re not putting your money stories onto others by assuming how much they can afford. And don’t let their money stories impact negatively on how you price things. Lots of people want and need to outsource things. They either don’t want to do them or can’t do them themselves.
It should take you less than 15 minutes to come up with a price for any job you’re asked about. Have a method or way of pricing that ensures you’re not agonising over it. This can include having guide pricing, a list of ad-hoc upgrades etc.
Remember, pricing is never a one and done thing. It’s constantly evolving, always changing - and that’s how it should be. So once you’ve set your fixed prices, know that you can change them whenever you want!
If you want to know more about pricing your packages, check out my Creating and Pricing Packages Masterclass. This 90-minute class will take you through the exact steps you need to take to price up your client packages. So head here to find out more!
Listen more to my podcast on moving to fixed pricing.
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The Pricing Queen podcast is produced by Decibelle Creative
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