One of the biggest mistakes I made in my own first business, and I see other small business owners doing today, is charging clients by the hour.
Not only does this put an automatic cap on what you can earn in any given week (because there are a finite number of hours in a week) but I also find that, when working out their estimated income, a lot of business owners forget that, when you’re really trying to get a successful business going and regular money coming in, more than 50% of your time really needs to be spent on marketing so you can keep your pipeline full.
That’s 50% of your time that no-one is going to pay you for.
When I first speak with clients to set their 12-month and 90-day Bold Money Goals, I will often hear something like “ Well, I’m going to be charging £25 an hour and working a 40 hour week, so I’m expecting to earn 40 x 25 = £1,000 a week.”
Well, that’s all well and good if every single one of those hours are billable hours – in other words, as long as those 40 hours are packed, back-to-back with work your clients are paying you for.
But that’s never the case. Because where are those clients going to come from if you’re not spending any time marketing?
So, if we estimate that 50% of the time we should be marketing, then allow for admin (raising invoices, paying bills, sending out agreements, book-keeping etc.) you’re more likely looking at 22-23 money-producing hours per week.
And if you’re charging £25 an hour that works out more like £550 – £575 a week.
And that’s a) assuming you can fill every available hour with work and b) not taking into account people who don’t show up, people who don’t pay or pay late or those clients who you under-quoted so you’re going to have to charge them for less time than you actually gave them.
So what’s the answer?
Stop charging by the hour and, instead, create fixed-price packages that your clients pay for either up-front or by way of a deposit then monthly instalments.
I can already hear the objections from here J but hear me out.
When you charge by the hour, you create 2 major problems for yourself that you just do not need to have:
- Potential clients will automatically compare your hourly rate to that charged by the next person who offers what you offer. They have no idea what differences exist between you both in terms of experience, qualifications or service delivery but they will think they are comparing apples with apples and they WILL make a judgement based on price – and that’s never good.
- You run the risk of people querying a) the number of hours or sessions it takes you to complete your service for them – they’ll have one eye on the number of hours/sessions they’re going to have to pay for and b) stopping using your services before they’ve had chance to see any real results.
Each of these can lead to you feeling like you have to justify what you’re charging or even revising your charges down if someone challenges you.
Creating a fixed price package and agreeing the pricing in advance, on the other hand, completely eliminates this problem. It also:
- Makes your business more profitable because fixed-price packages bring in greater income per client
- Frees up more of your time because you don’t need to work with as many people to reach your desired income goals
- Creates greater cash flow even with a small list or small number of contacts
- Keeps you from slipping into over-delivering and burning out
- Focuses your business on creating extraordinary results for your clients, not on selling your time, which liberates you to enjoy your business and love your life
- Means you become known as one of the best at what you do
- Elevates your sense of self-worth and makes you feel fulfilled at a soul level
- Keeps your business simple to run, which synergistically lowers the stress of running a business
So, have I convinced you yet?
Back to those objections then – virtually everyone I work with starts off with some kind of objection towards creating packages, so I’ve put the most common 3 below with my advice. J
- I don’t know how long it’s going to take to solve a person’s problem – it could be 2 sessions (or hours), it could be 20. I can’t say how long it will take until we start so it would be unethical to charge them for a full package if they don’t need it.
The point of having a package is that you take your client through a particular step-by-step process that you’ve designed with their best interests at heart (see my article on your Branded Signature System). Your ideal clients just want to know that if they work with you, they will experience the results they’re looking for.
That might be fixing their problem completely or it might just mean a significant improvement for them – depending on the services you offer.
Even if their problem is entirely ‘fixed’ by step 2 of your process, you will still take them through the rest of your package to make sure they get the best results they possibly can from working with you. Probably better than they could have imagined.
You are showing them, up front what your package consists of and what it costs, and that is what they are paying for. You have moved the focus away from the number of hours or sessions it takes and towards the results they want.
Do you really think someone is going to complain if you manage to completely fix their problem quicker than they were hoping for?
It just doesn’t happen that way when you offer packages instead of talking about hours/sessions.
- My clients all have different needs, I can’t possibly create one package to suit all.
Yes you can.
When you have worked out exactly who your ideal client is (we use the Niche Breakthrough Secrets method) and the specific problem they are facing, you will see that there are commonalities across all those particular clients.
When you examine what you actually do with each client, you will see that there are things that you do, steps that you go through over and over again with every single one of those clients, and you will continue to go through with new clients that you enrol.
It is this that becomes your Branded Signature System.
Of course, if you want to add additional, bespoke items, sessions or bonuses for clients who have additional needs you can do that – and you can decide whether to charge a premium for that.
It’s your business, your decision.
The point is that the main package is in place for you to follow so that you become an absolute expert at delivering it and you have a basis to start from that is not based on your time – it is based on the results you want your clients to experience.
You know exactly what you’re going to do for your client and so do they.
- I’ll lose the clients who pay me hourly if I switch to package only offerings.
No you won’t. Not all of them.
When you show them the process you are going to take them through and the results they can expect at the end of it, your ideal clients will jump at the chance to take you up on your offer.
And the ones who want to continue to pay hourly are free to go continue to do that with someone else.
My experience shows that the loss of those who want to continue paying by the hour is far outweighed, financially, by those who move to the new package.
And, let me tell you, the clients you take into your packages will be FAR better clients to work with – more committed to following your advice, more interested in doing their own additional research and more appreciative of your expertise – than hourly payers ever will be.
It’s just a fact.
If you’d like to learn, step-by-step, how to create lucrative premium packages that sell, join me in my Ignite Mastermind & Coaching programme at https://emmahague.leadpages.co/mastermind