If you run a business and still charge by the hour, you might be selling the wrong thing.
Your customer isn’t really buying your time. They’re buying an outcome.
This applies to professional services, consultants, agencies, IT providers, trades, repairers and many other businesses where the scope and outcome can be clearly defined.
Customers don’t care whether your expertise allows you to complete something in two hours instead of 10. They care that the problem is solved, the job is done properly, and they know what it will cost.
That’s where value pricing changes the game.
Value pricing means setting the price based on the scope, complexity, expertise and value of the outcome, rather than simply multiplying hours by an hourly rate. Your customer gets certainty upfront. No nasty surprises. No wondering whether every phone call has started the meter running.
But here’s the powerful part: profitability is now in your hands.
Quote $5,000 and deliver efficiently for $2,500, and you’ve created strong gross profit. Take twice as long because your processes are clunky, your technology is poor or your team is inefficient, and your profit disappears.
That’s a very good reason to improve.
Start with services you perform regularly. Define the scope, understand your delivery cost, determine the gross profit you need and set the price upfront. Then measure profitability and refine.
And review your prices at least annually.
If you haven’t increased prices for three years, you haven’t kept them “the same”.
At just three per cent inflation a year, your prices have fallen almost nine per cent in real terms. If your net profit margin is 10 per cent, that’s frighteningly close to the margin you’re working so hard to make.
Being the cheapest is not a badge of honour. And being flat-out while making lousy margins is not success.
Charge fairly. Deliver brilliantly. Make a healthy profit. That’s not greedy. That’s how you build a financially unshakeable business.