If you are planning to start a service business from home, I have a tip for you that you simply cannot ignore if you are to succeed. It is based on my own personal experience.
I have two good friends, Andrew and Jeremy, who are in the consulting business. One specialises in brand identity work and the other in customer relationship marketing. We formed an informal network to share business opportunities with each other, which we called ReLiance.
Once a month we would meet for lunch to chat about business opportunities and things we had learned since we last met.
At one of these meetings, my friend Andrew passed on a tip he had learned from a “mega-consultant” that had enabled him to increase his income enormously without working any harder.
Fortunately for me, this was just as I was establishing my marketing research and management consulting business. I didn’t have to “re-educate” my clients about my new business model. This single tip accounted for at least 25% of my income.
It is an absolute must for people starting a work at home service business.
The secret to maximising your income from your home business is
Why not, all my competitors do?
9 Reasons Why Selling Your Time Is A Bad Idea
- Clients buy the value you deliver, not the time it will take.
- Selling time can lead to disagreement about how long a task should take.
- Your time is a fixed resource. It limits your ability to grow.
- Time-based fees subject you to comparison with the hourly rates of competitors who may deliver inferior value.
- Selling your time subjects you to someone else’s view of what it is worth (like a union). It should be up to you and the client to decide its worth.
- Unless you quote a fixed number of hours, the client runs the risk of an unhappy surprise. If you quote a fixed time, you might as well not have mentioned hours at all.
- Unless you quote time beforehand, you run the risk of an argument about billable hours.
- Quoting a fixed fee helps clients budget and cap their expenses.
- When you sell your time you are almost always under pressure to try to reduce your time estimate.
Can you see the advantages of escaping the selling time trap?
But Then, How Do I Set My Fees?
The reason why many people quote based on time is that it provides a measure against which the quote can be assessed. But, time is a poor measure because it assumes productivity is uniform.
So we need another measure on which to base fees. Here it is:
At the end of the day, clients buy benefits, not hours. If you provide a service cleaning awnings, for example, clients buy clean awnings, not 1 hour of someone’s time.
How much is a clean awning worth? Well that depends on the individual client and his or her situation and alternatives. The advantage of value-based fees is that they can be set collaboratively.
13 Tips On Setting Value-Based Fees:
- If asked what your fees are before you and the client have worked out the scope of your service, always say “I don’t know“.
- Look for opportunities to broaden the scope of your services or add complementary services to increase your fees.
- Premium fees create perceptions of premium value in buyers’ minds.
- If the client wants lower fees, always seek something back from the client in return.
- It is better to do something for nothing than for a low fee. It is then more likely to benefit you through positive word-of-mouth advertising.
- If you don’t know what your competitors are charging, you are charging too little.
- Offer an incentive for repeat business or extended contracts.
- Offer an incentive for upfront payment.
- Be prepared to walk away from business rather than committing to a poor deal.
- Practise stating and explaining your fees before talking to the client.
- Add a premium if you, personally, do it yourself.
- Provide a version of the quote that is extended from the original brief and over budget.
- Always, always under-promise and over-deliver. This is the key to repeat business and positive word-of-mouth advertising.
Based on Andrew’s tip, I developed a template for my proposals to provide services that made no mention of time. Instead, it forced me to brainstorm the details of the value I would be providing, item by item.
I cannot remember ever losing a proposal to a competitor. The advantage I had was the option of amending my proposals to perfectly fit the client’s needs. Much harder to do if you are selling your time!
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