Mythbuster!

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I read a manuscript today and realized that I am guilty of believing in myths.   Perhaps, you are guilty of the same crime.   Crime, you ask?  Yes, it’s a crime when we don’t get paid for the value we provide our clients.

Here are the myths…

  1. When a client is in trouble, solve their problem and worry about fees later.
  2. When and if we raise our fees, we lose clients.  And, it’s corollary- We can’t raise our fees, because the supply exceeds the demand.
  3. When we provide outstanding service and advice, our clients will appreciate it and pay for it.
  4. We are paid for the products and services we deliver.   And, it’s corollary- if we provide some services at no charge, we will be paid more promptly by our clients.

Let’s deal with them in that order.
1.  Solve first, fees later:   Part of our business is to get clients out of trouble when the authorities come knocking.   Whether that is the FDA for an inspection (or the inspection has occured and there are pages demanding a response on their 483’s) or the IRS with a (paper or in-person) audit, among others.
Having worked in hospitals, I understand the concept of emergency rooms, where patients must be treated now.  But, no one needs to have the audit response or accompaniment tomorrow- unless the client waited a week before they came to you.  And, whose emergency is that, then?
No, we will have our discussion about hourly rates to accompany (and prepare) for the audit.  Or, the response to the 483.  Because we don’t know how deep or wide the response will need to be until we start (and see what the IRS or FDA found)- so we can’t quote a “flat fee” for the service.

2.  Raising fees.  First a truth- you will lose clients when you raise fees.  These are the clients who don’t value the services you proffer them and probably don’t at the prices you were already charging.  Generally (at least from our experience, when we have raised our rates), these clients already had Cadillacs, Porsches, flew first class, etc.  But, resented the fact that we raised our prices.  I guess we were not so entitled…
And, our services really have no peer.   Yes, that’s arrogant.  But, yes, it’s true.  Because every one of us have multiple backgrounds and experiences- which is not true for our competitors.  We have run medical device firms, we have run pharmaceutical houses, we’ve developed and introduced new products, we’ve run countless businesses.  So, we know the problems and sources for all sides of the accounting/tax/computer/pharmaceutical/production/technology  issues.  That’s not available elsewhere.  I’m sure you and your company offer services that others can’t match, as well.
Moreover, we don’t want to have 50 hours of client effort each week.  Because we need to plan and manage our efforts, we need to market to potential new clients, and we need time in our schedules to respond to those emergencies.  Some of us even have families that want a piece of us…  Which is why we need to price our fees accordingly.  Determine how many hours a week (25 hours?  30 hours? and remember vacation and holidays decrease the number of weeks way below 52) you will be covering.  And, then, there’s rent, phones, taxes, etc. that all factor into the salary that we must pay ourselves and our staff.  That sets the minimum hourly rate you can charge.

3.  Clients pay for quality work.  No, clients expect it (they also deserve it!)- and, the technical aspects of what we do are invisible to them, besides.  I was talking with a client for whom we provide financial services the other day and told him about a client (who happens to be a client of theirs) that flew me (and my then family) in a private jet to a vacation spot, to enjoy ourselves for a week.  Because we solved their problem (which we did for a set fee) faster than we promised- and, to be honest, more completely and much cheaper than it expected.  But, I could describe this situation because it rarely happened.  And, it will rarely happen to you.
We were lucky.  Our first instinct worked perfectly.  So, we made out like bandits.  Since we expected to earn our normal hourly rates- and managed to quadruple them, since we solved it so quickly.  We were already happy.  And, that’s why it was solved quickly for the client.  But, we’ve had cases where our fifth instinct was required- and we were not happy, since we did not make money, either.  Price matters.

4.  We’re paid for what we give.  Often, the only thing our client sees is a piece of paper (or lots of them).  They don’t see the agonizing, the scheming, the arguments that resulted in that calm report or document in their possession.    Even when we show our write-downs ($ 0 invoice items), the client rarely takes note of them.  Especially if that work is done in our offices or our labs.  They have no idea how long something should take in the first place.  They have no idea if you had to deal with Suzy Firsttimer who had not a clue what you were saying or Tom Ministheonlyway who cared not that there were no infractions.

So, make sure you are solvent.  Your clients will appreciate that- because they can come back to you again, with their next problem, emergency, or need.

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14 thoughts on “Mythbuster!”

  1. I think all of the statements about fees etc. depend on the business you are in and most importantly, your own beliefs and unconscious programs about them.

    On more than a few occasions, the same person who would not pay some other consultant $50 and hour paid me or friends of mine $300 or more an hour.

    Most people will get what they believe they can get and life will pretty much be match for them to their dominant beliefs and their unconscious, underlying patterns. (That is, until they become aware of them and clear them.)

    🙂

    Thanks,

    Kathy
    Kathy Hadley recently posted..Featured In Premier Edition of Moneyroom Magazine

    1. Ah, Kathy- that’s a branding issue. And, the person who is not deemed worthy of $ 50 is the generic version of pop; those being paid the $ 300 are the Cokes- or more likely the Pellegrinos of the world.
      And, you are absolutely right on- if YOU believe you are only worth $ 50, that is what you are worth. But, if you know you provide $ 300 of value, then you communicate that to the client (or potential client)- and they will pay or recognize they can’t so afford.

      Thanks for those GREAT additions to the discussion. It really rounds out the issues people need to consider when setting rates, changing rates, or even starting a business.

  2. Interesting read. In automotive many jobs are bid by book time. Sometimes you win, sometimes you lose. However if the customer has been present, waiting on a job that is completed in less than book time you may have to remind them that you are being paid for what you know more than perhaps the time it took to do it (not even accounting for investment in necessary tools and reference material expenses).

    1. The book time exists- the book rate is your choice, Alessa. And, you are right- on a time basis, you win sometimes and lose sometimes. Moreover, you need to notify your customers that you are not choosing the time for these activities, but are using the judgment of professional who insure that all obtain a fair price. That means that sometimes, having done a job repeatedly your are more proficient- or that nothing goes wrong; but other times, you have not done that work in a while, or things were worse than anticipated and you take it on the chin.

  3. Good article. We hire people to do things for us because we don’t know how or we don’t have time. I would only hire a service if they went over the potential costs ahead of time, no matter the emergency (unless it was a medical emergency like you mention). I think there is a definite need for communication and to keep the client aware throughout the project of time and costs as they add up.

    1. I’m not quite sure that’s true, Carol… But, if you run across any clients like that, I’d be thrilled if you sent them my way…
      But, seriously, charging what you need to earn your needs- and providing great results- is the best way to run one’s business.

  4. I think that, sometimes, you need to educate a client, because they don’t understand the quality of the services. They need to go elsewhere and come back to be more appreciative. It has happened to my business a couple of times. It has also happened to be, for instance when I worked with a lawyer and didn’t understand that she was doing an amazing job. I went with someone else the next time and that’s what it took me to understand that the former one was really excellent!
    Muriel recently posted..Pre Christmas Blues

    1. You know, Muriel, there’s a great deal of truth in your first sentence. The problem is that many folks are too embarrassed to return- and clients are too resentful to proffer their best services…. I wish that weren’t the case.
      Thanks for your story to illustrate the point- and I’m thrilled you weren’t one of those folks to “resilient” to realize the facts.

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