Question from a reader:
"Hi Danilo, quick question. I want to move away from charging based on time, so my partner and I are starting to experiment with fixed pricing. Of course, clients and prospects have pushed back. What's the best way to answer "what's your hourly/daily rate?""
Thank you for the answer and for providing some context here.
If you've been following this newsletter for a while you probably know I'm a big proponent of charging either a fixed amount for a project, or pricing based on value. There are dozens of reasons why hourly pricing is, 99% of the time, objectively worse for you and your consulting clients. Jonathan Stark has written a whole book about it.
Getting to the point here - how do you reply to "What's your hourly rate?"
You cannot script a conversation, but there are certain key responses to certain key questions that certainly deserve more attention than others. And this is one of them. Here's how I reply to that:
"I don't have an hourly rate."
Simple and clear. The hardest part here is to avoid excusing or explaining yourself. Don't say "I'd rather not bill by the hour", or "I usually don't bill by the hour" - just stick to "I don't have an hourly rate." And don't rush to fill the silence.
The prospect will probably ask back: "What do you mean?" or "How do you charge for your work, then?"
This is your cue to explain that you charge a fixed price for the entire project and how it works better for your other clients. You can say, for example:
- "Clients know the total price of the project before starting."
- "If my hourly estimate is wrong, I lose money - not the client."
- "Clients don't need to worry about tracking my time and expenses."
Or a combination of those advantages. Don't engage in behavior that makes it seem as if you're chasing them. If it worked better for your other clients, it probably will for them too.
If you see a huge resistance to this, that's not a sign that fixed pricing doesn't work. It means you are either poorly positioned (marketing) or rushing the sales process and failing to earn trust (lack of consultative conversations).
Try this out and let me know how it went.