I think you should too.
The two trends ?:
- Customers searching the web compiling spreadsheets of what random consultants charge per hour -with little apparent regard for whether the consultant is good, has the capability to solve the problem or even has recent relevant experience with similar companies.
Think I’m kidding? On an average day we’re receiving two calls that are nothing more than companies (or IT consultants who work for them) checking on our rates and “how many hours would it take” to [fill in random project here].
- Consultants who, desperate for work, have slashed rates to an unsustainable $125 per hour (billed in quarter hour increments) and below.
And if word-of-mouth is to be believed those eye-popping rates of $125 are appearing in large cities like New York and Boston.
We bill our time for support and consulting as a fixed guaranteed fee.
So for me – quoting an hourly rate is meaningless. It does nothing but lower my perceived value to the same – or less – of the consulting morons firms who are underbidding, under-serving (and ultimately losing) their customers.
Some other thoughts.
Other Reasons You Should Double Or Triple Your Quoted Hourly Rate
Those who are fixed billing purists will comment that you should not have an hourly rate at all.
Perhaps that’s true.
However I am finding in real life that nearly every customer has been conditioned to work their analysis magic based on an hourly rate. Almost 100% of suspects ask the magic “so what is your rate”. This approach doesn’t work when you bill on a fixed fee. I’ve provided the fixed cost and the customer still wants to know “so what is your rate”.
My new reply?
$400 per hour. Full hour increments. Minimum charge $1,600 when billed hourly.
Hourly is no longer cheaper than fixed price.
I am no longer comparable to my competitor across the street who artificially chopped his rate to 50% of what it needs to be.
I will lose the projects that insist on paying by the hour in 10 minute increments unless the customer is focused on value and outcome.
As soon as I quote the new rate – the customer has two choices:
- Price shop someone else (85% will)
- Focus on the value of a fixed price
Now you see why this is potentially a brilliant idea?