If you’re a freelancer, charging by the hour is a good way to start. Time is an approximate measure of value and reduces risk to you on scope creep. Clients understand billable hours, as do project management systems.
Yet, tracking time can be painful. And time spent is not an approximation of value. A few quick tweaks to a $10,000 per month ad campaign can produce thousands of dollars of on-going monthly value.
Consider that some universities now offer social media courses that give certifications, like Pepperdine University, who offers a few programs: Social Media Professional Certification for $1500 and a Social Media Strategist for $2500. Takes about 30 course hours to complete- Not bad, since according to Glassdoor (a salary / employment data aggregate), the average social media pro makes around $50k / year.
And you know consultants who charge a lot less than you would, but they either take much longer or can’t even do what you do. The hourly model rewards people who take longer, punishing the good guys. So you certainly don’t want to compete on hourly rate, unless you are an offshoring company.
But wage slaves can sometimes get $500/hour (that’s my rate), but it requires you to do a lot of speaking and publishing to build up your reputation- a bigger investment well over 30 hours.
So how do you graduate from being an hourly wage slave to a business owner charging what you’re worth?
You need to charge percentage of spend or a flat monthly retainer. Percentage of spend usually means 5-15% of spend with a monthly minimum. 10% of $5,000 per month is $500, so decide how much effort a client is.
Could be great or could be a nightmare depending on the expectations and how much effort you need. By not doing hourly, you have to limit scope more carefully, of course– and that means you have to set strict package offerings.
You cannot graduate from hourly to retainer/spend pricing without this structure in place, lest you risk random outcomes and uneven client expectations.Consider what Jakob Hager of TaskWunder says:
“My advice is to learn as much as you can while charging hourly and, at the same time, figure out what you enjoy doing and where you want to specialize.
By doing so and by writing about it, you become an expert in this area.Once your knowledge increases and your hourly rate goes up, think of how to streamline what you do and create processes and checklists.
By starting hourly and improving your skills, you make sure that your expertise is based on real-world competence. By creating checklists you learn how to both think in processes and create a system that generates value independently of how many hours of work you invest (in the long run).”
Perhaps the biggest challenge of packaged offerings is getting the set-up bits done.
That means getting necessary access to the accounts, creating them (if necessary), and being super clear on GCT (goals, content, targeting).
The bigger players will have an on-boarding process handled by a separate team.
But if you’re small, then use a series of forms (Infusionsoft, Google Docs, whatever) to make sure the prerequisites are out of the way before starting.
If you’re really smart, you’ll put these online to qualify anyone who might be a client.Just make sure you have a process in place, as Mike Gingerich of Tabsite suggests:
“The shift to digital over the past few years has created a wave of opportunity for new entrepreneurs. The ‘online business’ model has exploded but, as many who jump in find out, it’s not simply a matter of posting your website on social media and watching clients roll in!
It’s important to have a plan and a process. Most people who take the entrepreneurial plunge have somewhat of a plan, but few have a process and this is the big gap! The onboarding and business processes you have help you qualify clients, give you a complete and clear plan to demonstrate your competence to prospective clients, and it gives you a clear checklist and scope from which you can evaluate your costs.
My advice… spend as much, if not more time, on the process than on the plan because the process ultimately guides the plan!”
Then no more free consulting calls, which wastes your time and reduces your effective rate. It’s not that all potential clients are freetards, but that you must set clear expectations of what you do and don’t do. Instead of having to repeat these bits endlessly, write it down, record a video, and you’ll never need to say it again.
If you’re a solo consultant, it’s easier to get away with no process.With just a few long-term clients, you’re not going to need to acquire new business or explain what you do.
But maybe you want to be a business, not freelancer/consultant. And if you believe in packages, driven by checklists, then you’d naturally take the next step to have others follow your checklists, buoyed by training you create. That means you have to package up what you know into checklists for repeatable excellence.
So do you want to keep working in your business or on your business? Continue to be tortured by the E-Myth with dreams of a 4 Hour Workweek or actually be a Checklist Manifesto disciple?
Invest 30 minutes to systematize your expertise and watch this: eventualmillionaire.com/dennisyu/
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