I did a search, didn’t see this posted. This is Jonathan Stark and he is a web and filemaker developer. He talks about his value based billing. This has inspired me to up my skills so much so I can use it!
Jonathan Stark: Value based billing
http://filemakertalk.com/matt-squared/09016
He starts talking about it at 6:31
This is a must listen for anyone who has clients. I am so sick of the hourly based billing it is B.S.
we can talk about why later…
It makes a lot of sense to base the price for a job on its value to the customer. If the client estimates that a new website will make them $20K per year and you charge $10K for it, they will get a ROI in 6 months. The problem is judging what the job is worth to you, and that’s the bit I have trouble with. Stark sounds pretty confident about setting the price, which I guess is based on more experience. It’s pretty important to establish is a lot of detail what is required, but it sounds like he makes a pretty quick decision about price.
Thanks for your reply ralph. This has really inspired me. It’s funny what gets you going. I had a revelation of sorts in the early 2000s. I was a web developer back then just starting my business, it was doing really well. Then I was offered a job as an assistant to a famous person who toured. She had a designer design t-shirts she would sell after performances. Since I was the assistant everything went through me. The designer charged her $60hr to make the design. Took him about 6 hrs = $360. He probably thought "wow, I’m getting $60hr to do this easy design.
When we would tour she would sell the shirts after each show and depending on the size of the audience (300-1000) people, she would make $1000-$4000 PER NIGHT on shirt sales alone. I remember thinking at that time that there is something really wrong with hrly billing! Fast forward, I saw her recently on tour, she is STILL selling those shirts. That is why some of us are in the 1% and some of us are in the 99%.
But you are right, the problem is determining the value.
But could the designer make the shirt and get it in front of 300-1000 very interested buyers on a regular basis without a whole lot of effort? And how many other people was she charging $60/hr to design stuff for?
As I understand it, value billing (as discussed by proponents like Ron Baker) is a system of determining the fee for a particular matter based not on the inputs involved (i.e. time, expenses, etc.).
That is the beauty of it. It all about what it’s worth to the client. The fact that she can get it in front of that many people means it’s worth a lot to her.