Getting paid what you are worth
Wednesday, December 12, 2012/
Last week, a coHubber (someone who also works out of Melbourne co-working space The Hub) asked me: How can I include creativity on my bill?
This question is huge, so it is going to take more than this blog post to start answering it, but it got me thinking about value.
And at Christmas time, that’s something that’s on all our minds as we search for gifts to deliver the message of thoughtfulness without looking cheap.
Or perhaps we are looking for gifts that say how much we care just because they are so expensive.
Whatever, our measurements of what constitutes value are actually an internal measure and that, plus the time honoured method of calculating value, creates a problem for the solo knowledge worker.
If you are currently sending invoices to a client for coming up with a brilliant solution to a difficult problem based on billable hours, read on.
Researching this idea brought me to Ronald J Baker, who has inverted the traditional Service-Costs-Price-Value-Client flow, because he says that the client recognises the value, not the provider.
Traditionally, we knowledge workers, sole operators and service providers have estimated what the client would pay for a job, made an intelligent guess at the time it would take, applied the billable hourly rate and come up with an answer.
There are two problems here. Firstly, this is based on a manufacturer’s view of production where a tangible product takes a certain number of labour hours to produce.
Secondly, as a knowledge worker, the better you are at your job, the less time it takes. Put these together and you have a strong motive to invent time-sheets to justify the charge.
The creative person who asked the question that sparked this post came up with an outstanding solution to an organisational dilemma in about two hours. That’s because she is one of the few people, if not the only person, whose mind works that way.
So the time it appeared to take (in fact, it was a culmination of her whole work and life experience plus skill) is irrelevant.
If she billed for that 120 minute section of thinking it would mean that she was seriously undercutting her own best interests, and in addition, the client might not even value the idea as highly as one which appeared to take longer.
What to do? The situation requires a total rethink, along the lines that Baker suggests.
The first one is to do away with invoicing by hours and instead invoice for results or outcomes.
This will need some strong communication and negotiation skills. You need to agree with the client what the successful outcomes they want will look like, and how they will be measured.
The second part also depends upon an agreement with the client – that the value they receive will be worth more than the financial price they will pay.
Hmm… I’m already picturing what that conversation will look like!
Baker’s formula inverts the old one and rewrites it as: Client- Value- Cost- Price- Service.
So I leave you with a small gift – a quotation from Baker. It hardly took me any time at all to type it!
“There is nobility in earning what you are worth.”