gold eggs

How much do I charge?

I got an email from one of my team members earlier today asking if we should invoice for some Software Technical Support she provided a client. And if so, when should she invoice and how much?

The answer was (of course) a resounding yes. Charge.

As to when we should invoice, I suggested we do this immediately. I keep saying the best time to invoice is when the tears of appreciation are still wet on the client’s face. Too many people fail to understand that the value of all services provided depreciates at an incredible speed. The longer we wait, the less the value of the service will be perceived to be worth by the recipient.

So then, of course, comes the most difficult question: How much?

In most cases, this is an easy question for me to answer. The answer is almost always “whatever we quoted”, unless, of course, there was a change in scope during the engagement that needs to be taken into consideration. And yes, whenever possible, we should ALWAYS quote all services as well as we can before rendering it.

But in this circumstance, nothing was quoted. The client simply asked my team member to provide a solution to a problem they had, with the expectation, I’m quite sure, to be billed for this consulting (I’m assuming, which may be a dangerous assumption to make for some clients). And the question, of course, is “what amount is the client expecting to be billed?”. In this case, I really don’t know. Don’t you hate those?

I trust at this point, you are probably sitting at the edge of your seat, biting your nails, in total suspense wondering how in the world am I going to determine what I will charge for this service given. As you know, I’m not big on charging by the hour, but rather prefer to charge on the value of service provided.

I’m sure some of you reading this are probably thinking “who cares, just charge by the hour and be done. It’s just so much simpler”. Well, I suppose it is simpler but not necessarily fair nor good for business. If I have $500 of time but the client believes it was worth $750, I will have pissed away $250 on this one single transaction. And I don’t want that.  And trust me, those missed $250 opportunities can add up to a tremendous fortune at year end. But the opposite is also true. If the client found little value in the service provided, sending a $500 bill will insult the client, create bad blood, possibly result in the loss of the client, not to mention bad publicity, and possible harm to my reputation as being a person of little or no integrity, only out there to screw good people out of their hard-earned dollar. Not to mention, he’ll likely never pay the damned bill. 

Hmmmmm…  What to do?

Ahhhhh, come on now. You’re probably wondering how long I’ll let the terrible, agonizing suspense last with regards to how I will determine what to charge this client.

Well, here are the questions and information I asked my team member to help her determine what to charge this client.

  • Was anything quoted at any time?
  • Was anything even suggested by way of fee?
  • Did the client ever discuss fees?
  • Do you think the client cares a lot, a bit, or very little about the cost?
  • Just how thrilled was the client? Did the client sob her thanks?
  • How long has the client been looking for a solution? The longer they’ve been looking, the greater the value.
  • What alternative did the client have in finding the solution elsewhere?
  • How good do you believe the solution would have been elsewhere? Better, same, or of less value?
  • What do you think they would have paid for the solution elsewhere, if available elsewhere?
  • Is this a good client or someone who we wouldn’t mind losing? (I already know the answer to this one)

And of course, the cost of the solution to our firm needs to be considered. How much time was spent looking for the solution and providing such to the client? Did you seek the resources of other people to come up with a solution? And if so (as I know was the case here), whose time, how much time, and what are those people’s standard charge-out rates? 

Now wait a minute. I know you’re thinking that we weren’t supposed to look at people’s charge-out rates and time to produce a bill. Not true. I never said that nor will I ever. The time and charge-out rate is our cost (at retail) to provide the solution. And yes, because I’m value billing and not charging by the hour, the engagement may end up in me losing money. So be it. But it will impact my decision.

So now, while I wait for the answers to my questions to determine what I will invoice for services rendered, let me give you a hint.

Say my employee tells me we have $250 of time but believes that the client was extremely thrilled with the result of the technical support provided, that client would have very difficult time getting answer elsewhere even if they looked for a solution for quite some time themselves, I may very well charge between $500 to $650 for the technical support. But admittedly, I will run this by the employee who worked with the client to get her take on whether she believes the client will be receptive to this bill or not.

If on the other hand, she tells me we have $500 of time, that the reasons WIP is so high is because she didn’t really know where to find the solution, that the solution was, after all, quite simple had she bothered to look in the right place to start with, and if she tells me that the client was a bit frustrated with how long it took to provide the solution and was possibly regretting calling us at all, the bill may be as low as $50, resulting in a substantial loss on my part, but doing good at maintaining a good relationship with the client. 

Fact of the matter, I do sometimes experience bloodbaths. With time and experience, these bloodbaths are few and far between, much less severe than they once were, and the upside is OUTSTANDING!!!!

Quoting fees is not a science. Oh, how often I wish it was. Oh, how I sometimes miss those silly days where I always only charged based on time spent. Life was much simpler back then. But a hell of a less profitable too. A LOT less. 

So how does one perfect this skill of properly billing what you’re worth? I don’t know that there’s one easy answer, but here are a few ideas:

  • Read books on the subject (We actually have a book hot off the press on that very subject)
  • Watch YouTube videos on the subject. They’re out there, you just have to look for them.
  • Attend all seminars on the topic. This is more difficult to find here in Canada, but they do exist. Or do what I did and visit our friends out South.
  • Find a mentor who really knows how to bill who will coach you with all your quotes. Of all the ways I learned how to bill, my mentor is what made the biggest difference in learning how to quote and bill. His experience and guidance were invaluable to me in my learning.

You have questions? Call me.

You’re not sure I can help? Call me.

You lack the guts to charge more? Call me.

You wish you knew how to bill more? Call me.

You’re bored and just want someone to talk to? Okay, okay, call me.

Book your free call here

Did you find this article helpful? There’s a lot more to this topic, including multiple videos I’ve made that you can find here:

YouTube Channel

If you have a question or something to add about this month’s article or want to share how the topic affected you, you can reach out anytime.