Whether your business sells services, products or both, you know that a normal day includes speaking with many different clients solely to offer them bits and pieces of your knowledge and advice. This accessibility is great because your clients see added value in your constant availability.
The problem with that accessibility, however, is that you’re probably not getting paid for it.
While a simple solution to this issue might be to charge your client for every second you’re servicing his or her account, it may not make the most business sense. You have every right to be compensated for your industry expertise, but nickel-and-diming your clients is an easy way to send them running to your competitors.
So what can you do?
Generally speaking, freelancers, consultants and small business owners have three options to ensure they get paid for their intangibles: increasing hourly rates, charging a retainer fee or getting paid per project. Let’s examine each of these options, as well as their associated pros and cons, and see what works best for you.
Option 1: Hourly Rates
Charging by the hour offers you more flexibility. However, it also makes it harder to charge for incidental advice or support beyond the end of the project. Additionally, when charging by the hour, clients typically expect to receive an itemized invoice, giving your clients more opportunities to pick apart your services and question your charges.
Option 2: Charge Per Project
When you charge your client by the project, you typically agree on a final cost that covers agreed-upon deliverables and a set timeframe. Payments can be made all at once or scheduled throughout the duration of the project.
The difference between paying per project and charging an hourly rate is that you typically don’t need to provide an itemized invoice that associates each deliverable with a cost. You will definitely want to provide a scope of work document to the client that clearly outlines what is and what is not included in the project cost, but you don’t normally have to account for each item with a specific rate.
Option 3: Charging a Retainer
Throughout the tail end of the 20th century, it was fairly common for companies to keep certain vendors and service providers on retainer. This enabled clients to call upon vendors at any time to get a project completed or to get a question answered. Nowadays, it’s more common for a retainer to be called a maintenance or service fee.
As more and more services and processes become automated, your knowledge and expertise is an even more precious commodity. It’s important to determine how you want to be compensated for the expertise you spent years cultivating. Additionally, it’s important to set the tone with a client early in your relationship so they don’t grow accustomed to getting “something for nothing.”
Don’t be embarrassed to charge what you’re worth. In this instance, your intellectual property is a product, and you should be paid accordingly. It has as much value to your clients as the printer they rent or the cleaning crew they’ve hired.
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