Questioning the Billable Hour part 3: Seven Industries

Questioning the Billable Hour part 3: Seven Industriescost between X and Y dollars. Let’s discuss
 Situation A: Is Faster Service Worth More?what you’d get.”
Your computer is not working properly. You have Q2  What if, in addition to replying as above when
tried to understand the problem and find a solutionasked, “How much?” Jacquie would say,
that you can implement yourself. Yet, after trying,“If we can discuss how important it is to you,
you are no closer to a solution, you find the situationthen we can fix the fees in advance with a
aggravating, and you decide that there’s nosatisfaction guarantee”? 
point in continuing to attempt fixing the problem 
yourself. Your time and attention are better spent onSituation E: Paying for the Solution – Not the
productive activities and should not be wasted onTime It Takes
this computer problem any more.Dexter is a management consultant with an
 The computer technician that you call asks a fewaccounting firm. He has been advising the owners,
questions then says to bring the computer in to hisdirectors, and senior managers of various companies
shop. He charges $60 per hour and predicts thelong enough that he typically begins formulating
computer ready in two business days. Once he hassolutions to their problems during the initial stage of
the computer, he will diagnose the problem then calldiscovering the problem. Understanding that each
you with an estimate.situation is unique, Dexter still pays close attention
 Q1  As you consider not having your computer onthroughout the discovery stage.
hand for two business days, and the opportunities to Because he always brings to bear his years of
use it  productively that you must forego, wouldexperience, and because he has the expertise to
you be willing to pay more to have it fixed and back“sometimes come up with a $10,000 solution in
in use much sooner?10 minutes,” Dexter eschews the billable hour as
 Q2  If the computer technician offered to fix yourunfair. Rather, his firm charges fixed fees, established
computer within 24 hours, satisfaction guaranteed,up-front based on the client’s gauge of
for a fixed fee agreed in advance, how attractiveimportance, and includes a satisfaction guarantee.
would that be to you?When the scope of any project changes while
 underway, the fee is adjusted on the same basis
Situation B: Evaluating Your Next Car– all in writing.
You and your spouse are shopping for a new car. Q1  Would it still be more fair for Dexter’s
Having visited a few car dealers, conducted researchfirm to charge according to his time spent, with his
on the web, and spoken to a trusted person at yourrate per hour linked to his seniority?
usual auto-service shop, you and your spouse have Q2  Should any other professions that apply
narrowed your search to two cars, both of whichexperience and expertise to solve client problems
you have taken on a test drive together.also consider value-based fees, fixed up-front with a
 Q1  As you consider the value of each car, do yousatisfaction guarantee, and accommodate any
care how quickly or slowly either car was built, orchanges in scope by adjusting the fees?
how much time the manufacturer put into design 
& engineering?Situation F: Fixing the Cost of a Pizza
 Q2  As you consider the asking prices of the cars,In Canada, there is a great number of pizzerias. Even
does it matter to you how much time the carsmall towns typically have more than one pizza place.
salesperson has spent on the sales process withThough there are pizza chains, there is also a variety
you?of independent pizzerias across the country. Despite
 the number and variety, the industry has certain
Situation C: the Value of a Saladstandards for ordering and pricing, anywhere you go,
At a restaurant, you order a supper salad. The menubased on size of pizza and number of toppings.
says that the salad costs $7.99. As usual, you expect As Emile considered opening a pizzeria in Morocco,
the salad to be served to you in a few minutes.he had the opportunity to consider the Canadian
 When your order reaches the kitchen, the managermodel: standard sizes of pizza, each with its own
finds that the supply of tomatoes has gone too low.basic price, then standard pricing for toppings, plus
She sends somebody out to buy tomatoes so thatfree delivery within a certain radius. Emile analyzed
your salad can include them. The errand runnerthe pizza business and found that toppings do vary in
breaks a sweat to get the tomatoes to the kitchencost to the pizzeria. He also found that, with the
in time for your salad to be served with the rest ofoverhead to keep a pizza oven at operating
the meal.temperature, the cost to bake a pizza would vary
Your salad is served with the rest of the meal, and itwith size each and number per day. The cost of any
is billed at $7.99.one ingredient could also vary over time, as would
 Q1  As you sit at your table waiting for your mealthe price of fuel for a delivery car. These all factored
to be served (unaware of the restaurant’sinto Emile’s business plan.
tomato supply) does it matter to you if the Q1  How important is it to you to know how much
kitchen’s supply of tomatoes has gone too low,a pizza will cost when you order it?
causing the manager to send somebody out to buy Q2  If your pizza order today matches your pizza
more?order from a month ago, do you consider it
 Q2  If you knew about the low tomato supply andreasonable for the price to be the same, even if the
the decision to send somebody out to buypizzeria’s costs might have varied?
tomatoes, how would that affect your expectations 
about the timing of the meal being served or theSituation G: Original, Custom Newsletters for Standard
amount billed?Prices
 Robert was a professional writer, not of screenplays
Situation D: How Much Trust When the Meter isor magazine articles, but of original custom
Running?newsletters. Despite his ability as a wordsmith in a
Jacquie has been self-employed as a graphic designerrange of contexts, the market consistently regarded
for four years. She has found that her prospectivehim as a newsletter specialist and brought that
clients (for example to design new logos and usebusiness to him. Robert decided to embrace this
those logos in designing stationery) typically start thereputation. The rationale behind his business model
buying process by asking her, “How much?”was simple: Give people what they want.
 In her first year, Jacquie found this frustrating He developed a business model that would always
because she could not answer right away. Shecreate original, authentic newsletters – best to
needed to learn each client’s needs andmaintain a credible connection between his clients and
expectations before she could provide a reasonabletheir readers – and in an apparent paradox, make
estimate, and her estimates were based on howprofits charging standardized fees.
much of her time would be needed. The reputation for newsletters that had driven
 Eventually, she learned to redirect that question todemand for his writing was based on reliably good
gauge the scope of each new project. This allowedwriting with a degree of original authenticity that
her to provide reasonable estimates and close sales.made his third-party authorship invisible. He trained
Still, from that first question until the client signed herand managed a small cohort of writers in his
estimate, there was always uncomfortabletechniques also so that readers would assume the
uncertainty and a sense of risk.writing to be the issuer’s. Robert also ensured
 There seemed to be a problem of trust intrinsic tothat each newsletter would have a look unique to
the pricing aspect of the sales process. For example,the issuer. Then, each issue would be laid out with
one prospective client said, “I understand thatclient-approved text and photos by the same person
you’ll show me three logo options with sampleswho designed the original template.
of how they’ll look on stationery. I am then Robert paid his writers and designers fixed fees
supposed to choose and you’ll proceed fromand had them work under a contract that protected
there. But what if I don’t like any of them as-isthe business interests of all parties. Likewise, he
and want you to adjust or mix-and-match before Icharged his clients fixed fees under a purchase
approve one? Would your fees stay the same?”agreement that both encouraged decisive
 Jacquie dreaded this. If the client was not satisfiedcollaboration on newsletter contents and allowed the
with her initial work, then she would have to chargeflexibility necessary to make each issue fulfil its
more or make less money for her time and effort.potential as a timely reflection of the issuer-reader
Under the circumstances, neither possibility wasrelationship. His purchase agreement even included a
welcome.pay-upon-approval satisfaction guarantee.
 She considered that she would have to improve her Q1 If you could have original, custom work
skill at developing trust. She also longed for a way toperformed for you by a small team of creative
make buying from her easier – especially if shepeople with the security of fixed fees and a
could avoid the tension involved in estimating andsatisfaction guarantee, would you bypass low-cost,
hoping to make a decent profit when working foroff-the-shelf alternatives?
clients whose need for her billable time could exceed Q2  If you were to read a newsletter that seems
their budget.to be a generic, impersonal product with the name
 Q1  What if Jacquie reviews her process for eachand photo of an individual pasted in, would you
type of project to establish a range of cost? Thisconsider it worth much more to that individual to
way, somebody interested in a new logo andissue an original, custom newsletter like those Robert
stationery, for example, could ask, “Howand his team create?
much?” and Jacquie could reply, “It would – Glenn R Harrington, Articulate Consultants Inc.