Project based pricing: showing ongoing value
Don’t neglect the ongoing value you’re giving your client when you set your price
Most consultants price by the hour. They do things like $100/hr and say things like: this will take 20 hours.
Pricing by the hour is ok in some scenarios where you’re fixing an issue without creating a solution.
Yet it makes more sense to create project-based pricing.
A lump sum of money based on the true, long-term value you deliver to your customer.
Let’s pretend you’re working on a content strategy piece for a SaaS company. They are your customer and their base plan is priced at $49 a month.
The work you’re doing, this strategy you’re creating for your customer, will allow them to 2x and 3x their traffic in 6-12 months.
Assume they currently convert 1% of their audience reading the content.
That for example could mean 20 hot leads per month.
With your new strategy - when executed correctly - you’re allowing them to get 40 to 60 leads per month, a year from now.
At this point you might be spending 10-20 hour worth of work on a single client strategy. You are doing research and delivering a blueprint solution. A solution allowing your customer to gain 2 or 3 times more sales/demos in the long run.
That’s 2x or 4x more $49/month users purchasing 12 months from now.
1 | 20 * $49 = $980 MRR |
In 12 months you’re delivering your customer with a way to make more money in the next 2 months than what they paid you. The money they paid for 10-20 hours of your time. (assuming they eat the cost of producing the content)
A year later, after month (3) they’ve already recuperated the cost of paying you. Going forward they are benefitting fully from your content strategy.
Is it okay to charge by the hour?
You charged this business $2000.
This business is now making $2000 a month forever thanks to you.
Doesn’t make sense right?
That is why you shouldn’t charge $1000 or $2000 for 10 or 20 hours of your time. The value you delivered to them is HUGE compared to what you charged.
A solution or some advice
Show this reasoning to your customer when negotiating project based pricing.
As long as you can show this data to your customer, you can seal the sale of your services.