How much should you charge? Part 1: Dealing with the unexpected
If you are already self-employed, especially if you offer services as opposed to products, then you’ve probably already struggled to figure out the answer to a very important question:
How much do I charge?
It’s not just a matter of having a set fee or knowing how much to charge per hour. The real problem for many is figuring out how long a project will take.
You need to know fairly accurately how long it will take to get the job done so you can provide an accurate quote. If you base your quote on 30 hours of work at $40 per hour, but the job actually ends up taking you 60 hours, you just cut your hourly income by half.
If you charge by the project, instead of by the hour, you still need to know how much time the work will take, or you won’t know how much to charge.
My clients tell me that determining how long it will take them to complete a project, and therefore come up with accurate pricing, is one of the biggest hurdles they face. And they also tell me (and I know this to be true) that the main factor that causes their estimates to be off is:
The unexpected needs and expectations of the client.
Clients can often throw things at you that end up meaning more work than you expected. They might want more meetings than you planned, or they might want to make last minute changes that mean you have to go back and rework something. All of that can throw your estimate off.
So, what can you do about it? First, you want to be aware of the different “client factors” that can lead to such extra hours. Let’s take a look at some of those now.
Connecting
When we start a new project, we don’t yet know everything we need to about the client and their project. So, we sit down together and go over what they want and need. We have planning meetings, send each other emails, and talk on the phone. Then, when we have a good picture of what needs to be done, we begin to work.
But the number of hours we spend on meetings, phone calls, and emails is one of the factors that can add substantially to the total number of hours a project may take. You might have estimated you’d spend a total of 10 hours in meetings, but what if your client likes to talk and the 1-hour meetings you planned each turn into 2-hour meetings? What if they call you every day and talk for half an hour, when you had expected to only talk to them once a week for 15 minutes?
Preparedness
Some clients are easier to work with than others. They understand that they have responsibilities too, such as giving you the information you need in a timely manner, or taking the time to really think about what they want before they give you directions. I often see this issue in planning meetings—sometimes the client hasn’t done any of the work they were supposed to do to prepare for the meeting, so you spend the meeting doing it with them. (Think of the guy who is supposed to go to his accountant to provide the total amount of his yearly expenses, but instead shows up with a box full of untallied receipts. Then the accountant has to sit with the client to organize those receipts and add them up.)
Knowledge
Your clients aren’t experts in your field. That means they will often have many questions for you. They want to understand what you need to do, how you will do it, and how it will impact them, their business, and their bottom line. Answering these questions takes time, but it is necessary in order for your client to make an informed buying decision.
But their lack of knowledge may also mean delays. What if a client changes their mind about a major detail halfway through the project because they just learned about a possible problem with the way your project will integrate with their company? What if they just spent time researching one aspect of what you do, and have come back with new questions on topics that they really should have decided about in your first planning meetings?
Revisions
Sometimes when you finish a project your client may come back with a bunch of changes they want made. Now you have to go back and rework things, putting in many more hours than you had expected on the project. This is related to the problem of preparedness: ideally, your client should have given you all the details of what they wanted in your initial planning meetings. But perhaps they didn’t properly think about and prepare their information the way you really needed them to. This issue is also related to knowledge: remember, clients are not experts in your field. So it is your job to educate them enough so that they can make all the decisions they need to up front, before you start working.
Timelines
You want to be as efficient as possible to maximize your profits. But let’s face it, your clients have their own schedules and timelines. They may not think there is anything wrong with not returning your call for three days. Maybe, in their line of work, that’s normal. But for you, it can mean delays. Maybe you can work on another project while you are waiting, but maybe not. All that time waiting can be wasted hours that cut into your profits.
* * *
Those are the main factors that I have found can add up unbillable hours. In next week’s post we’ll learn what you can do about them.
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