Ditching Hourly

Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I've got an audio excerpt from an answer I provided on my YouTube channel. You can check it out at thejonathanstarkshow.com and it'll redirect you to YouTube if you're into watching videos. Otherwise, you can just listen to the audio here on the podcast. Enjoy. Hey, Jonathan here. I've got a question from Cook Films who asks, I really appreciate this info. This is a comment on a previous video. I'm a filmmaker who works fast and feel that many of the times I lose money due to being fast at my craft. When asking the client the why questions and they do not give you an amount that they hope to make off of the video you produce, how can you create a quote if you do not base it on your old hourly rates? All right. I did hear at the end of the video asking how much they're willing to invest, but they say they want to invest $5,000. Is that what you charge or do you create a proposal with three different prices with $5,000 being the top tier? Thank you in advance. Okay, so there's a lot going on here. I'm going to break it down into a couple of things. First of all, he mentions that he's fast at doing his work and feels that he loses money. That is a common issue with trading time for money or billing by the hour. The faster you get at delivering a quality result, the less money you make. You can try and raise your hourly rates, but if you can pull that off, then fine. Maybe that makes you happy and makes your customers happy and that works for you. Another approach is to give people fixed prices for an outcome, not a deliverable, an outcome, and then achieve that outcome as quickly and efficiently as you possibly can. The quicker you do it, as long as it's still a high-quality outcome, you achieve the desired outcome, the more money you make and the happier the client is because then they don't have to wait more time to get the thing that you're going to do for them. So they get the results sooner, which is more valuable to them. So it's great. All right. Now the next thing he talks about is in the sales interview, I recommend people have what I call the why conversation where you ask, why this? Why now? Why me? Why would you do something like this? Why not not do it? Is this really that urgent? Couldn't you put it off and do it later? Or why would you hire someone expensive like me when this person's a filmmaker? You've got an iPhone. Why don't you just record it? What's the big deal? Why do you need someone expensive like me? So in that, so now this person here, Mr. Cook Films, has gotten to that point and they say that they want to, no, okay. They haven't been able to determine from the conversation how much money the client thinks they're going to make from the videos. And this is a really common thing to think. When you start to think about value pricing, you think that you're always trying to get the client in the sales interview to blurt out some price, some like direct effect that in this case the videos are going to have on their bottom line. And the fact of the matter is, almost nothing has a direct effect on the bottom line unless you're doing some sort of sales activity or sales training or you're working on commission or something like that, but you're doing sales. That's where the money changes hands. That's the place where it's most likely you're going to have a direct bottom line effect. But anything that happens upstream of that, like developing an application, internal systems, branding, design, all of that stuff is upstream.

So in the conversation, the whole point of the why questions is to find out like why bother doing this at all? What effect do you think it's going to have on your business? They clearly have some unstated belief that... They believe that something that they're asking you to do is going to achieve some kind of outcome for them. It's going to make them feel better in some way. They're going to be glad that they paid you the money they paid you because now things are different. And it's not always a tangible bottom line financial exchange. I mean, the vast majority of the things that you buy in a given day, you don't get a financial return on them. You buy your coffee or you pay for a karate class. You're not getting like direct money back, but you feel better that you did it. You're glad you did it. That's ROI. It's intangible, meaning that it's not going to show up on a balance sheet, but it's still real. Almost everything you buy falls into this category. It's like you're not getting a direct return on investment. It's not like buying a lottery ticket like, oh, I won. Everything you get, everything you buy, after you buy it, you either feel better or you feel worse, and that's buyer's remorse. But usually, you know, most things you buy, you're glad you did it. Okay, so if you can't find a dollar, the point is, if you can't find a dollar amount, that's not abnormal. The videos aren't going to make the person direct money. I mean, even if they were selling the videos, there were still a whole bunch of other things that could go wrong that would prevent them from getting that ROI. What you want to figure out is what their desired outcome is, and then what part they see your videos playing in that overall picture, and then you use that as, you know, this is art, not science. You use that to gauge what a reasonable price might be for your contribution to this overall thing. So you'd say something like, you know, let's say that these videos are intended to, I don't know, onboard new clients. Sorry, let's say the client is running a SaaS business, and they've got really bad churn, and customers are jumping ship because the customer portal is clunky and old and slow, and there's a new upstart competitor who's got a really sexy interface that people seem to be, you know, attracted to, and you started to hear rumblings that people are thinking about switching to this new competitor. And you've got a project underway that's going to make that customer interface a lot nicer and smoother and better, but it's going to be a year before it's done. So you want to do something in the meantime to reveal to your clients that your interface is actually more powerful than the other one. It's just not as pretty. So what you could do is, you know, I'm just making this up, but maybe your job as the video producer would be to do some explainer videos about the interface in a way that get the clients to look past the sort of clunkiness or maybe the fact that it looks like it's from years ago or whatever and reveal the really powerful features that the other software doesn't have. I don't know. I'm just making this up. But if the goal is to sort of fend off this competitor for the next six months to a year, let's say, and they believe that producing some videos would allow you to do that, then you could say, okay, so a home run would be if none of your clients jump ship for the other company, for the competitor. And the person would say, yeah, that would be amazing. So you'd say, okay, great. Obviously, I can't control that, and I certainly can't guarantee it. But why do you believe that creating these videos that you asked me to do is going to contribute to that? And the person will have some kind of answer, and they'll say, well, you know, Mary from ABC Company is our biggest customer, and she's been with us from the beginning, and she knows that the other software isn't as good as ours, but the other software does look prettier on the surface, and she's fighting internally because she doesn't want to switch, but she doesn't have control over it. So we kind of need to give Mary the ammunition to show to the other decision makers in ABC Co. that they would actually be disappointed with the other software and that our software is actually better. And if we can just, you know, tough it out for six months to a year, then we'll get this better-looking interface, but not to judge a book by its cover, so to speak. Say, okay, that's good. Would it be possible for me to talk to Mary while I was making the videos or in advance of making the videos? Oh, yeah, absolutely. She would do anything to not have to switch to this new competitor. All right, so if we go through and Mary is just, like, very happy with the videos the way they are, she thinks that they'll absolutely convince her decision makers inside of her company, or if she actually is able to convince the decision makers in her company, then would it be reasonable to assume that other clients like ABC Company that are currently working with you, that they would be convinced as well that they should stay and not leave for the competitor? Yeah, that would be...

Great. I'll stop there. I'm going to keep going. But the idea is you found a desired goal. The client doesn't want ABC Company and the other clients to jump ship for a competitor. You found something you can measure while you're doing the project, Mary's reaction to the videos, Mary's opinion. So your job is to make Mary happy. And the client has connected the leading indicator of Mary's happiness with this lagging indicator of their customers not churning out. So all of that has come from the client's mind. And you, let's just say you as the filmmaker, you believe that you can satisfy Mary. You believe that you can satisfy one person with this situation. So, okay, now your scope basically is make Mary happy. Give Mary the tools to keep her company there. That might not actually happen, but you do believe, the ABC Company might churn out, but you do believe you can make Mary happy. All right, great. So at that point, there's going to be some, this is where it gets super artsy. The client believes that giving Mary the ammunition to keep ABC Company from leaving, that's good enough. That's good enough for your involvement. And you, now you know, you can probably make a pretty good back of the envelope calculation of how much money ABC Company is paying per year to your client, perhaps how many other companies like ABC Company there are. You might have that information already. So you know that anything you contribute to keeping them there is worth less than, let's say, just ABC Company's annual, or their annual revenue, because you can't actually control the whole thing. But you get a pretty good idea. So you can get a rough order of magnitude idea. And then let's say they're making 100,000 a year from ABC Company and a few other big ones like that, that they're nervous about leaving. Let's say it's a total of 100,000. And they say, well, we've got $5,000 to invest in this to decrease the odds or increase the odds that ABC Company and similar are going to stay with us. You say, okay. So now you've got, you can say, so back to the question, they've got $5,000 to invest in this. All right. So what I would do when it comes to the proposal piece is, you know, I'm going to create a custom proposal. That's the question. And I'm going to have three tiers. And the 5,000 is going to be the bottom tier. So whenever I do a proposal with options, the bottom tier is the thing the client thinks, the thing the client's expecting to get. It's the thing that would be, if you're just going to have no options, it's the thing that would be just the one ultimatum proposal. Like, here's what I'm going to do. It's just what we talked about on the phone, and it'll be $5,000. So it's kind of like if I was working with someone to create options in an ultimatum proposal, I would say, all right, just write your normal proposal, then give it to me, and we'll work together to come up with two additional options, like upsells you can think of them as. So, okay, so the question asker asked, would you have three options in the proposal with 5,000 as the top tier? No, I would do it as the bottom tier. So they said, we've got $5,000 to invest in exactly this thing that we're agreeing to. All right, great. I'm going to give you two other options on the proposal, so you've got a range of choices here, but I'll make sure that one of the options fits into your budget. Okay, great. So the bottom option is the one that they're expecting, the one that you agreed to, the $5,000 one, and you need to scope it such that $5,000 you believe is going to move the needle for them, but also be profitable for you. So whatever that looks like for you, you have to decide on your own, but you come up with an option where it's profitable for both people, both parties. The next option up, if I was using like a Goldilocks pricing structure, the next option up would be, what did I say, 5,000 for the base, so the next one would be 12,000. So option two would be 12,000, and you say to yourself, all right, what could I do to make Mary happier for $12,000? If I had a budget of $12,000 given to me by the client, and I knew the goal was to decrease churn, especially among these premium customers, and I know that making Mary happy is one of the things that we want to measure, and the happier she is, the better, maybe I could do something a little bit more broad, not just more of option one, but something a little bit more involved, where I take a little bit more ownership over ensuring the outcome is satisfactory. And who knows what that looks like? It could be that you don't want to just say more videos, you want to say maybe you interview more Marys. Maybe you say in option two, I'll interview...

the key people, the key allies inside of your top five clients. And you meet with all of them. So you're not just making Mary happier, you're making all of them happier, and you're getting input. Or maybe you do custom videos for each different client. Maybe the distribution of the videos is not public, but it's internal. Maybe you'll do a live webinar with Mary. You'll be on there, who knows? And then option three would be even bigger. So option three is where you take the most ownership over the project. With Goldilocks pricing, the top tier would be $25,000 here, so it'd be $5,000, $12,000, and $25,000. And again, you think, if I had $25,000, what would I do to maximize the chances of this being a success? So you could get more involved, you could go farther downstream, I don't know. But you want to think really broadly about what it is that you're good at. I know it's making videos in this case, but there are other things that you're good at, consultative type things. Maybe there's some sort of ongoing, I don't know, maybe you get feedback as you're talking to the Marys, you get simple feedback that they could put into the development process for improving the interface. So anyway. Okay, to summarize all of that, what I'm saying is that separating time for money is really important for you to actually make profits, especially if you're good at what you do. So that was the first thing. Then when you're going through the why conversation, you really want to get an understanding of what the goal is, even though that goal might not have dollars attached directly to it. You want to find out what the ultimate goal is, and then figure out with the client what you can measure along the way that you do believe you can control. And then the last thing is, if they do happen to give you a budget, that will be your option one. That should be the thing that they are expecting you to send them. You want your option one, when they read it, you want them to think, yeah, this is what I was expecting, and oh, it's $5,000 just like we expected. Oh, what are these other options? And you want the benefits of the other options to be significantly more valuable and different from option one. You want them to be value add. You don't want it to be more of option one. You want it to be something they didn't think of. And they can perhaps consider that and pick a higher option because maybe they're like, oh, wow, there's more value here than we expected to get from this particular person, and this thing we see in option two would be amazing. We didn't even think that was something this person could do, and we do have money for that after all. We can pull it from somewhere else. All right, so hopefully that all helps. If you have a question, you can hashtag AskJonathan on YouTube, Twitter, or LinkedIn, and we'll get to it as soon as we can. Thanks. Would you like to learn how to get paid what you're worth? How about selling your expertise and not your labor? We work through all of this together in the Pricing Seminar. Pre-registration starts soon, and you can sign up to be the first to know when early bird pricing is announced at thepricingseminar.com. That URL again is thepricingseminar.com. Hope to see you there. Hey, Jonathan again. Do you have questions about how to improve your business? Things like value pricing your work instead of billing for your time, or positioning yourself as the go-to person in your space, or maybe productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal. Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes you to get ready for work in the morning. Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call you don't feel like it was worth it, just say the word and I'll refund your purchase in full. To book your one-on-one coaching call, go to jonathanstark.com slash call, C-A-L-L. That URL again is jonathanstark.com slash call. Hope to see you there.