Ditching Hourly

Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Imagine two kids at a birthday party, Alice and Bob. Why would Alice want to trade her green balloon for Bob's red one? Is it because the red balloon cost more to make and is therefore intrinsically worth more? Is she thinking about the labor that went into creating the balloon? No, of course not. She simply likes red better than green. She just wants the red one because she likes red better. Now luckily for Alice, Bob likes green better than red, so he agrees to the trade. Now what's happened here, right? Both Alice and Bob are now happier for having made the trade. They're both better off than they were before. Another way to say this is that they have both made a profit. The red balloon is actually worth more to Alice than the green one, and the green balloon is actually worth more to Bob than the red one. This is wealth creation. Both parties in the transaction made a profit. Wealth was created. Alright, so why does this story matter? The reason this matters is because the same principle applies if instead of balloons we're talking about Alice having $250,000 to trade for Bob's WordPress website development service. Yes, this is a little more protracted because a service is delivered over time and therefore requires trust on Alice's part, but if we assume that Bob understands what Alice wants and delivers as promised, both parties will profit from the engagement. Wealth will be created. Now we don't usually think about the buyer making a profit from giving someone money, but that is exactly what happens. That's the ROI. That's the investment. So in this case, Alice invests $250,000 into Bob's WordPress website development service, and she's going to get a return back on that. So for whatever reason, it was more important for Alice to get this return than it was for have this $250,000 sitting around in the bank. Maybe she's a billionaire and $250,000 doesn't matter to her that much. Maybe the return on investment is going to be very tangible, like Bob creates an e-commerce website for her where she can sell her products and make a million dollars a year, so $250,000 is a small investment. Or maybe it's something intangible where she was just embarrassed by the website and she couldn't stand it and she didn't really need the $250,000 or whatever the situation might be. Now does this mean that WordPress websites in general are worth $250,000? No. Does it mean that Bob's specifically are worth $250,000? No, of course not. All that matters is that it was worth $250,000 to Alice and that that seemed like a fair trade to her. It's important to internalize the notion of mutual benefit from these transactions. It's important to remember that not just the seller makes the profit because he or she is the one receiving the money. It's important to remember that both parties are profiting from the exchange because as you move away from hourly and start value pricing your projects, your prices are going to start going up and your costs, i.e. the amount of time you invest in delivering the results, are going to go down, which means that your effective hourly rate is going to go way up, almost certainly to places that you would never feel comfortable charging. So you have to keep in mind that how much time you spend on the project is irrelevant to the buyer, the same way that Alice, you know, little kid Alice, she didn't want the red balloon because of how much it costs. It costs more to make than the green balloon. She just preferred the red balloon to the green balloon. So your clients in the future are going to prefer having the outcome that you promise. They're going to prefer that to the amount of money. Otherwise, they wouldn't make the trade the same way that Bob and Alice wouldn't have made the trade if either one of them preferred the color that they had. All right. Hopefully I explained that well. See you next time. 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...

Go to jonathanstark.com/call. That URL again is jonathanstark.com/call. Hope to see you there.