Billing: Why incentives matter
- Hourly billing presents a conflict of interests with clients
- Many large firms such as Coca Cola have negotiated new pricing paradigms with suppliers of professional services
- Aligning incentives with your pricing model is a way of ensuring good practice and value all round
- Getting the pricing conversation out of the way early allows you to focus on the work required
Ron Baker reflects on the shift from hourly to value based billing and explains how to make your pricing structures more efficient.
Even ardent supporters of hourly billing will admit that there exists, right from the start, a conflict between the professional's interest and the client's. When you make hours important, then the client is bound to focus on hours, rather than value. Professionals caught ‘padding’ their timesheets because they believe the value of what they created exceeded the price measured in hours will lose the respect of their clients.
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