Pricing Outcomes Not Hours!

The natural instinct for a small business owner when they are starting out is to consider the time it has taken them to make or do something whenever they are pricing a job up.

This comes usually from the mindset of an employee where they would have traded hours for money.

Carrying this in to a small business can be detrimental to the bottom line profits their company can make.

When you price by the hour you are bringing something totally irrelevant into the equation.

This is because customers will have a price point they are willing to pay to have an outcome solved – rather than how long it takes the business to solve that problem.

Obviously if you have to pay staff you need to factor this into your cost structure but it shouldn’t define the price that you charge.

If you customer is willing to pay a large amount to solve their problem it shouldn’t be affected by the number of hours it takes you to solve it.

Equally, if they only are willing to pay a small amount to get a problem solved then this will affect the amount you can charge and therefore the number of hours you could work on it.

Don’t be mistaken everything you do is solving a problem:

  • Selling a fridge = keeping food fresh for longer
  • Mowing lawns = making customers feel proud of their garden / freeing up their time
  • Making Concrete Blocks = providing elements to build housing

So regardless of how long it takes you figure out the price customers are willing to pay to solve the problem / provide the outcome you serve and then charge that!

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