How do you price your service? And why an hourly rate works against you

Start your price from what the change is worth to the client, not from how many hours it will take you. First agree with the client on the goal, the measure of success and what that change is worth in PLN. Only then give a price, ideally as three options. An hourly rate has a built-in flaw: it punishes you for working faster.

Why does an hourly rate work against you?

Alan Weiss has advised companies for years and writes about pricing consulting services. In Value-Based Fees he lists what goes wrong when you bill for time. You only earn when you can be seen spending time on work for the client. That pushes you toward adding meetings, taking on side tasks and widening the scope instead of guarding it, because every extra hour is revenue. Weiss calls this a conflict of interest that shows up from day one and that you can’t get around.

The client loses too. With every small request they have to work out whether the hour is worth it, so they ask less often, even when help would be useful. The rate reduces you to a commodity that gets compared with other people’s rates. And a year has only so many hours, so your revenue has a ceiling.

In my view, AI adds a new argument. Say a task that took you ten hours a year ago now takes you three with the help of tools. At an hourly rate, your revenue from that job falls by 70%, even though the client gets the same or better.

How do you talk to a client about value?

Before he gives any price, Weiss agrees on three things with the client: the business goal, the measure by which you’ll both recognize progress, and the value, meaning what the improvement is worth to the client. He has this conversation with the person who decides on the spending. Without these three, there’s nothing to calculate from.

Questions for this conversation, picked from the book’s appendices and freely paraphrased:

• what should change in the business if this project succeeds;
• what bothers you most about this situation;
• how will we know the goal has been reached, and who will judge it;
• how much this problem costs you today, over a year;
• what happens if you do nothing;
• what this change will give your clients and your team, and what it will give you personally.

Weiss also shows the difference between what you do and what the client gets out of it. “Running a sales training” is the work. “Closing more deals” is the result. The client pays for the result.

Three options instead of one price

A single price asks the client “yes or no?” Three options change the question to “how should I work with you?” Weiss claims that options alone raise the share of accepted proposals by at least half. That is his observation from practice, not the result of a study. The mechanism, as I understand it, is simple: the client compares your options with each other, not you with your competitors.

Weiss also gives a formula to start with, though he admits that pricing is more art than science. The cheapest option should pay the client back many times over in the first year; in his example, 20 to 1. Each option after that costs at least 20% more and gives the client clearly more.

An example with fictional, round numbers. You help small businesses put their order handling in order. A hypothetical wholesaler with twenty people estimates in your conversation that the mess in its orders costs it 300 000 PLN a year: complaints, rework, overtime. I always cut an estimate like that in half, so you work from 150 000 PLN. At a 20-to-1 return, the cheapest option costs 7 500 PLN.

• option 1, 7 500 PLN: a map of the order process and new rules in writing;
• option 2, 9 000 PLN: the same, plus rollout with the team and ready-made templates;
• option 3, 10 800 PLN: the same, plus three months of support and a review of results after a quarter.

The client doesn’t care how many hours option 1 takes you. You do, because every hour AI saves you stays with you.

When this doesn’t work

With small, repeatable services, such as office cleaning or changing tires, the client is buying something familiar and compares the price per square meter or per item. There, a fair unit price list wins.

Value-based pricing also won’t work when the client doesn’t want to talk about goals and numbers, or when you’re talking to someone who doesn’t decide on the money. Then you have nothing to calculate from, and you’re guessing.

If the result depends mainly on what the client does after your work, don’t promise a result. Price a fixed scope and name its value, but don’t take responsibility for something you can’t influence.

For tomorrow

Before your next quote, ask the client how much this problem costs them today, over a year. Write down the answer before you count your hours.

Read next: how to build an offer the client won’t compare on price alone · how do you say what your business does in 5 seconds

Want to work out what your service is worth to a specific client? Let’s talk

How this text was written: the research, the choice of sources and the final version are mine. AI helped me prepare a draft; I checked every fact, and I am responsible for this text. — Maciej Chmura

Sources

• Alan Weiss, Value-Based Fees: How to Charge What You’re Worth and Get What You Charge, 3rd ed., ch. 2 “The Lunacy of Time-and-Materials Models,” pp. 25, 27–28, 31.
• Ibid., ch. 4 “How to Establish Value-Based Fees,” pp. 67–71 (goal, measure and value before price), pp. 80–81 (options), pp. 85–86 (the 20-to-1 formula and +20%).
• Ibid., Appendices B, C, D and F, pp. 253–258 and 261 (questions about goals, measures and value; the difference between the work and the result).