As a business owner, your time is your most valuable asset. However, selling your time by billing clients hourly or daily can be a serious roadblock to growth. When customers rent your time instead of buying a result, your business model lacks leverage, making it difficult to scale without working harder or hiring more people.
Here is why you must stop selling your time and tips on how to start growing a valuable business.
Selling time can make you less appealing to investors.
One of the eight factors that acquirers look for in the businesses they invest in is your company's Growth Potential.
When you bill by the hour, the amount of work you can take on is limited by the number of hours in a day, which makes it difficult to grow without working harder or hiring more people. In contrast, when you sell results, you can take on more work without increasing your hours. This can help you scale more quickly and efficiently.
Ultimately, this can make your business a more attractive investment opportunity and increase your chances of securing the funding you need to scale up. If you want to sell, you will increase your potential to attract a buyer.
Selling your time can hurt customer satisfaction.
The following are some reasons your customers may become dissatisfied if you are billing them hourly.
Uncertainty - When customers are billed by the hour, they may feel uncertain about how much a project will cost. This can lead to anxiety and frustration, negatively impacting their overall satisfaction with your business.
Incentives – As mentioned before, hourly billing may incentivize you to take longer to complete a project. However, this incentive structure directly opposes what customers want, which is a quick and efficient solution to their problem. This misalignment can lead to dissatisfaction and frustration.
Lack of transparency - Hourly billing can be opaque, with customers needing clarification on what they're paying for and how much each task costs. This lack of transparency can be frustrating and may make customers feel they're being taken advantage of.
Difficulty budgeting - When customers are billed hourly, it can be challenging to budget for the work they need to do. They may need to learn how long a project will take or how much it will ultimately cost, making it difficult to plan and manage their finances.
Lower perceived value - Finally, hourly billing can make customers feel like they're paying for time rather than results. This can make them feel like they need better value for their money, negatively impacting their satisfaction with your business.
When you sell your time, you open yourself up to competition from others who offer similar services
This competition can lead to downward pricing pressure, as customers are likelier to choose the provider with the lowest rates. This is because when you're selling your time, customers view your services as a commodity that can be easily compared to other providers. However, when your services are commoditized, your business becomes less differentiated, making it challenging to maintain your margins and stand out in the market.
Moreover, when competing primarily on price, you may be forced to cut corners to keep your rates competitive. This could decrease the quality of your services, ultimately harming your reputation and reducing customer satisfaction.
Focusing on delivering unique value to your customers is essential to avoid this commoditization. This may require developing proprietary technology, offering value-added services, or building strong customer relationships. By differentiating yourself in these ways, you can create a competitive advantage that makes it more difficult for others to compete with you solely on price. Ultimately, this can help you maintain your margins and stand out in a crowded market.
To grow a valuable business, stop selling time and focus on value-based selling instead.
By delivering unique value, you can differentiate yourself in a crowded market, improve customer satisfaction, maintain your margins, and stand out from the competition. Ultimately, you can grow a more valuable and successful business by stopping selling your time.