I think that professionals can be ethical and make a solid profit. If the job has value to a client beyond hourly rates then a client can be charged for the job on the basis of providing value. The very worst contracts are not to exceed contracts where you limit your profit and do not account for the value you provide. "Making a killing"...sounds like you are adverse to making a profit. Lawyers, doctors, plumbers etc don't seem to have that problem
> Not everyone reads POB Larry, perhaps could you do a blog or go over your high points here?
Good idea. I will try to set up a central location where I can post not only those articles but also shorter thoughts along the way.
Larry P
I'm thinking about this from a consumer's perspective.
Sometimes I need a service done, and want to know how much it would cost to have it done. (Let's say a kitchen remodel). For me, if it will cost $10,000 I will look at my finances and might say that I can afford that; but if they estimate $25,000, I might decide I can live with my kitchen as it is. That's just an example; but apply it to anything. I can afford a survey to know where my property corners are if it will cost < $2,000; but I might think it not worth it if it is going to cost more than the value of the land being surveyed.
Maybe some clients simply can afford anything, and will hire you if they believe they can trust you. But sometimes a guy needs to have an idea of what a service might cost. What if they didn't have the money to pay you when your final bill comes?
I'm thinking that an hourly rate has its place, and a lump has its place as well.
> I'm thinking that an hourly rate has its place, and a lump has its place as well.
I'm wrapping up a proposal today, hourly with an estimated budget of $1.79 million. I know what my profit is with my hourly rates. If I did this lump sum and estimated 10% low, my CEO and CFO would gladly volunteer to personally clean out my office for me.
Huh?
"Professionals charge by the hour. Many professional services can't be accurately estimated, I have no idea how long it's going to take to do your boundary survey."
Never ever heard of a Doctor charging by the hour!
Attorneys only rarely do...
I almost never do.
Like I stated above, I have clients that live and breath hourly invoices for our services.
We also do a tremendous amount of work for two of the Tribal Nations here in Oklahoma. All of their work is a quoted "not-to-exceed" sum, based on an hourly breakout estimation.
I will agree that one-time clients probably prefer lump sum quotes, probably to help them feel as though they have control on the costs.
But my established clients have accounting they have to keep track of and are periodically audited. That is probably why those clients prefer an 'hourly' justification of fees.
Huh?
I didn't say they charged by the hour, I said they don't seem to be adverse to making a profit like some surveyors are...at least that's the point I was trying to make!
> I'm thinking about this from a consumer's perspective.
>
> Sometimes I need a service done, and want to know how much it would cost to have it done. (Let's say a kitchen remodel). For me, if it will cost $10,000 I will look at my finances and might say that I can afford that; but if they estimate $25,000, I might decide I can live with my kitchen as it is. That's just an example; but apply it to anything. I can afford a survey to know where my property corners are if it will cost < $2,000; but I might think it not worth it if it is going to cost more than the value of the land being surveyed.
>
> Maybe some clients simply can afford anything, and will hire you if they believe they can trust you. But sometimes a guy needs to have an idea of what a service might cost. What if they didn't have the money to pay you when your final bill comes?
>
> I'm thinking that an hourly rate has its place, and a lump has its place as well.
In my area, the value of the service often exceeds the value of the property. A lot of tax sales are made to people out of the area and they are shocked that the survey is more than what they paid for the vacant lot. 1 acre lots have an assessed value of about $300 in a paper subdivision from the 60's in spanish land grants laid out in a PLSS fashion and poorly monumented. Those same lots end up on tax sales because the tax is more than the land value. True waste land.
Been there, got the T-shirt to prove it.
This is an excellent post Larry!
In my business, I have been able to lump sum predictable projects such as topo and most construction but boundary surveys I do at an hourly rate. I find that most all of my clients prefer a lump sum price even the government organizations I do work for. I try and explain that an hourly rate is a cheaper way to go most all of the time; they still want to go with lump sum. Most all of the clients make their decisions to hire based on low price even though they have absolutely no idea how much money they should spend for a good product. Unfortunately I have found that most all clients don’t have any idea of the quality of the product they purchase. How do I fix this?
Changing the Client Relationship
Value Pricing: What Are You Worth?
Value Pricing: The Client Matrix
Value Pricing: Step 1: Be a Good Listener
Value Pricing: Step 2: Price the Client
Value Pricing: Step 3: Develop Service and Pricing Options
If the client thinks they'll receive the same product or service no matter which telephone number they call, you've become a commodity. Commodities are all about price competition.
What can you do to incent a client who is 500 miles away to call you instead of calling the guy who is 10 miles away? If you can make that happen, then you are starting to differentiate yourself. Once you differentiate yourself, you can start charging professional fees. I use lump sum fees 95% of the time, but there is an occasion where an hourly fee fits the client's processes better. I just charge a really high hourly rate. Sometimes they balk at the rate and we go back to the lump sum, other times they pay the high hourly rate.
> In numerous posts I see a common theme. Everyone wants to talk about hourly rates. What is your rate for court?
> What is your rate for Flood Certs?
>
> Guys, few clients care about your time. Clients aren't employing surveyors because there is something magical about our time. They employ us because of our knowledge. Or more specifically, they employ us because of what we can (or should) be able to do to help them accomplish some goal.
>
> Some goals are more important and valuable to clients. This is what we should focus upon. The value we bring to our client is what counts, not our time.
>
> Larry P
Thanks Rich.
For those of you who have not had the pleasure of hanging out with Rich, you have missed a real treat.
Larry P
Larry,
Not to be rude but you obviously do not perform oil and gas surveying or plant construction work. While I do agree that most times lump sum, value based pricing is best for boundary work, however in other work you would be out of business.
I would say that all my clients care about my time and I charge very well for it by the hour. Of course we don't do much boundary work.
> Larry,
>
> Not to be rude but you obviously do not perform oil and gas surveying or plant construction work. While I do agree that most times lump sum, value based pricing is best for boundary work, however in other work you would be out of business.
>
> I would say that all my clients care about my time and I charge very well for it by the hour. Of course we don't do much boundary work.
Actually Matthew, most of what I am doing these days is oil and gas pipeline work. I agree that the nature of "industrial" work makes it very difficult to implement a value based pricing system. That is part of why I said in the title that "almost nobody" cares.
Even with that sort of work, take a deeper look. Who is it that cares about your time? It is the bean counters. They have established a system where they get to determine your value by time. But is that really the best way to figure your real value? Is one person's time exactly equal to another's time? Of course not. The mangers know well that some people are worth more than others. I see it all the time and bet you do as well.
So I say it again. Who cares about your time? Not many people that truly matter.
Larry P
