Fee Structures Must Be Designed To Consider Today’s Economic Conditions

Lately, many small business owners are finding that a more creative approach to billing fees works far better than a static, traditional one-size-fits-all approach.

I have found that a flat fee works very well, even in a traditional hourly billing relationship. This allows the client to know exactly what the price will be. Then, once established, you can finance the fee over time with weekly or monthly payments. This is the best of both worlds – a fixed price paid over time.

In other situations, when success is measurable, a fee can be determined by the degree of success. This is hard to generalize about as different businesses have different metrics and determining your value-added service is sometimes a challenge but sometimes it is clear and obvious. If you can determine the effect of your efforts in bottom line dollars then bill accordingly. This will work for everyone.

I am not a big fan of hourly fees. But, if you must, then sell in small units, bite-size sections, all adding up to a larger number but with small commitments along the way. This is more affordable and it works for all involved.

Here is another approach – if your fee is a larger fee, and the job is done in a short time, finance your fee by splitting it up over a number of months, as many as are required to ease the cash flow burden and get the deal done.

Discounting, of course, is the bane of all businesspeople these days as it is very common for tradespeople and other businesses to bill so low that there is little or no profit at all. However, it gets the job and the extras – the change orders get the profits. Lowball to get the bid, get the job and then live off  the extras it pays for the workers… and some profit on the extras. Loss leaders can also do the same by bringing in the client with unusual offers that are possibly even below cost and then earning repeat business or expanded business.

Giveaways and gifts are also successful tools for bringing in business and retaining clients. Bartering also works under specific circumstances.

It is true that under the current economy people are spending less and want quality, not quantity, and above all, a good deal. This is a challenging time for every small business owner but with challenge comes opportunity. Figure out how to bill effectively and beat your competition to the punch.