Five Simple Questions To Avoid Time-Based Billing From Vendors

Are you stuck paying vendors for time?

Is it YOUR fault?

Here’s some of the feedback from The Seven Curses of Hourly Billing video (view here):

  1. “There’s no other way to do it.”
  2. “I hate charging by the hour. But we have to.”

Why do they have to?

Because the buyer (you) doesn’t really know what you want.

This truth is infamous in software development, residential construction, logo design, government contracting, and so on.

The buyer has a notion of what they want, but cannot define it well enough to ensure a first effort that hits the target spot-on. Or sometimes — they just change their mind.

The issue is RISK. If a seller promises you satisfaction for a set fee, then they take the risk and you define satisfaction. If they simply promise effort (i.e., they bill by the hour)… then they’ll keep trying as long as you keep paying.

 

What is the way out?

You can be a dream client – and save tons of money – by spending extra effort up front defining requirements. (That is, reducing the vendor’s risk.)

It’s more work early on in the process. You have to make some decisions and close some doors. But getting 80% there – rather than 50% there – could cut the project cost in half.

The tactics here are purchase-specific, but these FIVE QUESTIONS from the buyer will lead to profitable discussions:

1. “How can we reduce your risk on this project?”

2. “How will we both know we’re done, and it’s been a success?”

3. “Where do costs start running high with other clients, and how can we avoid that?”

4. “What problem have you solved that is closest to ours? Can our solution be the same?”

5. “For you to offer a fixed price on this job, what qualifiers would we have to agree to?

 

Great vendors LOVE these questions.

They don’t always lead to fixed fees, and there are other elements of risk beyond requirements (as a trial lawyer friend reminded me today).

But front-loading requirements will clarify cost, reduce scope, shorten duration, and make for happier clients and vendors.

(In other words, more surplus all around.)

 

You’ll find more tips available on the Eleven Cures to Hourly Billing free guide here on our site. And, make sure that you check out our article titled “Expensive Sentences: Common Buying Mistakes That Can Hurt Your Bottom Line” to help you sit down and hammer out that 80% before you head into negotiations.

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