The problem with a service-based-business is that you can't always publish a fixed price.
The pricing always seems to depend on what needs to be done for the client. This results in a lot of wasted time and effort. Often, both the client and the vendor (that's us) get so bogged down in the process of quotes that the job gets postponed or falls through.
How do we avoid this back and forth? And is it really possible to make your service like a product? Let's find out in this episode.
If you've watched the sci-fi series, Star Trek, the most exciting part isn't likely to be the space adventure.
Instead, most of us would have loved the way crew members got into a teleport machine and were beamed instantly to another destination. ‘Beam me up, Mr. Scott,’ is what Captain Kirk would say to his Enterprise‘s second officer as they were teleported to yet another ship or planet.
Often enough, things would go wrong. The teleport machine would malfunction, and only parts of the person would appear on the other side. This was most certainly a glitch and the mission was almost instantly jeopardised, or at least stalled.
This feeling of getting stalled or at least slowed down is often what we feel when we run a business and have to publish a price for our services. We look around us and see others selling their products at a fixed price. There's no back and forth, no estimate, no weird waiting time while everything sorts itself out.
We too wish our clients could simply get to the site, pick a service and instantly pay for it. Yet it seems unclear how to we are to go about this process. After all a service is complicated.
If you're building a website, for example, you can't just put a fixed price, can you? If you're creating a presentation for someone, how are you supposed to know in advance how much time it will take, or how much you should charge.
The answer lies in a concept called “productising your service”. Let's find out how it's done.
Can you buy a car over the Internet?
You can, right? Because a car is a product. But what if weren't a product?
What if everything—like buying a car—were a service?
Let's say you build cars. A person walks into your garage. “Build me a car,” he says. “How much will it cost?” he asks. “Well, it depends”, you say to him. And then you tell him exactly what service-based consultants have said for decades, or centuries. You tell him it depends on what he needs, how he needs it built, blah, blah, blah.
One day, however, a car company got fed up of this back and forth and decided to turn the service into a product.
The car company has put all the bits and pieces together and said:
Option A gets you this.
Option B gets you that and this.
Option C gets you that and that and that.
And how do we know we can turn our service into a “product”?
The answer is Squarespace.com. What does Squarespace do? It's a website builder. At this point in time if you decided you want a website, you're likely to go to a graphic designer/developer—who by the way, happens to be a service provider. Ask a website developer to give you a “product” rate and she/he will say, “It depends”.
But Squarespace has made it a product.
The question is: How do you make it a product? It's not easy at first, but it starts with some sort of core parameters. If you're building a house of a specific size, you're going to need a certain amount of timber, bench tops, roof material and then there's the service component on top of it all. If the house is bigger, smaller or different, only then would you need to calculate the extra cost, just like a car adds on accessories or additional service.
Almost any product you buy today, was once a service
Someone, at some point, said “Wait, this is too hard. Clients can't make up their mind if we keep giving them the same answer we've given for five thousand years. Let's put all of the main stuff we do into a package.
“But what if they want something more?” says the one objecting to such a weird suggestion. “If they want something over and above this package, we are happy to provide it, at an additional cost. And yes, we can have a meeting for that”.
As a cartoonist, I didn't have this insight at all
Clients would want me to do a cartoon or a bunch of cartoons. And like most service providers, I had to estimate time, costs, etc. and get back to the client. There were times when the client wanted the cartoons but wasn't prepared to pay for the work. Hence, I had to work out a way to productise the service.
Back in university, the various groups like the various societies would print t-shirts.
I knew they would end up with something boring on the t-shirts. It would say something like “Debate Society, Sydenham College.” If I put a cartoon on the t-shirt, it would lift the t-shirt to a whole new level.
There was just one problem: no one wanted to buy cartoons from me because well, students don't have money for “cartoons”.
The way around it was to productise the service
I said to them. “You can get the same old t-shirt, with some text written on it, or you can get a t-shirt with a cartoon + text”. No one stopped to ask the price of the cartoon. They were focused on getting the cool t-shirt. They bought into the package of cartoon + text + t-shirt.
In short, what was a service became a product.
When you look around you, you'll find that a lot of what you think of as products were once very much services. The computer you own, that was a service at one point. The car you drive, theoretically could be put together by someone. The house that you live in, that's a service too, but someone building houses put all the elements into Option A, B and C.
All of these are services, and can all be made into a product by creating a package.
Example 1: Audio Editing
Step 1: Noise cancellation, noise gate and compression
Step 2: Removing blank spaces
Step 3: Adding music for 30 minute podcast
Step 4; Uploading the file to the server
Step 5: Ensuring distribution of files across to YouTube, iTunes, Amazon, Google Play and Spotify.
Example 2: A car
Step 1: Put together the engine
Step 2: Seats
Step 3: Wheels
Step 4: Roof
Step 5: Lights
Example 3: A house
Stage 1: Foundation
Stage 2: Roof
Stage 3: Interiors
And a price is put in place for all of these steps
Now, of course, you can say, “it works for them, but not for me.” If you were to go to a house builder, that is also what he/she would say. But if you go to a house building company, that's not what they will say.
It's the same house yet the person who works as a service provider will always show enormous resistance (and for no reason at all). If the house company can put a price together based on stages, then so can the standalone builder.
This will be true for almost any service
If you have steps, or stages, or elements, you can make it a product. A restaurant is not a product, it's a service. Yet, they've listed prices of their meals, and they include the service as part of that price. In short, a restaurant, car dealer, house builder etc. can all have their services as products.
However, all of this logical reasoning only applies when you're starting from zero.
If you've got to build a car, or a house, or even a website, the product has a fixed steps, and every step is known. How do you price a house renovation where the building is already standing and you have no idea what problems exist?
How do you know if the foundation is strong? How do you know the pipes aren't rusted? It's frustrating, isn't it? Let's find out how we can solve this consistently frustrating problem as well.
How do you charge when you have to do a bit of digging?
How many moons does Jupiter have?
The answer should be definite, but it's not.
There are 79 known moons of Jupiter, says science. But notice the term “known”. That's as if to suggest we might be wrong and there's something we're missing. That somehow the information may change along the way and we'd have to revise our knowledge of the moons.
It's somewhat of a similar situation when you're dealing with an existing vs new service
A new car has fixed options and it's relatively easier to figure out the details and have a set of prices in place. A car that has been running for 10,000 miles might have a completely different set of issues as one that has been running for 500. Hence, try as we may, we're dealing with two completely different situations.
In the first instance, the probabilities are limited and most of the information is known. In the second situation, there are a lot of variables waltzing in, and we can't always give a clear answer without some spade work.
It's definitely odd to pull out a random figure out of thin air. You could be largely underestimating or overestimating the time and costs, neither of which are helpful to you or to your client.
However, there's often one factor that's within your control—and it's called an assessment.
The bridge between the unknown and the known is usually the assessment. It's the in-between factor that gives you the chance to have your fixed price.
While you may not be able to quote a price for projects with unknown issues, you can put the assessment as a fixed price on the site. The moment you know what is next (based on the assessment) you have somewhat of a fixed price.
The problem is that we often do assessments free of charge
And in turn, the client expects the assessment to be part of the deal. Yet, this is where your communication skills come into play. You let the client know that without an assessment, most consultants are just guessing. However, the assessment is advantageous because it allows the client to choose you—or any one else as their supplier.
And to give you an example, we got the garden landscaped in 2013.
It was relatively difficult for the landscaper to give us a fixed quote. However, there was a fixed price for the assessment. He created a plan for the garden and that had a fee of $2000. The plan told you which plants went where, where the pergola showed up etc. It was the drawing that we paid for. If we were okay with the drawing, he'd go ahead and work out the costs to execute the project.
At this point, the biggest sticking point for the client is “how do I know the assessment is worth it?”
How would we, for instance, know that the landscaper would come up with a design that was suitable to our tastes? And this objection pops up because of good ol' risk. Risk is usually removed by expecting that the client will have objections, and you have answers to those objections.
However, the best method to reduce the risk is to have testimonials that talk about why the assessment was worth the trouble. Clients can talk about how the assessment saved them time, money or false expectations.
However, the problem of clients expecting you to do the assessment free of charge, still remains.
For instance, if you hear some rattling with your car, you go in to the repair shop, the mechanic looks at it and gives a free assessment. You expect it to be free. However, there are times when you will pay for a 21-point check of your car. It might seem that the first kind of assessment and the second are exactly the same—and they are. When you drive in with the burning problem, the mechanic may still do a 21-point check and not charge you for it.
What's the difference between the two?
In order to productise your offering, the initial pitch would need to be a health-check of sorts. You come in not as the person fixing the problem, but instead as the person who's analysing if improvements could be made in the first place. Instead of selling a reactive “call me when you have a problem”, you're positioning yourself as the person who “checks the system in advance, and gives your assessment”.
If all of the above sounds a bit too difficult, here's an example
When I first got to Auckland, I had no clients and no testimonials for my consulting. The only way to get any testimonials was to get the consulting in the first place. Hence, we went in with an assessment plan for companies. We didn't call it an assessment plan, and called it a workshop, instead.
We'd get the clients together in a room for an hour or a day. The client would pay for the workshop to be held. During the workshop, it would become clear that their communication had gaps and needed to be filled. The assessment paved the way for the consulting that would follow.
We would get paid for the workshop and the corresponding consulting. It became such a good system of being paid for the assessment, that we ran this system to get clients over and over again. We'd do a workshop, they'd pay for the workshop (because companies like their staff to learn) and it would give us our entry as the expert into the organisation.
Publishing fixed prices on your website might seem quite impossible when you first think about it.
However, let's look at what we've covered so far.
1- Many businesses that were services, now successfully sell the services as products e.g. your local restaurant.
2- A service that's new has known factors, hence it's relatively easier to charge a fixed price.
3- Just like buying a car, you can create modules. Module A gets you one thing, module B another and so on. A concept like building a website which was always considered a service, now works on modules.
4- When you're dealing with a completely unknown situation, it's difficult and may well be dangerous to take on a job without doing an assessment. Hence the assessment becomes the primary factor to tackle. Instead of trying to get the job, make the assessment the fixed price item.
5- Since a client can't always tell how good you're at assessing an issue, you'll need to reduce risk by bringing up and reducing objections. And as always, having precise testimonials becomes very crucial.
6- The assessment is now the fixed price item on your website. It allows you to go into the organisation, or have the organisation come to you. You are paid for the assessment and have a big advantage over your competition, because you're the expert.
Is all of the above a fair bit of legwork?
Yes it is. However, as a consultant, it's likely that you've spent hundreds of hours looking under the hood of a company and not getting paid for it. Like that mechanic that only deals with burning issues, you've not been compensated for your time.
However, if you change the way you position yourself, you're more likely to be the 21-check kind of person that not only gets paid for the assessment, but is also the preferred choice to carry out the rest of the work.
The transition may not happen right away. It may take you at least a few months, or possibly more.
However, the goal is to get started now. If you've already been in business for a while, it might be a good idea to call the people who you've worked with before. It's a good idea to ask them for testimonials on your assessment skills.
Those testimonials can then go on your website along with your fixed cost for the assessment. When getting the testimonials, make sure you tackle the main objections, namely, price, how good you are at assessments etc.
And that's approximately how you go about publishing fixed prices on your website and productising your service 🙂