Breaking the Time Barrier

🚀 The Book in 3 Sentences

1. This book explain how value based business work compared to regular hourly business
2. Problem with business / Service who charge by hourly rate
3. Advantages of moving to value based business / service

🥰 Who Should Read It?

• Freelancer, small business owner

☘️ How the Book Changed Me

• I will set up my business based on value I provide

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A Whole New Way of Thinking

“The value of what I do,” Karen said, “is based on the impact I can have on my client’s business. Impact is how they value my services. So I look at pricing from their point of view. They don’t hire me to design a website for the sake of designing a website. They hire me to design a website that’s going to help them grow their business. I find when I look at it like that— from their perspective—it’s clear I’m not selling time. Instead, I’m selling a solution that is going to make an impact for my client and achieve some business objective.”

“The value of what I do is based on the impact I can have on my client’s business.” - Mike McDerment, Breaking the Time Barrier

“I’m the accumulation of all my skills and talents. I’m wisdom and creativity. I’ve stopped seeing myself as a punch card. My clients don’t see me that way either. Yes, sometimes, I’ve had to change my client’s mind-set. But it starts with me, first, just as it starts with you. You have to forget selling time. The best thing you could do for yourself is to get the concept of time out of your head.”

“I’m the accumulation of all my skills and talents. I’m wisdom and creativity.” - Mike McDerment, Breaking the Time Barrier

“To be honest, when I started out I charged an hourly rate and I think hourly rates make sense for someone just starting out, someone with little experience and limited skill. But over time I established myself and my credibility, which led to great references. When that happens, you begin to outgrow the cost-plus pricing model of charging by the hour. So if you stay with that pricing model, you’ll find it very limiting.

“since there are only so many hours in a year, it puts a cap on how much revenue you can collect in a year, and it means that the only way to make more money is to work more hours. These are limits…and the truth is, they are false limitations that lead to bad behaviors, like burning yourself out by working around the clock in an effort to earn more.”

“Selling hours actually creates a conflict of interest. It puts you and the client on opposite sides of the table. If you’re selling hours, it’s in your best interest to take longer, to bill more hours. But your client is interested in getting solutions that work as promptly as possible. What if you work quicker for one client than another, but deliver the same value? Should you penalize the client you worked longer for? If you’re slow, it’s not their fault.”

“Right. Our clients don’t care about our costs. They care about the value we create for them, so that’s what we should be asking them to pay for. But just because my clients don’t care about my costs, doesn’t mean I don’t. I do care, very much. Which is why I see it as my job to look for ways to create value for my clients so that I can charge fees that more than cover my costs, making my business profitable.

“Our clients don’t care about our costs. They care about the value we create for them, so that’s what we should be asking them to pay for.” - Mike McDerment, Breaking the Time Barrier

“So what do you do if your client wants to talk about price right away?”

“I tell them I need to understand what they want first before I can set a price. Most people are fine with that. If they’re desperate to know a ballpark, I might give them a range, but I really resist that. I find that prospects who focus on price right away often turn out to be the kind of client you don’t want anyway. The best thing I can do for the client is to help them explore what they want. And it turns out, this initial conversation about their problem is the foundation of my approach to pricing.”

The seven mutual benefits of exploring value with your clients

Creates trust

“When I start off by asking my clients probing questions, they see that I’m interested in understanding their unique problems and crafting solutions based on what I learn. That inspires trust because they know I’m not trying to push cookiecutter stuff that I force on everyone. I also ask a lot of insightful questions that demonstrate my expertise, which reassures the client that they’ve got someone in the room who can help them. That relieves a lot of anxiety for them. I had that experience myself a few months ago. My knee had been bothering me so I went to a doctor. During the examination he asked me if it hurt a lot when I flexed my foot a certain way. As soon as he asked that question I knew I had the right doctor, because when my foot was in that position it hurt like hell. I want my clients to have that same ‘aha’ experience that I’m the expert who knows exactly how to solve their problem and that I have experience with what is ailing them. That feeling deepens the trust I’ve started to create, which is something of great value to both my clients and me.”

Fosters alignment

"I’ll ask questions about their goals. Goals themselves create problems because if the goals aren’t met, the client will experience a loss. So the client’s problem is either something they are experiencing currently or something they will experience if they don’t get to Point B. The value I create for the client lies in closing the gap between A and B and solving the problem.

“You gain an immense amount of clarity by establishing the A and B points, but many service providers don’t do it. That’s why I said my solution would likely be different from the one you would design. Without crystal clear alignment, you risk designing something that doesn’t have as much value for the client as it could.”

Helps your client better evaluate vendors

“The clarity I help my client gain about why they are starting a project makes it easier for them to evaluate vendors. That’s because the deciding factor becomes who can deliver value rather than price. And because I’m the one who’s helped the client gain that clarity, I have a leg up on the competition. The client isn’t likely to compare investing in me with your lower price of $2,500. Yes, your price is lower, but as far as the client is concerned, it’s apples to oranges to them, because you haven’t shown, as I have, that you can deliver a big impact. Lots of inexpensive providers are surprised to lose business to a premium professional like me. This is why and how it happens.”

“When you present prices up front,” Karen said, “you make price your distinguishing factor, not your ability to deliver results. You’re encouraging your client to compare your hourly rate to someone else’s. And as you know, having the most competitive rate doesn’t always work in your favor. That’s because low prices can create the perception of low value. The first thing you think when someone offers to sell you a perfectly decent-looking car for a thousand dollars is that something must be wrong under the hood.

“So, if you want to be judged on your abilities, not your hourly rate, you have to go through this process. It’s better for you and your client."

“But having said all that, let’s be clear about one thing: this valuebased pricing and positioning stuff isn’t just a bunch of consultancy voodoo. Because I dig in and come to understand the problems my clients have, I design solutions that are more strategic. I wind up taking a different and more impactful approach to what on the surface can sometimes seem like the same project. So my clients may pay more for my services, but they get more too. You know the saying, ‘You get what you pay for?’ Well, this is why.”

Frames the solution as an investment, not an expense

“You may have noticed I use the word investment when referring to price. This is one massive point of difference between my approach and yours. When you walk in and throw out a price, you’re an expense. Nobody likes expenses, so they try to keep them as low as possible. That’s why you experience downward pressure on your prices. But keeping the price low isn’t a benefit to the client if they end up paying for something that doesn’t create the value it could for them."

“By comparison, when I take my clients through the process I just outlined for you, I’m framing the price differently. Because it’s tied to value, my price is an investment. When clients look at your prices through that lens, they merely want to know that the investment is a wise one. That the return is going to justify the outlay. And if there’s a wide margin between my price and the expected return, as there always is, the investment is easy to justify.”

Inspires action

“When I help my clients paint the picture of what Point B looks like, when I get them to envision the awesome results they can expect from my project, they become emotionally involved. They’re eager to make those results come true. They’re inspired to act now. They don’t really want to put things off to price shop. Acting soon is good for you, but also for the client, because the quicker they act, the quicker they get the great results they seek.”

Lets your client make an informed business decision

“Which brings us to my point about offering clients more than just one option. When I present my proposal it comes like a menu—with options that have distinct prices. The choices address their business needs and goals, and offer solutions at various depths. I won’t haggle on price. If a client wants to pay less, they have to choose to have less delivered. That puts them in the driver’s seat where they can make an informed decision, one where they are clear about the trade-offs.

“By contrast, you ask your clients to choose your price or not choose your price. That kind of yes-orno choice is more likely to result in not going ahead than a choice between various valuable options. And just as in my previous point, a ‘no’ hurts both you and the client, who now won’t benefit from the results you could deliver.”

Establishes a trusted partnership

“The last point is the culmination of all the other benefits. Once you’ve created the first six benefits and you begin working with the client, they get to experience the impact of your work. As soon as their investment in you translates into real value for them, you become a trusted partner, someone they will continue to work with. They will also become champions for you, leading you to other opportunities.”

Looking Invard

“When you have an exploratory conversation with your client, you’re getting to know them at a deeper level. But you’re part of the relationship too. And getting to know yourself in a deeper way is just as important. You want to consider all the ways you can contribute to the relationship. Sometimes that means tapping in to abilities you aren’t using, or developing new skills. In healthy relationships both parties are growing.”

“When you look inward, like Tara did, and push yourself to come up with ways to serve your clients, you end up redefining what you do and expanding your services. The funny thing is, the other dog walkers in my neighborhood who keep losing business to Tara incorrectly think of her as the most expensive dog walker. A lot of them try to win back their clients by offering discounted prices. But they’re playing the wrong game. Tara’s services aren’t commodities.

“But,” Steve said, “somebody could come along and match your service, right? You’re always going to have competition. In Tara’s case, couldn’t another dog walker do what she did? Wouldn’t that put competitive pressure on her prices?”

“Someone else could try to do what Tara does,” Karen said, “but in all likelihood, they wouldn’t do it quite the same way. In the service world, we all have our differences, however subtle. What’s important is that you know how you are different from your competition, and that you can help the specific types of clients you are targeting make an informed decision based on the distinctions between the choices they have.

"If things get very competitive in your industry, instead of trying to compete on price, which just reduces you to a commodity, look for new ways to distinguish yourself and your services. Sometimes that means learning a new skill."

“In fact, while Tara already knew a lot about dogs, she did a ton of research, took various courses and acquired a number of certificates. This has allowed her to help her clients in more ways—and stay one step ahead of the competition.”

The Test

Steve started to make changes right away, but found some aspects of the new strategy easier than others. The most rewarding part was taking the time to really understand what his clients wanted. In those exploratory conversations he was acting more like a consultant than just a designer. Not only did he listen more deeply than he ever had before, he was also often heavily involved in shaping the vision and objectives for the client. He could tell that many of his prospects were seeing him quite differently from the way they used to—more like a peer than someone just pitching his services.

Some prospects, though, still insisted on knowing his rates up front and didn’t want to get into a dialogue first. He knew grinders like this would just drag his business down, so he began to weed them out. That meant giving up the chance to earn a little money, which caused some short-term pain, but it also freed him up to search for better clients—clients like the health start-up. If he could get another opportunity like that and price his services appropriately, he and his business could make a big leap.

Another thing Steve struggled with was abolishing his hourly rate completely. Some of his clients were more comfortable using him on an as-needed basis for ongoing service and didn’t want to commit to recurring fees when they might not use him. So Steve frequently used a combination of value-based fixed fees for projects and hourly fees for maintenance. He felt that this made more sense for the types of clients he had, who tended to be smaller and less established than the clients Karen dealt with.

Moving up

Perhaps the most significant benefit Steve experienced was that he was gradually moving upmarket, dealing with bigger clients who had more exciting projects. He attributed this upward move to a few key factors.

1. the value-based approach weeded out lowquality prospects, forcing him to find better prospects.
2. the better clients turned out to be referral engines to other similar prospects. This created a virtuous cycle, instead of the vicious cycle he was trapped in before when low-quality clients led him to more low-quality clients.
3. his better clients had more exciting projects, which were fantastic opportunities to learn, improve his skills and gain experience—all of which made him more valuable in the marketplace. He ended up developing a lot of expertise in copywriting for the web. Remembering the story of Tara, he made this a point of difference to set himself apart from other designers, including Karen.