Embracing Outcome-Based Pricing and Ditching Hourly Billing with Jonathan Stark
Impact Pricing · Mark Stiving, Ph.D.
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Show Notes
Jonathan Stark is a former software developer who is on a mission to rid the world of hourly billing. He is the author of Hourly Billing Is Nuts, the host of Ditching Hourly, and writes a daily newsletter on pricing for independent professionals.
In this episode, Jonathan highlights the drawbacks of billing hourly which can reduce your value to just a commodity. Instead, he suggests pricing your services based on the outcome you deliver, thereby providing maximum value to your clients.
What you will learn from this episode:
- Discover the top reasons behind the shift away from hourly billing
- Find out the advantages of choosing outcome-based pricing over hourly billing
- Uncover why positioning your service effectively can have a significant impact on your pricing strategy
"Positioning is critically important for any kind of upward lift on your fees."
- Jonathan Stark
Topics Covered:
01:04 - What got him into pricing
03:35 - The problem with having an hourly rate
06:11 - Pricing uncertainty in the case of a car diagnostic
08:45 - What makes it better charging fixed price upfront
10:33 - Why positioning your service is crucial in pricing
12:59 - What hourly rate appears to be on the label
16:15 - Touching on the 'Experience Economy' [pricing transformation]
19:06 - Formula for value or the maximum price
21:36 - The best reason to not use hourly prices
24:22 - Solving the scope problem with knowing the desired goal
29:21 - Jonathan's pricing advice
30:38 - How to connect with Jonathan
Key Takeaways:
"If you sell somebody an hour, you cannot make it more efficient. It takes an hour to deliver it. It artificially limits your income." - Jonathan Stark
"The way I do it [on the scope problem], I don't scope first, I scope last." - Jonathan Stark
People / Resources Mentioned:
- Alan Weiss: https://alanweiss.com/about-alan-weiss/
- Joseph Pines: https://strategichorizons.com/pine-and-gilmore/joe-pine/
- How to Measure Anything: Finding the Value of Intangibles in Business by Douglas Hubbard: https://www.amazon.com/How-Measure-Anything-Intangibles-Business/dp/1118539273
Connect with Jonathan Stark:
-
Website: https://jonathanstark.com/
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]