How Much Do You Charge?

Don't you hate it when someone asks, "What are your rates?" or "How much do you charge?" It especially bothers me when they ask it before I even know what they're trying to achieve or what their current status happens to be.

Recently a consultant asked me how to handle the above questions without being cagey or evasive. Since she never charges by the hour, but instead negotiates a project price once the parameters are well defined it was a particularly sticky issue for her.

Here were my suggestions ... and please feel free to add your ideas as well.

To be effective, you have to know how you'll deal with this situation before it occurs. Otherwise you'll stumble over your words and appear totally inept when it occurs — which is the last thing you want to happen.

Plus, you also need to transition back to questions as soon as you can. Why? By doing so, you:

• Get a better handle on business objectives.
• Can more clearly define the project parameters.
• Enhance your credibility with the decision maker.
• Begin establishing your relationship.

So the key is to not get stuck on the money issues. You see, many corporate decision makers find additional funding once they realize the value of what they're getting.

Here's how a dialogue on these tough questions might go. Don't let yourself get rattled. Always answer honestly with a calm, quiet confidence.
____

Client: "How much do you charge?"

You: "You and I work together to scope out the project needs in more detail so we know exactly what you want to achieve. Then I'll give you a proposal."

Client: "How much do you bill per hour?"

You: "I don’t charge by the hour. I charge by the project. It's a much better deal for you that way. You get a fixed price you can count on and put in your budget. Then, regardless of the amount of time it takes to get the work done, you'll know how much it cost.

Client: "Everyone else is quoting an hourly fee."

You: "Find out what the project costs from them. That's what's important."

Client: "We need to know how much it costs to see if you'll fit in the budget."

You: "If there's a finite amount in your budget, we'll figure out how to do the maximum amount with the money you have. For example:

• We may need to prioritize to determine what's most important to do first.
• Or, we can break the project down into phases so you can get started right away.
• If there's not enough for the whole project, we can do some this year and roll the rest into next year's budget.
• If you have some people internally who can do part of the work, we'll let them take it on to reduce the costs.

"There are so many ways we can tackle this. The most important thing though is to clearly understand what you're trying to achieve and figure out the best way to get there. You mentioned that one of the issues you were facing was ..."

(Now's the time to transition back to an issue that was briefly discussed early and focus on it in more depth. Typically this changes the dynamics and the price question evaporates until it's time for a proposal.)

But occasionally you're talking to a person who is insistent on an answer ...

Client: "We have to know how much you charge by the hour. That's how our organization works. We have to know that amount."

You: "I don't bill that way. Perhaps it's not a good fit and we shouldn't be working together."

(Yes, you need to sometimes be willing to walk away from projects.)

---

So how do you handle these always tough questions related to "How much do you charge?"

Please share your insights with us!

Comments

[Nathan Rutman]

Why not, when asked how much you charge, start the business relationship then and there by saying something like, "Well, what do you want to accomplish?" They don't have to go too deep before you can bring up different details and say, "We'd have to talk about ________, ________, and ________ before we talk about pricing. I don't charge the same for every project because every project isn't the same." At this point, they should be grasping that price depends on what they want, and you are already forming a relationship built on listening to the client's needs.

Just a suggestion...

[Tema Frank]

I'd love to hear from the corporate folks on this issue. Seems to me that this would still sound cagey to them. Their big fear is that you'll adjust your pricing to fit their budget.

I normally deal with it by giving a VERY wide range, explaining what sort of things can be accomplished at the lower end and what sort of things can be accomplished at the upper end. Then they seem to get the concept that it depends on a mix of their budget and their goals.

[Bill James-Wallace]

I had this just yesterday and I stacked it! (meaning I fell right in and offered a daily rate.) The response wasn't good and I am not expecting a call back. (What is more annoying is I saw myself doing it as I did it. Sheesh!)

However, I don't like cagey, evasive answers so I decided to be direct.

I think it's good to be direct but as Jill suggests get a good (underlined) handle on the project first. If the client/prospect keeps changing gears or adding extra things, walk away. It really isn't worth the trouble.

[John Klymshyn]

And we wonder why people get frustrated talking with a consultant!!! Folks- please stop beating around the bush! When someone asks the "How Much??" question, ANSWER them. If you don't know how you get paid, how can anyone apply a value to what you do?
Here'e my approach: "How much do you charge?" my answer: "My daily rate is x$. How does that comapre with what you expected?"
When you ask how much ANYTHING is, the next thing you want to hear is a number. Stop trying to play bait and switch. If you are not comfortable quoting a fee or a rate, how can anyone be comfortable approving your invoice?
By following your quote of a dollar amount immediately with a question like the one above, you take the issue off the table.
If they say: "We would never pay that!" Then this prospect is not one that you can say is a good, qualified prospect.
BY asking them the "How does that comapre?" question, you are putting the pressure back on them. If it's out of their range or budget, it's better for you to know that immediately!
John Klymshyn

[Patrick Kilhoffer]

Personally I think you are better off answering their question. I used to throw in a comment like, "People in New York think I charge too little so I must not be any good and people in Mississippi think I charge too much and I'm ripping them off. So whether you think that's high or low probably depends on what you are used to hearing." And they would almost always say what they thought of the price and we would go on from there.

Lately I just let the people that think the price is too high move on to someone else. In my industry, sometimes you are better off working with someone AFTER they have tried a lower cost provider and seen how little they end up getting for their money. That way they end up doing a lot of business with you because they have already tried the cheaper guy.

[Deborah Savadra]

I'm always really tempted (esp. if they're in a service business) to respond with, "Well, what do you charge for a computer network [or whatever it is THEY sell]?" (I have actually had a good-natured discussion with one client about whether they preferred to drive a Yugo or a Mercedes, project-wise.)

What I actually DO respond with is "I generally sit down (or have a conference call) with new clients like you for about 45 minutes to an hour defining the scope of the project and then base my flat-fee not-to-exceed bid on the number of hours I estimate the project will take times my billing rate of $XX/hour." I feel this both respects the prospect's question and is honest about the fact that project costs can and do vary widely by scope.

I think the hidden question behind the question (at least in my market as a copywriter) is, "Am I going to waste time talking to this person only to have to back out because she charges more than I can afford?" Particularly when people are buying a service they've never bought before, they want to make sure their expectations are in line with reality before spending too much time in negotiation. Otherwise, they risk being embarrassed. I don't think there's anything wrong with them comparing their expectations to your reality.

[Tim Young]

In this example, the prospective customer is driving the agenda. Questions need to be respected and answered, but the sales rep or consultant has to refocus the agenda of this conversation on the problem to be solved, the value to be gained by doing so and the importance of working with someone with a high probability of solving the problem.

Example:
Client: "How much do you charge?"

Me: "You indicated that you're losing market share due to ____. Let's sit down and scope out what you need from me to solve this problem, and I'll give you a project quote."

Client: "How much do you bill per hour?"

Me: "We don't bill per hour any more than a surgeon quotes someone an hourly fee who has cancer. The problem has to be diagnosed and the best course of action chosen in order to determine the full scope of the project.

Client: "Everyone else is quoting an hourly fee."

Me: "That's not surprising."

Client: "We need to know how much it costs to see if you'll fit in the budget."

Me: "I can definitely tell you how much it will cost just as soon as you and I sit down and scope out the project. I have to be clear on your expectations. Can we do that now?"

Client: "We have to know how much you charge by the hour. That's how our organization works. We have to know that amount."

Me: "Does your company do budgets that way? By the hour? Do you have hours to spend, or do you have dollars to spend? If another firm gives you an hourly estimate, surely you have to multipy that by the number of hours they estimate to determine a total project cost, don't you? I'll save you those steps. I'll just provide you with a total project cost to achieve what we commit to in the project scope".

Naturally these conversations can go on forever. But you have to take the high road and stick to your value propostion. If you market your brand as a surgeon (in this case) then stick to your guns and know when to walk away.

Tim Young
www.tycoleads.com

[Troy Bingham]

When I speak with someone that dances around the issue, I feel that they are going to try and charge me what they feel they can get out of me. I understand that cost typically depends on the specifics of the situation but give a budgetary ballpark. If it is outside the budget, we can address specific modifications to the scope that will get the bid below budget. Don't hide your costs.