You’re Not Selling Time

In many service-based businesses, in the trades, in the professions, or in any business where the labour of a human is involved in the delivery of the service, there is often the notion that the person delivering the service is being paid for their time. This is simply not the case, what they are being paid for is the delivery of the service, and time has little if anything to do with it.

There is a famous story involving either Picasso, or a man with a hammer, depending on who is telling the story. When a customer complained that a painting or a piece of percussive maintenance had only taken seconds to perform yet was being priced exorbitantly, the reply was that it had only taken a little time to provide the service, but a lifetime to learn how to do it.

I have noticed that my motor mechanic has recently started adding “one and a half hours at $125 per hour” at the bottom of each invoice, For me, this is a completely irrelevant piece of information. I have no idea whether it has taken him an hour and a half to do the job or whether it should have, or whether he is simply inefficient. Nor do I have any notion as to whether $125 per hour is a reasonable rate to pay or not, leaving aside how he went about calculating that rate.

I have had the tragic misfortune in my own life of being expected to record time as a basis for billing, and I can say with surety that the recording by staff of six-minute intervals in professional services firm is also an utter waste of, rather than recording of, time. What happens is that the amount of time spent on a clients matter is diligently recorded, some arbitrary rate applied to that time, and then some discount or write up factor is applied when actually doing the billing. This makes a farce of the whole recording process. Not only is the time recorded not used to bill the client, but the very fact of using time as a basis of billing means that there is no reward for efficiency gain on the part of those providing the service. In fact, were time truly employed as a basis for billing, the professional would be rewarded for being particularly poor at doing their job.

Then there is, for example, the issue of time-based fraud. If a particular staff member knows that a job is being priced more highly than the underlying time would justify, then guess where any time spent browsing Facebook is charged.

It was only partially a joke during my time in this environment that we charged the client 10% more than last year or whatever they would put up with, regardless of the time spent.

In most cases, your client or customer doesn’t really care how long it takes you to provide a service they simply want the service provided. If you can do the job more quickly then that is an advantage for yourself, and if you are lousy at it, then that is your problem. In our next article, I will explore what you are really getting paid for.

In September we will be running a workshop “Setting Prices For A Service Based Business”. You can register your interest by emailing enquiry@innovusadvice.com.au, or by calling 0242580099

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Posted on August 22, 2018 in Advice, Business

Response (1)

  1. » Only Value Is What You Can Charge For
    September 11, 2018 at 2:56 pm · Reply

    […] discussed how the notion that we charge for time is a fallacy (see here). We use this model because it provides us with a convenient way to justify what we charge. In […]

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