Stop Trading Hours for Dollars If You Want Your Services-Based Business to Be Successful Defining your services as products, while it may be a shift in your business model, will increase consistency, stability and profitability.
By Trevor Hubbard Edited by Amanda Breen
Opinions expressed by Entrepreneur contributors are their own.
Let's play a game of would you rather: get paid for the 30 seconds it takes you to do your job, or the 30 years of experience it took you to be able to do that job in 30 seconds? Services-based businesses must master balancing these factors — the knowledge needed to complete a task with speed, value and high impact measured against the time it takes to complete. They fall into a trap of trading their services for dollars on the hour, leaving clients to define how much their time is worth and pay when they feel the work is done — an endless cycle of devaluation and damaged trust.
On the contrary, when it comes to products, people know exactly what they're buying upfront without any room for confusion. Why should services be any different? I learned from experience in growing a small services-based agency into a global brand-growth and -transformation company that we needed to solidify the value in our services. Don't just prove your worth — make it undeniable. To do that, you have to redefine your services as products.
Shift from dollars for hours to a price tag
To define the value in your service, break down the benefits it provides to the client: the problem it solves, the impact of the return on investment (ROI), the process and the ability to show repetition and experience. Once you've identified each essential element of your service, repackage them together as fully defined products with appropriate price tags to match. When you enter a transaction with clients, you can offer a thorough explanation of exactly what they're getting and exactly how much they're going to pay. This way, there's no negotiation or room for faulty trust. Products you purchase are largely paid for in full upfront; this is no different. Getting paid before any work begins will free up time spent stressing about outstanding invoices and can resolve major threats to your cash flow.
Related: Harnessing the Power of Inflection Points
Leave no room for lost income due to assumptions
Trading dollars for hours leaves many opportunities for lost income. Say a window washer is hired to clean a client's windows. He or she shows up, brings supplies and does the job. But when the client returns, he or she says, "You missed a spot, I don't want to pay full price" or "Can you do the skylight, too? It shouldn't take you long at all." Without definitions, the client's assumptions define the process, putting service providers in a challenging position. If service providers charge for everything, clients might start poking holes in their pricing, or worse, become so unreasonably unhappy they decide not to pay for any work at all.
With products, there are no assumptions. People can't walk out of the Apple store with a new iPhone, load it up with apps and music and only pay for it three weeks later if they decide they want it. That's not how buying a product works. You know the brand, its features and its quality, and you commit to a purchase right then and there. With services defined as products, a client cannot make assumptions or stray from the original deal. It can only be added to or amended, which is a win-win, leaving ample opportunity to add products as you go if the value is clear.
Related: Key Strategies for Marketing New Versus Existing Products
Refine your practices
Defining your processes helps refine your practices. When you break your services down into products, you learn to allocate resources and budget more efficiently. Being able to define your service precisely demonstrates a track record of success and builds a reputation of premium quality and expertise, weeding out unprofitable work or value-seeking clients. As products, your services should solve your clients' failure points, so ask them how their company or brand could fail. Demonstrating how your products solve those failure points gives the client a better idea of what you offer. The million-dollar equation is aligning your products to the failures they prevent and opportunities they create.
Account for all unseen value
A clear picture of exactly what your agency provides lets you uncover value in areas previously unseen or left off the table. Selling services by the hour builds reputations, not around quality, but how "flexible" you are in offering quality for less money. Companies shove in extra features to their services to stay competitive without calculating the real added cost and end up unable to resource, budget or get out of bad relationships. When you break down and examine what you sell from all angles, you can end up identifying and addressing inefficiencies that save companies tens of thousands of dollars.
Make sure you charge for all parts of the process that clients value. For example, with a service listed simply as "strategy," clients can more easily refute its price. Instead, we break "strategy" into a dozen components, including audience segmentation, brand-awareness measuring, brand platform and brand strategy — all with defined features that prevent a given failure point. Clients are less likely to try and cut costs by removing any of those features if it means a more expensive failure point could happen without them in place.
Create deeper client relationships
Identifying your services as products creates more robust, rigorous and deep client relationships through trust and clarity. There is a lack of clarity behind every unreasonable client, unmet expectation and delay. A business based on hours and assumptions surrounding service is a recipe for confusion and drama, but defined products set the stage for a long-lasting partnership.
The task of breaking down services into products may seem ambitious, but it can help your company become more healthy, stable and profitable. To grow your services-based business, take the time to redefine what products your business can and should offer and what failure points they prevent for your clients.
