Charge More: “Minimum Billing Units”

By Kai • Get daily marketing tips for consultants here


How do you bill your clients?

  • Hourly? $X/hr for each hour you’ve worked?
  • Daily? $X/day.
  • Weekly? $X/week.
  • Per-project?

One question that freelancers often ask is “How can I attract better clients with bigger projects.”

What I’ve discovered is that by increasing your minimum billing unit (the smallest unit you bill in), you’re able to better pre-qualify prospects and projects and work on better, higher paying projects.

What does this look like in practice?

Go from billing hourly to billing in half-days or full-days or weeks.

Let’s talk about making the jump from billing hourly to billing half-days.

If you’re billing hourly, you can start quoting a half-day rate to your prospects. Just take your hourly rate and multiply it by 4!

That’s now your minimum project size and minimum billing unit.

When someone asks what your rate is for a project, you can say that the minimum project size you accept is a half-day project and you bill in half-day increments.

This small adjustment to the minimum project size that you’ll accept has a range of positive effects:

First, you’re pricing yourself for the larger projects that you want.

By positioning yourself as accepting half-day (or day, week, etc.) projects, you’re positioning yourself for larger projects.

If someone needs, say, a logo uploaded on their site, great! You can help with that. You have a new rate for this work and the client gets to decide if they want to work together.

Which brings us to the second point….

Second, you’re leaving the value decision in the hands of a client.

Let’s say that someone approaches you with a small task. In all honesty, it will take you 30 minutes to do.

If you’re billing hourly, you’d quote this as an hour project, do it, bill it, and be done with it.

But if you’ve followed Kai’s advice, you’ve raised your minimum project size (your minimum billing unit) to, say, a half-day or day.

Now when this prospect comes, if you’re interested in the project, you can say that you’d love to work on the project.

Your minimum project size is a half-day and this will be a half-day project. A half-day is $X.

Now the client is able to make a value based decision.

The client has two factors known to them:

  • The price, which you’ve quoted
  • The value (quantifiable and qualitative) to them in having this project completed

If Value exceeds Price, then it makes sense for them to work with you.

“But,” you might be thinking, “Isn’t this just a 30-minute project?”

Yes!

And your minimum project size is a half-day.

So if the client thinks “Excellent, we need this taken care of, we can afford this price, and the value in getting this completed is very high.” then they have determined that value > price and should move ahead with the project.

Where it can feel confusing for us, as freelancers and consultants, is balancing the fact that this is a 30-minute project with charging a half-day rate.

And that, dear friend, is because you have confused the cost, price, and value.

The cost of a project is the cost, to us, in doing the work.

The price of the project is what we quote the client to do the work (price > cost).

The value of a project is the value to the client in having the project completed (value > price > cost).

As a freelancer, it is very easy for us to understand the costs and prices associated with the project. 30-minutes of work. A half-day of our time.

But what we lack is an understanding of the value of the project to the client.

This small 30-minute project? While it may look small and tiny to us, perhaps it’s something the client has struggled to do themselves.

Maybe they have a high amount of quantifiable or qualitative value attached to this project being completed.

Perhaps they’ve spent hundreds or thousands of dollars already working with other providers and they’re struggling to get it finished.

Who knows?

The client knows.

Which is way the decision on working together is in the client’s hands. They’re the party best equipped to compare value and price and make the decision:

“Is there enough value in this project for us to invest in it?”

When you raise your minimum billing unit and project size, you’re optimizing for larger projects. You’re charging more by optimizing your pricing and billing for larger projects.

If someone comes with a small project and you say “Great, it’ll be a half-day, that’s $X.” Now they can decide if the value exceeds the price. If it does, great! You just sold a half-day project.

If the client decides that the value is less than the price, then they will pass. Great! You just avoided a smaller project!

And that’s what you want.

You want to be optimizing for better, larger projects.

And one of the easiest ways to do that is to increase your minimum billing unit / minimum project size.

So, what should you do now?

If you want to work on larger projects, better projects, or higher paying projects, raise your minimum billing unit.

If you’ve been charging hourly, start charging by the day or half-day. When a prospect comes to work with you, say “Great! My minimum project size is a half-day and I bill in half-day increments.”

If you bill in half-days already, try moving your minimum billing unit to a full day.

If you bill daily, try switching your minimum billing unit to a week.

What will be the effect be?

When a prospect comes to you with a project, you can — early in the conversation — let them know that you don’t bill hourly, your minimum project size is half-days/days/weeks. That’s the smallest amount you bill by.

If the project doesn’t have enough value for the prospect, then the prospect will be able to recognize — early on — that this isn’t the right fit, and go with another freelancer.

And if the prospect sees the value in the project, they’ll be saying ‘Sure, we need this done, let’s get started!’

Raising your minimum billing unit makes it easier for you to attract larger, better paying projects.

So, go and do it today. If you bill hourly, quote a half-day rate on your next project.



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