Winning a job on a schedule of rates is a tough job.
Regardless of the value you can bring to a project, the time it costs for one hour of my time becomes front and centre in the quest to beat a competitor and secure the project.
Even on a lump sum, if variation rates are provided, that’s where I’m often measured.
It’s an age-long dilemma.
Let’s Look Away from Services for A Minute and Consider Products.
When buying, we don’t buy anything of value by considering the cost of all the parts. we convince ourself that we need “it”, then we look at the price, the quality, and the difference between one product over another.
Ultimately, we make our decision.
Our decisions are often based on the price, but it’s not usually the bottom price. Because we know “You Get What You Pay For”. And the one you bought has something special about it. It might cost more, but it’s worth more.
Back to Consulting Services.
I paid a large sum of money to a shrink several years ago. The rate was $185/hour, just to listen to me rant and cry my way through depression. There was no quote. It was an undefined journey and the only way to pay.
After several such hours, I was “fixed”. It cost a lot of money but I was saved ?. My marriage was saved ?.
Imagine if I had shopped around for rates. A mate might say
“There’s a bloke who charges $90/hr. Not sure what he’s like though.”
Imagine I go and see that guy, he’s useless, and my marriage falls apart…
My point is when you buy professional services YOU ARE STILL BUYING A PRODUCT. The product will either be cheap, or good, perhaps, but probably not, both. It might be delivered quickly, or slowly. But the outcome – the product of the service – is what you’ve ended up with.
Let’s play with numbers (I’m an engineer, okay?!)
Engineer 1 – $135/hr
Designs a structure conservatively and quickly.
10 hours later, his design requires 10 tonnes of steel @ $5,000/t and 5 cubic metres of concrete @ $1,000/m3.
The structural component of the project, therefore, costs $56,350.
Engineer 2 – $200/hr
Designs a structure using the same brief and inputs. Realises some savings through “clever” design, risk management, extra care, whatever.
15 hours later, her design requires 8 tonnes of steel and 4 cubic metres of concrete.
The structural component of the project costs $47,000
WHAT? Engineer 2 charges 50% higher rates. Not only that, she took 50% longer! Who’s she kidding?
Becomes
WHAT? The “expensive” engineer just saved the project ten grand. Cool!
This is simplistic, I know. I have plenty of anecdotal evidence that engineering represents a small amount of the total cost but a huge amount of the total value.
It wouldn’t be worth paying higher rates if the outcome was guaranteed to be the same regardless of who was providing the service.
But we know there’s a huge difference between service providers and a huge difference between outcomes.
A bad decision, or a conservative assumption, will cost the stakeholders far more than a few bucks an hour!
I am truly grateful to my clients. They see the value in what we do and together we add value up the chain.
Are you getting true value from your service professionals? Is it time for a change?
“There’s always the opportunity to cut a corner, sacrifice lifestyle quality and suck it up as we race to grab a little more market share.
But the problem with the race to the bottom is that you might win.
You might make a few more bucks for now, but not for long and not with pride. Someone will always find a way to be cheaper or more brutal than you.
The race to the top makes more sense to me. The race to the top is focused on design and respect and dignity and guts and innovation and sustainability and yes, generosity when it might be easier to be selfish. It’s also risky, filled with difficult technical and emotional hurdles, and requires patience and effort and insight. The race to the top is the long-term path with the desirable outcome.”
Seth Godin
