Episode 40: Why and How to Get Out of the Trap of Billing Hourly—with Jonathan Stark
Deb Zahn: I want to welcome you to episode 40 of the Craft of Consulting podcast. I have a really interesting guest today, Jonathan Stark. He is from Ditching Hourly, which is his business and the podcast he started after many years of consulting, where he talks to folks about alternatives to hourly billing. A lot of consultants bill by the hour, and he talks about the trap of doing that and why, if you did it a different way, you'd be able to bring more value to yourself and to your client. So, he breaks it all down for us and shows us a different way to do it. And it's really interesting stuff. So let's get started.
I want to welcome my guest today, Jonathan Stark. Jonathan, welcome to the show.
Jonathan Stark: Hi, thanks for having me.
Deb Zahn: So let's start off. Tell my listeners what type of consulting you do.
Jonathan Stark: Well now, I do business coaching for independent professionals, but that's relatively new. Most of the things I teach, I learned in a 15-year career as a software strategist and developer. Most recently, I did mobile consulting, mobile strategy from about 2008 to 2016. And I had a bunch of really successful books on that subject, so I would go around the world and consult with clients who were trying to leverage mobile to improve their businesses.
Deb Zahn: Oh, that's wonderful. And then talk a little bit about the business you have today, the coaching business you do.
Jonathan Stark: When I first went solo as a consultant, even before mobile, back in about 2005 and 2006, I left the firm I was at. I was managing a firm in Atlanta and suddenly, I had an epiphany about the craziness of hourly billing. I wanted to ditch hourly and switch to a different model. I suggested that to the owner and he was like, "I get what you're saying in theory, but I don't understand how we would actually apply that and make that shift." And to be honest, I wasn't sure how we would've done it either. But I couldn't unsee that truth. And I said, "All right, well, I'm going to figure it out. I'm going to go solo and start my own shop. I am my own shingle. I started an independent software development consulting firm. I immediately started with value pricing and it was a massive overnight shift from an income perspective but also a lifestyle. My day completely changed. It was dramatically better.
Deb Zahn: Wow. That's fantastic. Well, that's one reason I wanted to have you on the show. When people think of consultants, they think of hourly, and there are also retainers and flat fees. But value-based pricing is something I think that more consultants, including myself, need to start to transition to. So, let's start off with, what doesn't work with hourly billing? What's so bad about it?
Jonathan Stark: Off the top of the bat, it limits your income. It puts a ceiling on your income. There are only so many hours in the week; in a year; and, at a certain point, you can't raise your rates that much more than other people who do whatever it is that you do. If you're going to do that, you need to have a really compelling value proposition, and if you don't have a really compelling value proposition, then why bill yourself up by the hour anyway?
Deb Zahn: Right.
Jonathan Stark: So that's probably the most selfish reason. You can make more money if you stop doing it, or you can make the same amount of money working a lot less. So that's huge. But I think a little bit more charitable way to look at it is that when you're doing value pricing, you’re taking your customer satisfaction into account before you even take on a project. And you're figuring out what they're trying to achieve from all these tasks what they want you to do or what they think they want you to do.
You're putting their satisfaction first and foremost in the discussion. So you're not talking about scope and you're not talking about spec. You're not talking about any of that stuff upfront. It'll come up, but that's not the focus. You talk about what they're trying to achieve. How is their business going to be better when you're done than when it started? So, to me, that's critical...If you want to deliver customer satisfaction, it's kind of nice to know what's going to satisfy them before you even decide to take the work, right? It's kind of obvious when you say it.
Deb Zahn: Yeah.
Jonathan Stark: But with an hourly model, someone can say, "Hey, we need someone that does this. Do you do this?" "Yeah, I do this." "OK, great. What's your hourly rate?" "$150 bucks an hour." "We talked to some other people and their rates are a little bit lower than that and they do the same thing. Why should we pay you more?" "Well, I can decrease it a little bit. What do they charge?" You go back and forth and you land on an hourly rate. And they say, "Great. Can you get started on Monday?" "Sure." At no point in this conversation have you decided what they're trying to get out of all of this work they want. What if they told you to do the wrong thing—something that's not going to achieve any kind of business outcome that they actually want? They might have misdiagnosed their issue and they were hiring the wrong doctor to fix it.
So if you run into a doctor and you say, "Hey doc, quick, give me a triple bypass." The doctor's not going to say, "All right, jump up on the table." The doctor is going to diagnose the situation and decide if that's really, in their opinion, what you need or going to help you with anything. And, in fact, you might just need an antacid. You might not need triple bypass. So, I think selfishly, you can say, "Well, if I get rid of hourly billing, I can finally break through that $150,000 - $200,000 ceiling that most people find themselves in." Or you can say, "Well, I want to deliver more customer satisfaction, and a great way to do that would be to talk about the desirable business outcomes that my clients want to achieve. And then, if I'm confident that I can help them in that journey, I'll take on the project." So, there's sort of two sides to it.
Deb Zahn: And what are the value-based alternatives to hourly pricing? What do those look like?
Jonathan Stark: There are a bunch of ways you can price. Hourly billing, I would say, isn't a pricing model. It is technically, but you aren't giving the buyer a price before you start. So at the point when they need to make a purchase decision, they have not been given a price. They've been given an estimate usually.
So, it's really unfair to them. And if you've ever been in a position, maybe you're having work done on your house or something and they say, "Well, it'd probably be $10,000." "Well, is it going to be $10,000 or not? If it's going to be $15,000, I'm not going to have you do it." And you're really putting them in an uncomfortable situation. At the end, when the project's over and everyone has declared victory or at least given up, then there is a price. That's the amount of money that changed hands over the course of the project, but that's too late. That's too late because, at that point, if the price is more than what they would have paid had they known it upfront, they're going to be disappointed and angry. I've seen lawsuits and people fired over situations like this. It happens all the time.
Deb Zahn: That's right. And if you do it as not to exceed amounts and you put a cap on as a consultant, now you're in a trap like a contractor who didn't know there was asbestos.
Jonathan Stark: That's the worst possible approach. Hourly not to exceed is the worst possible thing you could do for your business. There's nothing worse. It's the worst. You're taking all the risk and getting no reward. Do not do that.
Deb Zahn: Are there certain types of projects or clients where you would have any pause in doing value-based pricing or special considerations when you're putting it together?
Jonathan Stark: I want to say yes and no to that. In theory, you can value price anything because if someone is considering trading their money for something, there's always some value that they perceive in the thing, whether it's intangible or tough to measure. If you trade $5 for a Starbucks coffee, there's a transaction happening and you're making a value judgment as to whether it's worth the $5, and it's incorporating all sorts of things beyond the coffee itself. It's the ambiance, the other people standing in line, the experience, everything. So technically, everything can be value priced.
But in our world, for services, the kind of conversation you need to have to help the client uncover what, to them, is their fundamental motivation, their desired outcome, it's tedious. It can be a little bit of a process. It's collaborative. It requires creative energy on their part. You need to be talking to the right people. It can be difficult to get the right people in the room.
So for a variety of reasons, I think value pricing is the best fit for (this is a generic answer) big projects, something that's going to be 3, 6, 9, 12 months, something that's going to be ongoing. And it’s a project. It's got a beginning, a middle, and an end. It'll be collaborative. The client is involved, these sorts of things. So, I would say value pricing is the best fit for non-trivial collaborative projects that are designed to achieve a particular outcome.
Deb Zahn: When you're developing what that value-based price is, obviously, you go through the process of making sure it's valuable to the client. How do you make sure that you're not underpricing yourself or not getting into a situation where you might be working beyond what you would have if you were hourly?
Jonathan Stark: The quick answer to that is to just make your prices really high, and then you won't really care because what you're getting at is scope creep.
The reason people are so worried about scope creep is that they have no margins. You wouldn't care about scope creep if you added a zero to your price. And then the next question is, "Well, how would I get clients to green-light a project that had a zero added to the price? That's a different question.
If you're worried about scope creep, it means your profit margins are too small. This is collaborative creative work that we all do. It's knowledge work, it's emotional work. There are a lot of unknowns. There's a lot of creativity involved. There are going to be changed to the scope and you and your clients are going to want to change direction. If your goal is to get from point A to point B and you find out halfway there that you're going in the wrong direction, or the direction you're going is not the best way to get to point B, you want to change. You want to change the tactics; you want to change the scope. And if that means taking a step backward so you can take two steps forward, you want to do that because it's going to get the client to that satisfaction quicker.
The big answer is if you're worried about scope creep, you're not charging enough. OK, that's the answer to that. Now, tactically, here's what I would do in a situation to help me thread that needle, so to speak. If I'm talking to a client and I came from software...I don't know if you've ever been involved in a software project but software developers, when they first come in, they want to know everything about scope. They want you to tell them everything you want before anything's built. It's really hard. It's like designing every aspect of a building before anything's there. Nothing's on paper. You're just talking about it. You know what I'm saying? "Well, where exactly do you want the paper towel rolls?" "I don't know." It's impossible to create something for the first time, something novel, a new, in this case, software project.
It's impossible to know everything in advance and have a detailed blueprint of where everything's going to go. It's maybe not impossible but it's not feasible. It's just not, it doesn't make sense. It makes a lot more sense to just start after— do some planning of course—but start and then figure out the little details later. We're not going to decide where to put the paper towel rolls until we've got someplace to put them.
Anyway, when someone comes in, normally there'll be a big conversation about scope. So, a prospect is talking to a provider and scope, scope, scope because the provider is trying to protect themselves from scope creep if they're going to give a fixed price or they're trying to give an accurate estimate. If they're going to do hourly billing because they know the client is going to take that hourly estimate as gospel and be like, "Well, you said it was going to be $100,000 and we're up to $200,000 and we're not even halfway done yet." You don't want that. That's not fun. So, you think it's really important to know exactly what the scope is, in both of those scenarios.
But that's not what I talk about in the meeting. I don't care about scope yet. I'm not even thinking about it. What I'm thinking about in the meeting is, "What is this worth to them?" Well, first, what are they trying to achieve? Then when I see what they're trying to achieve, what might that be worth to them? And what did they see as my contribution to the transformation they're trying to make? There will always be some way to measure the difference between where they are and where they want it to be. It might not be exact, it might not have a particular unit of measure attached to it, but there will be a difference. You will be able to know what the difference is between where they are now, status quo, and the new world order that they want.
And then, if you're confident that you can help them on that trip, then you can say to yourself, "All right, this transformation for them, it's a big deal. It's a big project. It's a game changer for them. It's going to make a big splash in their industry. It's going to be a competitive differentiator. It's an important project. It's mission-critical. Amazon came into their space and if they don't do something about this, they're going to be crushed." So on and so forth. The bigger the project is, the more urgent it is, the better fit it is for value pricing. And you get the sense that it's going to be worth in the first year to them on the order of $1 million, let's say. So then I would say, "OK, I'm going to come up with three prices."
I still haven't decided what I'm going to do. I understand what they're trying to achieve and I understand that it's probably worth about a million dollars a year to them. And I'll say, "All right, what can I do to contribute to this outcome?" Well, I'm going to come up with three prices using a standard pricing curve like 1, 2.2, and 5. I'm going to give them a proposal with three options. Price number one is going to be $100,000. Price number two is going to be $220,000. And price number three is going to be $500,000. Now, I'll say to myself, "Given a budget of $100,000, what can I do to help this client move toward that goal?" So I'm going to pick a scope that fits the price. And so, I'll say, "There are going to be a lot of surprises and I'm going to want to make some profit." I mean, I'm running a business. I might have to bring in people from the outside. I could have all sorts of other expenses. I may have to travel to the client site five times.
All of that is scope that I would include. I would say to myself, "What scope can I fit into this first price that's still going to be comfortable for me?" So, even if it doubles in scope, I'm still going to feel like I did OK.
So, what I'm doing here is creating margin and that’s what causes me to feel less risk from the potential for scope creep because there is definitely going to be scope creep. Changes will happen. You're not going to figure everything out in advance and just execute it on a project that's 6 to 12 months long. I don't know if that answers your question...
Deb Zahn: It does. I think it's a fantastic way to do things. When you're figuring out what those three tiers are—and I always think it's really smart to give three tiers because usually, they pick at least the middle one. That's been my experience. But when you're saying, "OK, this is what I can do for $100,000," does hourly come into your calculations at all or do you have a different way of looking at it and determining what you can do within that value price you've picked?
Jonathan Stark: I want to be super clear about this because this is a source of confusion for people. What we provide to our clients in a service business. The bulk of it, especially if you're solo, the bulk of what you're providing is your time. So your cost is your time. You can't not consider it, but you have to not consider it when you're setting your prices. So there's an important difference there. You talk to the client, you find out the value to them, that's your first number, the value. Then you come up with some prices that are less than that value. They are never going to pick a price that's more than it's worth to them. It doesn't make sense. They would never do that. So you pick a price that's less than the value. And then you come up with a scope that’s inside that price for you. So in other words, you pick a scope in which your cost is less than the price you set.
At that point, when you're considering your costs, of course you're going to think about how much time you think it's going to take. You're going to be wrong. It's going to take more, almost certainly, but you can't think about that before you set the price. That's what I want to be super clear about it. When you come up with a price of $100,000 based on a million-dollar possible value, it's not science. It's more art than science. You're like, for a company like this, in a situation like this, it's worth about a million. For my $100,000 option, it's the no-brainer option. What can I do that I'd be happy to do for $100,000? One of the things you're going to consider within your costs is your time. But you didn't come up with $100,000 based on how long it's going to take. If you're thinking about hours first, you've already decided you're going to give the patient the triple bypass before you even know if they need it.
Deb Zahn: That's right, because basically, your hours are the bricks and you've already figured out what you're building. I love that. That's a great way to do that. So, let me ask you how you get clients to say yes to this, and I want to differentiate between new clients and existing clients. Let's say you're in front of a prospective client, and they might be getting bids from other people who are still stuck in the hourly trap. How do you convince them that this is actually in their interest to do?
Jonathan Stark: I never convince anybody of anything. That's important. I don't try to persuade anybody, ever. When I walk into a sales interview, which is what I call it, it's not a sales meeting or a pitch or anything like that. It's a sales interview.
We're both interviewing the other. And I'm deciding if I want to work with them. They're deciding if they want to work with me. We get together and I let them talk the whole time, basically. And they'd just come in and say, "Hey, we read your book" or "we've got a referral" or "we saw a video that you did" or “we saw that speaking engagement you did and it seems like there's a good fit here." I'd be like, "Great, maybe there is. So let's talk. Tell me what's on your mind, how can I help?"
And they'll brain dump about a project, and it will almost always, at least in software, and I think this is true in other professions as well, they get really specific and tactical about what they want you to do. "Here are these activities that we perceive we want an expert like you to undertake on our behalf." And it's like, "OK, I'll write that down." And it might be interesting, it might be relevant but, on the other hand, it might be the wrong thing to do. So they'll brain dump like that for 15, 20 minutes. At which point, I'll thank them. I'll probably have pages and pages of notes. They may or may not be important but I wrote them down. And I'll say, "Thank you for all of that background. Could we go up a level? I want to understand how this fits in the business context so that I'm sure we're going in the right direction here." And a good client will be happy to engage in that kind of conversation. And a bad client will be like, "What do you need to know that for?"
And that's the kind of client that's planning on pushing you around and treating you like an employee. That's a bad fit. So, if they do engage with that, "Oh, well I'm glad you asked." And I'm like, "Great." And then I'll ask what I call the why conversation; ask these series of why, why, why, why, why questions. And they fall into three categories. I originally heard this from Ellen Weiss. It's really good. "Why do you want to do this?” “Why do you want to do it now?” and “Why do you want to hire someone expensive like me?" And if you go through those questions, you'll uncover from them the motivation for the project. So they told you to do all these things. "We want you to put a button over here and we want this website to be responsive and we want it to be really fast." "All right. Why? Those things are all expensive. Why do you want to do those things? Why not just hire someone to enter the invoices faster? Why do you want me to write software that will automatically do the invoicing?" And get all of that information out.
And then you just go down the list. Next thing is, "Why not do this next year? Why do this now?" "Oh, well, it's important because Amazon…" or "It's important because the CEO wants to retire" or there's some kind of urgent matter. Then finally, "Why would you hire someone expensive like me?" And this is the long way around to your question, "Why not just do this internally? Why not just get an intern? Why not go to Fiverr? Why not have your brother-in-law do it? Why are you going to invest in the go-to person or the guy or gal who wrote the book on…? Why are you going to do that?" And they'll tell you all these things.
The whole time that I'm going through the conversation, I'm setting the expectation that I'm not going to be a pushover during the project. During the project, I am going to be a fierce advocate for the success of the project. If that means telling the CEO, "No, we're not going to put a carousel on the homepage," then I'm going to do that. And if that's not the kind of relationship they want to have, they're not going to hire me, and they'll just leave. It's fine. I don't want to work with them anyway. If they want to hire an expert, they're going to get an expert, not a pair of hands. So there's a lot of weeding out that happens in a sales meeting like this. The expectation is that I’m going to act as a peer and a partner of the buyer. And if they want someone they can just boss around, I will have already found out any of the pricing objections in this interview.
"Why would you hire someone expensive like me? Why not just outsource it to a lower cost-of-living country? Why not just get an intern?" All these other things I listed they'll tell me why they can't do that. And they'll have good reasons because it's not like they didn't think of that. As they're answering these questions, I'm taking notes like crazy. And then I'll just take what they said and put it in the proposal. So, you already considered hiring someone by the hour, you already considered...Or maybe you already tried doing this in-house and you've been failing for six years, so now you really decided it's time to invest in this. That's why you're talking to me. So, it sets you apart from anybody else they're talking to, especially anybody who's billing by the hour, because folks who go by the hour are happy to be told what to do.
Deb Zahn: Right. And the other thing it sounds like it does is, they will reveal information to you that helps you figure out what the value is to them. I like that a lot. I've certainly been in the same scenarios where I ask very similar questions, and I’ve said no to clients because they can't answer them because they really didn't think about them.
I’m in the healthcare consulting space so I've had a lot of conversations about mergers and acquisitions. And I always say, "If you're talking about a merger, which is long, painful, and 75% of them fail, tell me why you want to do that. What does that let you do today or what does that let you do in the future that you can't do today and you can't figure out any other way to do it." And if I hear them not be able to answer that question, that might be a reason I walk away.
Jonathan Stark: Yeah. Why would you take this enormous risk? Is it just pure ignorance? That's not good. Or maybe ignorance is the wrong word. Naivete maybe would be better a word. But yeah, I agree. That would scare me to death. If somebody came along and said, "Hey, we want you to create a mobile application for iOS and Android that does virtual reality and augmented reality to revolutionize the in-store experience at our bookstores," it'd be like, "There's still bookstores?" That's a $5 million project. And it would involve infrastructure changes and you guys just fired half of your floor staff. And now you think you're going to...No way, no way, way too big of a risk.
And that's the funny thing with doing value pricing or really, any kind of fixed pricing. I think value pricing is the only good way to fix pricing. Well, there's a caveat to that, but the issue is—and this is why it scares people when they're considering doing it—because you're taking on some of the risks. And if you are taking on a risk and not getting paid a premium to do so, you're a fool. I mean, you're just going to put yourself out of business. But if you are taking on risk, on the client's behalf because you're an expert and you say you know this stuff and you actually deliver results, you're actually good. You know what I mean? You're not just saying it. You are actually good. You've demonstrated results over time.
So you know what? I don't want you to take the risk of this piece that I'm an expert at. I feel like it's my responsibility to take, that's why you're hiring me to take on that responsibility, but the money needs to match so it needs to correspond. And this goes hand in hand. They can't tell you what to do in your area of expertise. You can take their input, but you need to have veto power on that stuff.
An expectation I set very early with new clients is that you're the expert of your business. I am the expert of, let's say it's mobile strategy, and I’m going to tell you what to do in...Based on your situation, I'm going to tell you how to design this. You're not going to second-guess me. Otherwise, you're just going to waste everybody's time and jeopardize the project. It's a waste of your time and mine if you're second-guessing how big the buttons should be on your checkout. And it's a waste of your time and mine if I say, "Oh, you should be targeting a different kind of customer." That's your job. I'll do mine, you do yours.
Deb Zahn: Right. That's great. I love setting that relationship early on, and I've seen this with folks who do website development. Well, because they've looked at a website before in their life, they think they're an expert in it. In which case, why did they bring an expensive person in to second-guess everything they're doing?
Jonathan Stark: Yeah, I get that a lot. I get a lot of designers who ask me that question like, "Oh well, how much is a logo worth?" And it's like, it depends on the client. You have to ask the client what it's worth to them. If it's not worth that much and you're going to have to set a price, it's lower than what it's worth. And you might not be able to set a price that's lower than what it's worth to a very sensitive client that's also higher than your cost. So, the value pricing thing cuts both ways. You can't just arbitrarily raise your prices. It doesn't work like that. A client will never pay more than something is worth to them. So if you're attracting clients for whom your intervention is only worth 500 bucks, you need to figure out something that you can give to them for 50 bucks, 120 bucks, and 250 bucks that’s still profitable to you, because then you're never going to talk them into a $10,000 logo when they have a $500 budget.
Deb Zahn: That's right. So let's say you have existing clients and you've been charging hourly and now you've come to your senses and you want to ditch that. How do you convince them to switch the way they've been paying you?
Jonathan Stark: It's almost impossible. It's much easier to attract new clients. It's like getting out of the friend zone. It's not happening. You can try and sometimes people have a really good relationship, a really close relationship with a client. But it's easier to attract new clients and set the tone from the beginning.
Deb Zahn: Gotcha. So if you're in the midst of it as a consultant and have been doing hourly, your plan is that over some period of time, you're going to transition to all value-based pricing, which means new clients.
Jonathan Stark: I wouldn't say all value-based pricing, but I would say ditch hourly completely. It's a transition. There are other ways to ditch hourly. Value pricing is just one. For big projects, that's what I recommend. But you can do product-based services that are relatively fixed scope that you price based on your costs and you can be very profitable.
Deb Zahn: Agreed. I worked at a firm where I and one other person developed the first product that they ever did, automated online product, and made quite a bit of coin. And they'd never done anything like that because everything is time for money. And we proved that it could actually be done.
So, as you go through this process, how do you make sure that you're making a profit? What do you pay attention to so that you know that how you're doing this is actually working for you?
Jonathan Stark: That's what your P&L is for. Usually when I get that question, there's a bunch of directions it comes from. One is, it's from people who are used to barely making any profit. And it's like that question just evaporates once you're making a lot of profit. If you're doing something in a weekend for $50,000, you know it's profitable. Even if it was $5,000, you just know. If you wanted to, you could calculate, you could track your time, and reverse-engineer an effective hourly rate if you really felt like it.
I had been billing hourly for years before I went solo and I was in the habit of it, so I kept doing it. After a while, it was just comical. I mean it was like, "OK, never mind, this is a joke." You know it's profitable. And the other thing that some people will say is, “Well, what if I'm hiring contractors or assistance of some kind by the hour?" And again, it's like if you price yourself right, you get the value. You price yourself based on a fraction of the value and then you come up with a scope. Just don't jam too much stuff into the scope.
If I was going to give any kind of specific advice around this, because it's pretty dependent, I would say just cut the number in half. So say my option one price is $100,000, what would I do for $50,000? And just cut it in half and that kind of a markup, because you're going to be wrong. It's going to end up being more like $75,000 or $85,000, but you still made a profit and you're still totally happy doing it. And oh, by the way, you don't have to have any of those horrible meetings about how you're going over budget and people going over your timesheets with a fine-tooth comb and, "How come this cost 6 hours last time and 12 hours this time?" All that administrative garbage goes away, the stress goes away, the relationship is much stronger. There's no fracture where you get paid more if you're slower and they want everything done faster. So all of the emotional stuff goes away. So, the profit thing, I understand why you ask, everyone asks that but it's just, it's fine. You'd be like, "Wow." You make $2,000 an hour, or $500 or $800 an hour. You can stop checking.
Deb Zahn: Exactly. I'm thinking of folks in particular because where I worked at a firm, I had a lot of really accomplished professionals who were coming into the firm to be consultants. Our rates were lawyer rates basically. They were just shocked that anybody would pay them that for the hour of the time. And I would just laugh and say, "Yeah, they will." In fact, they would pay us more if we charged it, because it’s so worth it to them for us to walk in and solve problems they haven't been able to solve.
Jonathan Stark: Right. And so now in that situation, what the client is doing is connecting the dots between approximately how long it will be and the outcome and the size of the outcome. So if the size of the outcome is enormous, they probably don't really care what your hourly rate is. But they are making some base assumption that it's going to take fewer than some X number of hours. So, in other words, the price doesn't really matter to them. And it could go wildly higher than they expected. It would still be way lower than it's worth to them.
Deb Zahn: This is great. Now I know you have a workshop coming up in February where you teach the nitty-gritty of how to do that. What can folks expect if they're in that workshop?
Jonathan Stark: If you're going to be in the Providence area in February, which is probably the last place I'd go, you can join me at my office or a workshop where we talk about a process for ditching hourly billing. It's called the Ditching Hourly workshop. And we go through a workbook starting at how to write a proposal and working backward from there into how to have a sales interview that will lead to a great proposal. Then we work backwards from there on how to create products where you don't even have to write a proposal. And we work backwards from there to how to attract people to those products and so on and so forth. So, if you're a professional who's doing some kind of work that you're billing for by the hour and you'd like to transition away from that and start to create actual leverage, actual profits for once, then that would be a great thing to do. It's a two-day thing, in person, and you can find out more about it at JonathanStark.com.
Deb Zahn: That's great. And I'll have links in the show notes so folks can get right to it. So let me ask you this last question because I think it relates to everything we're talking about because really, this fundamentally changes your life and frees you up in a lot of ways. So, how do you, in whatever way using this or other things, bring more balance to your life?
Jonathan Stark: For 14 years (from 2006 to 2020), I've drawn no distinction between my personal life and my work life, zero, which I find much easier. I have one calendar, I have one email address. To a lot of people, that sounds like heresy or a recipe for workaholism and I don’t
We homeschool our kids. I see them constantly, I come home all the time. But after they go to sleep, I'll work for an hour from 11:00 to midnight or midnight to 4:00 a.m. I'm very productive late at night. My schedule wouldn't work for everyone and my lack of distinction between work and home, notwithstanding. I don't know, I just love what I do. I just don't work too much. I balance everything. I think I'm kind of an outlier, so I don't feel like my advice is probably that great in this regard. But to me, if you love what you do and you've created leverage so that you're not trading time for money...If you're trading time for money, you've got a problem because there's a strong incentive to work more hours.
I have no incentive to work more hours. All of my incentives are to work fewer hours. So it kind of just works itself out. I don't do anything by the hour and I haven't for 14 years. So, when you take that away, every minute you work is money you're losing. So you don't feel that feeling you get when you go on vacation. If you're an hourly biller, you might remember this. I remember it. You might have it now. If you go on vacation, you feel like you're losing your hourly rate for every hour you're at Disney World. On top of everything you're paying for Disney World. Every time you do some kind of podcast interview or marketing for your business, you're like, "Ah, this could have been a billable hour. This cost me 600 bucks." That completely goes away when you're not trading time for money. If you want to work all the time, that's up to you but there's no financial incentive to. None. It's the opposite. The incentive is to work smarter.
Deb Zahn: I love that, and I think switching the incentives for ourselves is a really valuable lesson. I think the lesson of one calendar...I do that, so I have one calendar and it's color-coded because I like pretty colors. And meditation is there, and then my client call is there, and I don't feel any resentment switching back and forth between calendars like, "Oh my God, now I have to focus on this instead of time with my family" because it's all there. It's all in one place.
Jonathan Stark: Right. It makes it harder to double-book yourself. It's all the things. But you're right. I think the most important thing is just if you take away that incentive of,
“If I work more, I'll make more.” If you take that away, you automatically stop working more.
Deb Zahn: That's wonderful. I love that. Well, Jonathan, you've given us a lot of great information and you do a podcast where people can get even more information about this new world of Ditching Hourly. All of that will be a link on my podcast site but thank you so much for joining me today. This has been great.
Jonathan Stark: Thanks for having me.
Deb Zahn: Thanks so much for listening to this episode of the Craft of Consulting Podcast. I want to ask you to do three things. If you enjoyed this episode or any of my other podcasts, hit subscribe. I've got a lot of other great guests and content coming up, and I don't want you to miss anything. The other two things I'm asking you to do—one is, if you have any comments, suggestions, or other feedback that will help make this podcast more helpful to more listeners, please include those in the comments section. And then the last thing is, if you've gotten something out of this, please share it. Share it with somebody you know who's a consultant or thinking about being a consultant, and make sure they also have access to all this great content and the other great content that's coming. As always, you can get more wonderful information and tools at craftofconsulting.com. Thanks so much. I will talk to you on the next episode. Bye-bye.