Do Your Clients Feel You’re Nickel-and-Diming Them?

by on August 3, 2012

Nickel and Dime

Is this what your clients think about you?

Recently as I was ordering a pizza online, I took notice of the fact that the company was charging me for delivery. They took great pains to make it clear that this additional charge was not a tip. I understand the need to charge for delivery. Companies need to cover their cost for the driver. But I also have the expectation that when I order pizza, delivery is part of that. Seriously, how many people pick up pizza anymore? So to me, the fact that I’m being charged “extra” for delivery is a little irritating. I would rather they simply roll any delivery costs into the standard price of the pizza instead of calling out the fact that I’m being nickel-and-dimed for something that should be part of the service anyway.

This got me thinking about how we as independent technology professionals charge our clients. I know some charge for things such as travel time or phone calls. I have absolutely no problem charging clients fairly for services performed. But it doesn’t really matter what I think is right. If the client feels they’re being nickeled-and-dimed, that’s the only opinion that matters. I can tell you that I’ve gained many clients that have complained about their previous technology help charging them for travel time or other “extras” and were happy that I didn’t charge for drive time.

So how can independent technology professionals fairly charge clients for things such as travel or phone calls? I think the key is to starting thinking in terms of value delivered, rather than time involved. Time is not always a fair indicator of value. In fact in many cases it is not at all. I know that I can get a whole lot more done than other technology professionals in a shorter amount of time. You probably feel the same way.

True, in some situations time may be the only reasonable measure of how to bill a client. But let’s look at the example of how shipping companies charge. UPS or FedEx charge more to get something delivered quicker. That’s because faster delivery is more valuable for clients. Wouldn’t it be ridiculous if delivery companies charged based on how long they had the package? Slower delivery would cost more!

Just like shipping companies, it is often far more valuable for our clients if we deliver a solution faster. So should we charge less for work done quicker than expected? Conversely, should we charge our clients more when we take longer than expected if we didn’t estimate the time of a project correctly? I can tell you that I’ve also gained clients who complained about a particular bill from their previous technology help being several hours more than expected.

To prevent the nickel-and-dime perception, what I do is charge a fair hourly rate to cover expenses like drive time and answering quick phone calls. Why don’t I charge for drive time? Because I’m not delivering value to the client by driving. It’s not the client’s fault I live a certain distance away. Why should I charge for the time it takes me to get to them? All that does is make them shop around for another technology expert that is closer to them. To be fair, if the client is very far away I will let the client know that I will need to charge something extra to cover travel expenses. But I don’t charge my normal hourly rate nor do I charge for the entire travel time. Again, I’m simply not delivering value sitting behind a wheel. Which is one reason I’m doing more and more work by remote screen sharing. It lets me help my clients without the whole issue of drive time. More on that later.

I do charge a one-hour minimum for my services. Again, I look at it more from the standpoint of value delivered rather than time involved. If I can resolve a problem or implement a solution for a client in 15 or 30 minutes, isn’t that actually better than if I took a full 60? The client is back up and running and making money sooner. So I look at my one-hour minimum as more of a flat-rate charge for a solution. I rarely get any complaints about this method of charging.

Phone calls are a bit of trickier issue. My rule is that I do not charge for a quick call where I’m answering a simple question or giving a little bit of advice. Charging for phone calls just makes clients not want to call you! My apologies to all my attorney clients out there, but just ask people’s opinions of lawyers that charge by the minute for phone calls! However, if I’m troubleshooting an issue that ends in a resolution of a problem, then I probably will charge. The difference again is in the delivery of value. If I’m on the phone for a few minutes and give the client a little advice, then I chalk that up to good customer relations. But if I help the client solve a problem that was costing them time and/or money, the fact that I was able to do it quickly over the phone is more valuable than if the client had to wait for me to drive there. I also charge for longer phone calls where I’m working with a client on a project plan or something similar. Again, I’m delivering value and pretty much the same value if I had been there in person.

I do charge less for phone and remote work. This is because I can pass along some drive time savings to the client. Passing along savings to clients is always a sure-fire way to keep them happy. It’s a win-win situation because I don’t need to drive and my client saves some money. However, my one-hour minimum also applies for phone or remote work. By doing this, even though I’m charging a discounted hourly rate, it often it works out in my favor because I can resolve many problems in less than an hour. So I’ve had instances where I’ve been able to take care of 2 or 3 clients with remote sessions in less than 2 hours, yet I’m able to bill for 2 or 3 hours of work. So my effective hourly rate is actually higher. This is even before I factor in that I didn’t have any unproductive drive time getting to those clients.

Bottom line, your clients’ perception of the way you charge them is their reality. You may not feel like you’re nickel-and-diming them, but charging extra for things that your clients may feel should be part of your service leads to this perception. Consider how you’re charging your clients and look at it from their perspective. You may find that you’re no better than a pizza delivery company in their view.

I’m curious how all of you out there handle the “extras” when working with your clients. Do you have certain methods in place like I do? Have you ever had a client complain about the way you bill them and how did you handle it?

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