BAASS Insights Technology Blog

I thought I would take this opportunity to discuss why I believe in Fixed Fee pricing vs Hourly billing. It is a very controversial topic as many clients and prospects I discuss fixed fee pricing with seem to feel as if its a scam.  Plus Computers will one day soon be an organization that only offers Fixed Fee services. I hope the following explains my motivations.

1. I do not believe time has value. As that would indicate that the longer a project takes the higher the price should be. This would then mean that a poor consultant who takes longer to do their job should be of more value than a strong consultant who takes less time to do the same work. In fact it means that the strong consultant should charge less for the same work.  Some would say that we should then have different rates for different consultants but some consultants are stronger at some types of projects than others. Some say that we should then charge different rates for different types of work. I do not feel right charging one rate for report writing and one rate for training as they both have value and every client would have a different perception of which is more valuable.
2. I believe results have value. I believe our clients want results. I believe they do not really care how long it takes to get the result but rather that they get a result that improves their business. If you had cancer and one doctor indicated they could remove 100% of the tumor with a non evasive high tech surgical technique that takes 3 hours and another indicated they could remove 100% of the tumor with a evasive technique that takes 12 hours. If they were charging by the hour the more risky surgery would cost more. If they were charging for results I expect the high tech doctor may charge more. I don't know about you but I would strongly consider paying a premium.
3. I believe clients do not like projects where they are uncertain of the cost prior to the job beginning. I believe clients enjoy cost certainty.
4. Almost every product and service in the world is based on a fixed price other than professional services. I do not believe professional services should be different.
5. I believe as an organization we sell knowledge not time. The value of knowledge is determined by the client or customer. Clients pay us to give them information and expertise they do not have. The level of expertise and information varies from client to client but the value of this expertise can rarely be correlated to a time measurement.
6. Since we have moved to Fixed Fee Telephone Support contracts and Upgrades our client satisfaction ratings for these services have gone through the roof. Our clients on Fixed Fee plans are more satisfied than clients on hourly billing plans with rare exception.
7. I believe charging by the hour is unethical.
8. I believe tracking time via timesheets is a complete waste of time and energy.
9. Hourly billing is based on a theory developed by Karl Marx around 150 years ago. It is old, antiquated, and it was developed by a communist, need I say more.
10. I believe so firmly in Fixed Fee pricing I am willing to offer a 100% guarantee on Fixed Fee engagements.

As a follow up to one of our latest blogs, The 5 Sins of Inefficiency, we wanted to touch on another form of automation in the work environment to help increase efficiency.

Today companies can bring automation to bear on a wide range of sourcing and procurement tasks. Virtually every dollar a company spends, in fact, can be spent more wisely if the right systems are put in place. Sage Purchasing Solutions can help give you the insight you need to get better pricing from your suppliers. Designed to work seamlessly with your existing Sage ERP 300 (formerly Accpac) system, Sage Purchasing Solutions gives you purchasing power by combining orders and simplifying your purchasing procedures.

These questions can help you determine if you need automated purchasing software to reduce costs and improve efficiency:

1. Do different departments make small orders of the same types of items (for example office supplies and other MRO goods) with different vendors?
2. Do you use paper forms to request purchases and gather approvals? How much time is lost as these forms sit on desks? How often do they get list in the process?
3. If you use paper, spreadsheets, or an application that does not integrate with your General Ledger and Accounts Payable system, how much time do your employees spend replicating the same data?
4. Do you require the purchasing procedure to be used on all purchases, or only orders about a certain dollar amount? What percentage of your total spend is actually under the control of your purchasing professionals?
5. Are your employees irritated by the process of making a purchase? Do they attempt to circumnavigate your policies and procedures because they are too time-intensive?
6. What is your average cycle time from requisition to receipt?
7. If you add the labour costs of all of the time used by all of the people involved in your purchasing process, what would it add to the cost of each purchase?

Contact us for more information!