One day I picked up a call. “Hello, Scott & Associates, Joe speaking. Hey Tom, okay, okay, I’ve got it! We’ll take an imprinted bowl, top it with a CD that looks like cereal and milk, stick a laser-engraved spoon through the hole and send it to journalists instead of your media kit. I’m glad that you liked the idea. I’ll get you pricing.”
Although the order was pretty decent, I had given away a great idea, for free. The cereal bowl media kit generated several hundred thousand dollars in high-profile national TV and newspaper coverage.
At the time, that’s what we did. We also gave away product research, art preparation, logo design, copywriting, creative, media research, media planning and ad design—living on the margin generated by the sale.
A Whack Up The Side Of The Head
About the time we noticed that our margins were slipping, I had a conversation with an attorney who said, “Joe, our website sucks. I want you to make us a new one. And while you’re at it, we need a new tagline, a media plan, holiday gifts and a trade show schedule. Oh, and let me know how much you bill for your time.”
It took someone who bills for their time to get me thinking about billing for ours. As I thought more about it, I realized that most of my clients also bill for their time: engineers, architects, attorneys and CPAs. After asking more questions I found out that our clients thought it was really odd that we didn’t, especially since we were providing valuable services, which they were happy to get for free.
It Has To Be First Nature Before It’s Second Nature
Okay, so we got our first time-billing client. Now, how to get more? We had two options: Convert our existing clients to time billing and/or start new client relationships that way. Of course, it’s easier to begin relationships on a time-billing basis than it may be to convert existing clients.
Since we worked with a number of clients on a regular basis, I decided to try the time-billing idea on them first. The question was, what had changed during the relationship, which would allow me to bill for my time? The answer was quite easy: I had earned my CAS (and didn’t tell my clients—doh!) and I was closing in on my MAS. I told my clients, in essence, that due to the rigorous curriculum, requirements and the rarity of the designation that I would begin to bill for my time when I received my MAS designation.
Maybe because I had whipped up my confidence level before each call or maybe because my clients already expected it, over a two-year period, we were able to convert are largest clients to a time-billing relationship. I have to admit, though, the first time I asked an existing client to accept time billing I had sweated through my suit.
Now, you may think billing your clients for your time is impossible for you to do. My thought is this: If all you do is facilitate promotional products transactions (i.e., answering bids), this probably won’t work. If, on the other hand, you provide services other than selling products, I say, “Go for it!”
How To Start
First, take an inventory of all of the services that you provide to your clients. I’ll wager that these include the ones I have previously mentioned: Product research, creative, artwork handling and, perhaps, program design.
One way to look at it is this: How much would I have to pay an outside person to do those things? You should bill at least that much, or more.
While we are on that subject, consider this: As you enter The World Of Billing For Your Time, you will uncover client needs that can’t be met by your in-house capability. Fear not! You can always find someone to whom you can subcontract the work and mark up their time. There is no difference between selling $1,000 worth of stress balls on a “C” than selling $1,000 worth of logo design on a “C.”
When you think about it, do you design, manufacture, import, warehouse, imprint and ship those stress balls? Nope. You subcontract with a supplier partner to do that. Why not do the same with services your clients want and that you don’t provide?
This is how we grew our firm to provide in-house web design, photography, videography, copywriting, inbound marketing, search engine optimization, search engine marketing and other services. We started working with subcontractors and, as the business grew, we hired them. This, by the way, is a very low-risk way to hire employees: A subcontract relationship can be a long-term job interview.
How Much To Bill For Your Time
A model that we use is to take how much we would like to make per year, and divide it by the number of hours worked per year. That becomes your hourly rate.
Annual Revenue / Hours Worked = Hourly Rate
Some folks bill by the hour, some choose to round up to the nearest 10 minutes. It doesn’t matter. What does matter is to have an easy way to keep track of your time and efficiently bill your clients. There are a number of online applications you can use to do just that.
The Importance Of A Non-Disclosure Agreement
When you start to bill for your time, you will need to have discussions with clients during which you share proprietary information. They will share their confidential business plans and objectives. You will share your ideas. A non-disclosure agreement protects you both. One to two-page NDAs can be easily found on the web. Find one that you can understand and use it. I’ll bet that your competition won’t, and that’s what this is all about—differentiating your business from the competition.
We all have clients who will say, “Well, I can get those services for free from everyone else who calls on me.” Maybe we should fire those clients or go over their heads and speak with people who are responsible for generating revenue and not expense.
Defining An Agency Of Record
This is a fancy way of saying that your client agrees that your firm will do all of a certain type of work for them. You can find these documents online, as well. Find a short one and customize it to include an agreed-upon list of all services that you wish to provide your client.
When you think about it, how much time do your clients’ employees waste talking to your competitors? An agency of record agreement can state that “any inquiries by third parties relating to advertising media, promotional products, marketing services, event production, and related products and services will be directed to [your company name here].”
We had a client calculate that it cost him at least $1,000 per month in lost productivity to have his employees harangued by customers, customers’ friends and relatives trying to sell them promotional products and marketing services.
When I presented him with the Agency of Record agreement and explained it to him, he literally ripped the pen from my hand to sign it. By the way, we bill him for our time when we are directed by his employees to speak with our competitors.
Now, most of the conversations are very short and deal with products and services that duplicate ours. On occasion, someone calls with a great idea and we contract with them on behalf of our client.
Revenue People Vs. Expense People
We have found that when you tie yourself to generating revenue for a client, and you are successful, your business will grow along with theirs. I’ve found that working with “revenue people” (whose offices usually have windows at, or near the top, of the building) is more fun and demanding than working with “expense people” (mostly found in basement cubicles).
Also, when your story and capabilities allow you to speak and work with revenue people, they will tell the expense people what to do. For example, I had a first meeting with the CEO, CFO and CMO of a high-tech firm. They wanted us to plan an employee event and redesign their logo. At the end of the meeting I pointed to a coffee mug on the boardroom table and asked, “Do you guys do much of this stuff?” The CMO said, “Yes, I don’t know where we get it, though.” I said, “Since we will be redesigning your logo, this sort of thing falls under that category. We have someone at our firm who is really good at finding products that support graphics standards.”
I never learned who once had that promotional products business. The revenue people told the expense people to buy from us.
Last Hired, First Fired
The world of time billing is not without risk. Revenue people (and by default, you, when you work for them) keep their jobs and do very well as long as the revenue grows. When that doesn’t happen, they get fired. It is your job to help them keep theirs. Of course, you will never be 100 percent responsible for all of the revenue—just keep that in mind.
The Danger Of Getting Too Close To A Big Client
It is entirely possible that you will establish very tight relationships with clients due to your ability to drive revenue. We had a situation where a big client ended up not having a marketing department and decided to outsource to us all of their marketing services for all of their companies and product lines.
This is a great relationship and we are generating some really good results for them. The danger is that, although things are going really well and we are billing a significant amount of time, we still have to focus on new-business development.
My wish is to have that same thing happen to you.
Joseph G. Scott, MAS, is vice president of Scott & Associates, Inc., based in the southwestern suburbs of Minneapolis, Minnesota. He gets customers for his clients. Reach him at JoeS@scottassoc.com