While I have a minor in business, most of the lessons that I have learned about how to run a company were through making mistakes and figuring out ways to avoid them next time around. Sometimes I made mistakes many times before I realized it. In this case I still struggle with this mistake from time to time despite knowing better.
You should not do work for free, and you should bill for absolutely everything you do
When I first started out I constantly was giving away “bits” of work for free. Sometimes this can sound like a great idea, you are giving the client a little “bonus” of a better product with out paying a premium for it. However I have come to realize that this practice is bad for you or the client.
Why is this a problem?
When you first start giving away work, you may not have a fully booked schedule. You might not mind taking the extra time to deliver some extra value. It might make sense, after all… what else are you going to be doing (apparently not going out and looking for more clients).
There are really a few core reasons that this is bad for you and your client:
- As a long term strategy, the best way you are going to develop a long term working relationship is providing a win/win value. Of course you should do everything you can to provide great service to your clients, but ultimately if you are not getting value in return you will reach the point where you simply have to drop the client.
- It sets a precedent that your work is not valuable. After all you don’t deem it worth charging for. Ultimately the client will listen to you when you say “I am not worth your money,” and start treating you that way. Your quality will slip, resentment will build on both sides.
- Eventually you will try and burn through the free work as fast as possible. Less detail means more mistakes, this will frustrate a lot of clients and in turn frustrate you. “Why are they being so difficult? I am doing this for free!”
While it may be hard, it is important to confront your client when scope creeps or you are asked to do a “quick favor.” Be understanding but also explain why it is important to charge, if for no better reason that it allows you to make sure you can service them in a quick and detailed manor vs trying to juggle a dozen freebies.
What you will find is that you will start doing a better job and your clients will be happier. Your clients will also understand, value and respect the time, effort and expertise that you are putting into their work. The clients who are unwilling to work in this manor are not worth your time and would just cause you more pain and suffering in the long run.
Bill for the hidden costs
You may not realize it but there are also a lot of hidden costs that you should also bill for. Project management is a large part of any project, sometimes the corrispondence with clients, delegation and planning can take just as much time as the labor itself.
Your business spends a lot of time and expenses finding new work. Track and monitor how much time and money is spent marketing for every project that you get. Your pricing absolutely positively should include that time and effort so that you can cover your costs. How you integrate it is up to you (setup fee, higher hourly rates, etc).
Also consider that you spend time and effort in getting better at your craft. Seminars, events, reading, researching, practicing, etc… These are all activities that not only cost your business money (even if just in time lost), but also makes you a more valuable service to potential clients. This is another hidden costs that a lot of companies simply ignore or forget to cover while pricing.
It is an ongoing process
Some of this concept is simply being strong enough to communicate with clients regarding what they are paying for (your hours and expertise) and how more work means more money. The other aspect of billing for everything is tracking and monitoring all of the hard/soft costs that your business has incurs daily. Once you figure out how to bill properly you will find happier clients, do better work and increase your profits.