A Radical New Pricing System

By Scott Bourne

Posted Wednesday, August 23rd, 2006

I don’t want to sound like the main character in the Kung Fu movie, but it’s true: Sometimes the best way to find something is to stop looking for it.

I am not religious but I do study lots of religions. One of my favorite religions is the Buddhist religion. One of its basic doctrines is that you should never accept something that isn’t freely given.

About a year ago, I decided to apply this in a radical way to my pricing system. With the exception of telephone consulting, I now charge a flat up front fee of $2500 for all jobs. Then, I tell the client to pay me more when and if they think I have earned it. I do tell them what the industry norms are. I do have special circumstances when a larger up front fee is required, but generally, this is the approach I take. There are no invoices or standard accounts receivable. There’s just one check and a bond of trust between me and my client.

And yes, clients are quite often flabbergasted. And yes, once in a while, someone does try to take advantage of me. And yes my accountant thinks I am crazy. But the vast majority of my clients like this system and pay me well. And I’m not crazy because for me, the system is working.

My clients have an incentive to pay me. In addition to it being the right thing to do, they pay me because they see results from my work. If a client doesn’t pay me fairly, I end the relationship. But that almost never happens.

As for the upside? The clients that want more of my attention pay me more, and everyone gets along because there’s a mutual respect. Every dollar I receive is truly freely given.

Think of the cell phone company that locks you into a two-year agreement, regardless of service quality. Most of my friends don’t much like their cell phone provider. They just tolerate the cell provider. Since I know life is short, I don’t want to spend my time in those kinds of relationships. I’d rather know that my clients like me and are happy with me. I also don’t want people feeling like they have to do business with me because of a contract. I want my clients to want to do business with me because it makes sense.

I’d rather know that the people who I do business with call me because I perform. They call me again because I deliver. If I stop delivering, they’ll stop calling. We each have an incentive to help the other.

Now here’s the kicker. . . since I began using this pricing structure, my profits have doubled. In fact, I am running at almost 200% capacity right now. I can’t say that my pricing policies are the only reason for the increase. After all, the podcasting arena is growing exponentially. But I do believe that the change in my pricing structure has played a part in my success. So that takes us back to the beginning of this post. I suggested that in order to find something, you need to stop looking for it.

Since I pursue fun work with people I respect, working on projects that I think matter, seeking self satisfaction as opposed to financial gain, money has found me, not the other way around.

  • http://www.haddadink.com/blog Chris Haddad

    Now that, my friend, takes huge brassy balls. Though I’m honestly tempted to try it myself. Maybe with my next client I’ll try something similar. Just walk in with a shit eating grin on my face and say “nope, I don’t want to talk money. You just write me a check for what this gig is worth to you and that’s that.”

    Could be awesome. Could be radical. Could be hella ballsy.

  • Pingback: Haddad Ink. | The Hard-Working Words Blog » Blog Archive » Ballsy

  • http://iampms.com patrick

    “…In fact, I am running at almost 200% capacity right now…”

    Not to be too snarky, but how can this not result in service degradation?

  • http://podcastingtricks.com Scott Bourne

    Patrick that’s simple – I don’t sleep :)

    Trying to hire more help.

  • Duke

    So, what does a client get for $2500???

  • http://podcastingtricks.com Scott Bourne

    Duke if you really want to know the answer to that question send me an email.

  • http://www.bournemediagroup.com Scott Bourne

    Or Duke you could just give me a call at 253-851-5542. Thanks.

  • http://www.blogforbusiness.com Barbara Payne

    I love this idea, Scott. Now the thing is when you do a hundred different things for clients, it’s pretty hard to name a single upfront fee that fits all sizes. Any suggestions on that? Develop an upfront fee for each type of project? Would you say the upfront fee should be based on the hours it takes to do the job and then you ask for anything extra they care to pay? Would love to start doing this for my corporate blog writing.

    Oh, and what if they just want you to “help” with something instead of doing the whole thing? Like say I would charge $2000 for an executive speech consultation. But then they just wanted me to consult on it and not write the whole thing? How would you approach that?

    Thanks for the wonderful idea!

  • http://podcastingtricks.com Scott Bourne

    Barbara my system may not work for you. Or you may need to adapt it for your situation. The essense of the idea is that you trust the customer to pay you a fair price and you don’t rely on a contract to force them to do so. You rely on your relationship.

    You don’t have to have one firm fee. While I usually set $2500 as a fee, sometimes it’s ten times that much. It depends on the job and the client.

    I set the upfront fee after talking with the client and getting a sense of the minimum amount of work that I think I will need to do and then what I think that’s worth.

    Once you’re busy, the clients who want first chance at you will be sure to pay you well for that honor. At least that’s how it’s worked for me.

    Good luck. Glad this thread got you thinking.