Value-Based Fees. Alan Weiss
all seen this: the otherwise successful people who never pick up a check, who take modest vacations, who have ten-year-old cars, whose houses need maintenance. These are people continually asking if they “really” need something as an excuse not to spend money on an acquisition. We've all seen elderly people who have ardently saved through their lives only to lose it all in a health crisis or scam.1
I once asked a group of coaching clients at an event what they would do if they unexpectedly gained $600,000 via a client request for work, or a lottery winning, or an inheritance. Most spoke of partial savings, some philanthropy, some personal acquisitions, vacations, and so on. But one woman said to me, “I wouldn't touch a cent of it, it would sit in the bank!”2
Thus, we experience people with significant growth and prosperity who continue to act as if they were desperately trying to gain a foothold, to keep their heads above water. I call the need to change based on true prosperity securing the “watertight doors.”
Figure 1.1 The Watertight Doors
In Figure 1.1 you can see the progression from trying to survive, to being “alive,” to having “arrived,” and finally to thrive. Survival takes pressure off, then “alive” means you have a “going concern,” as the accountants like to say. “Arrive” denotes a brand and recognition within your field, with unsolicited referrals coming your way. And “thrive” is the expert and thought leader, one who sets the paces and is used as a reference point for excellence.
The problem is that many people to the right of my chart still act as though they're on the left, never having been able to abandon old habits and old friends. To transit from left to right, we must be willing to change our beliefs, friends, image, self-talk, expectations, affiliations, and so forth. That's the only way to create “watertight” doors that don't permit us to slide back.
I talk to people too often who tell me in the same sentence that they're having their best year ever but can't afford to invest in their own self-development, or give to charity, or take an unexpected vacation. You may see this as hypocrisy, but I see it as an inability to leave a poverty mentality that enabled them to survive but not enjoy their arrival or beyond.
The abundance mind-set is not merely about money. It's also about time, information, volunteerism, support, and so forth. In other words, an abundance mentality is denoted by generosity. The most successful people I know are also among the most generous I know.
You can begin each day as a long-slow crawl through enemy territory or as having the potential for great opportunity. Thinking abundantly is a mindset and a permanent disposition. It's not a motivational technique or a fad.
Not long ago, so many people burned their feet at a fire-walking (hot coals) session that extra EMTs had to be called! My conclusion is that they just weren't motivated enough! Trodding hot coals does nothing for your life, unless that's the only route to your office. But creating and maintaining a positive and abundance mind-set will enable you to enjoy life, be resilient, and constantly appreciate your own worth for others, which just happens to determine your fees.
WHY YOUR PRESENCE ISN'T REQUIRED
The concept of value is not, therefore, vested in your physical presence, physical work, or even being in view. Value is a function of the worth I place on a product, service, or relationship. Value may be, like beauty, in the eye of the beholder—a season ticket to a 49ers game might thrill one person but cause someone else to say, “Is that on Xbox?” or “What's a 49er?”3
Value can be tangible:
Increased income
Larger market share
More referrals
Lower cost of new client acquisition
Value can be intangible:
Improved aesthetics
A feeling of security
Greater safety
More freedom
Some value is society- or community-related, creating normative pressures to appreciate it:
Better roads
Faster internet
More access to quality health care
Better schools
Some is intensely personal:
More intimacy with my partner
Better cooking skills
Ability to speak a second language fluently
More respect from colleagues
Value pertains to the importance of something, and is measured in worth, often expressed in equitable compensation. Given the diverse factors noted above, some people see value as a bargain (“I purchased this fine wine for 25 percent below retail prices”) and some as justification for major investment (“The painting is worth $5 million on the market at the moment”). What is the worth of a great vacation or entertainment experience. Those with a scarcity mentality might buy cut-rate tickets to the theater and tolerate obstructed views, while those with an abundance mentality might pay 200 percent of face value to secure house seats.
But note that these are all experiences of one kind or another. A personal guide in Pompeii has to be with you if you're on a walking tour, and is much more valuable than an audio guide as you wander around. (You can't ask questions of an audio guide.) However, the person selling you the house seats needn't accompany you to the theater or even talk to you; it can all be done on the computer.
Alanism: Charging by the hour or any other time unit for professional services isn’t merely amateurish, it’s unethical.
Whether we are present (e.g., interviewing people and holding focus groups at a client's site) or not (e.g., advising by e-mail, phone, or Zoom), our value is in the results of our project and advice, not in terms of whether we are present or not, in reality or virtually. This book is of value to you, but I'm not reading it to you and you're not paying by the page.
Our clients are best served by quick, accurate resolutions to their issues. But if we charge by the day, for example, we make the most money by staying as long as we can. That is an ethical conflict. Moreover, the client shouldn't have to make an investment decision each time the client feels we may be needed. And our presence is often disruptive, distracting, and costs still more because of travel and lodging needs.
Many professional services began charging by the hour (lawyers still tend to bill in six-minute increments) and have never changed: accounts, designers, attorneys, architects, consultants, coaches, and so forth. However, the smarter ones evolved to understand the concept of their value, not merely their time. What is the value of legal services for a successful acquisition, or an amicable divorce? How valuable are accounting services that proactively can reduce your taxes or arrange for interest-free loans under certain circumstances?
CASE STUDY: THE ARCHITECTS
The American Institute of Architects (AIA) was a client for a couple of years. Their members habitually charged by the hour