[Podcast] How to Price Creative Work (& Why Hourly Billing is Nuts!) with Jonathan Stark

What if hourly billing is quietly holding your creative business back?

In this episode, Jacob Cass sits down with Jonathan Stark, pricing expert, author of Hourly Billing Is Nuts, host of Ditching Hourly, and co-host of The Business of Authority, to unpack why trading time for money is such a poor fit for expert work.

For designers, strategists, consultants, and creative professionals, hourly billing can feel simple and fair. But it often creates the wrong incentives. It rewards slowness, punishes efficiency, shifts the conversation away from outcomes, and positions expertise as labour instead of judgment.

Jonathan explains how creative experts can move beyond hourly rates, uncover the real value behind client problems, and price based on outcomes, trust, expertise, and business impact.

Together, Jacob and Jonathan explore the difference between fixed fees and true value pricing, how to run better sales conversations, why pricing is deeply connected to positioning, and how authority changes the way clients buy.

They also discuss the psychology of charging more, why creatives often underprice their own judgment, and the practical first steps for ditching hourly without blowing up your business overnight.

If you are tired of selling hours, defending rates, or being compared against cheaper alternatives, this episode will help you rethink what you are really selling and how to build a business around expertise, not availability.

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5 five practical ways to get started with value based pricing

1. Look beyond the deliverable

When a client asks for a logo, website or brand strategy, ask what they hope it will change.

Are they trying to attract better customers?
Increase trust?
Launch a new offer?
Compete at a higher price point?

The value is not in the number of logo concepts or pages you produce. It is in what the work helps the business achieve.

2. Talk to the decision maker early

Do not wait until the final presentation to discover what the owner or director actually wanted.

Before proposing the work, ask how they define success, why the project matters now and what happens if nothing changes.

This helps you understand the real problem before committing to a solution.

3. Price the value of solving the problem

Hourly billing can punish you for becoming better at your job.

If your experience helps you solve a problem in two days rather than five, the result is not worth less. The client benefits from your judgement, experience and ability to avoid expensive mistakes.

Price the value of solving the problem, not simply the time spent at your desk.

4. Offer three ways forward

Rather than sending one quote, present three fixed price options.

For example:

A focused brand review with clear recommendations
A strategic refresh of the most important brand elements
A complete strategy and identity engagement

Each option should help the client make progress, with different levels of scope, support and certainty.

5. Give clients a meaningful reason to choose you

Saying that you offer great service, creative thinking and tailored solutions will not separate you from others.

Be specific about who you help, the problem you solve and why your approach is particularly suited to that situation.

You might become the designer for professional service firms moving upmarket, the strategist for founder led businesses that have outgrown their identity, or the studio that helps hospitality brands prepare for expansion.

The aim is not to appeal to everyone. It is to become the obvious choice for the right client.

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Transcript

Hello and welcome to JUST Branding. Today, we’re joined by Jonathan Stark, a pricing expert, author and advisor who helps independent professionals stop trading time for money and start building businesses around expertise, outcomes, and authority. Jonathan is the author of Hourly Billing Is Nuts, which we’re going to talk about today. He’s host of Ditching Hourly and co-host of The Business of Authority. So we’re in good hands here. His work challenges one of the most common assumptions in creative services, that billing by the hour is fair, professional, even safe. For designers, strategists, consultants, and folks listening in, this conversation gets right into the heart of the business model. So are you selling time or are you selling judgment? Are clients buying your hands or you’re thinking? If your expertise helps you solve problems faster, why should your pricing punish you for getting better? Very good questions. So today we’re unpacking why hourly billing is broken and how value pricing actually works, and how to build a business of authority, where clients pay for the outcomes, trust, and expertise, and not just the hours on a timesheet. So welcome to the show, Jonathan.

Thanks for having me. Excellent intro. You really set the table there for us. We’ve got a lot to do here.

Well, you built a whole body of work around this idea of hourly billing is nuts. So for all our audience of designers, strategists, consultants listening in, who’ve perhaps built hourly their whole career, what’s the first thing they need to unlearn?

First thing they need to unlearn is that price does not come from cost. Price comes from value. Or if I was going to say that even more surgically, I would say that an acceptable price comes from value, not from cost. So that’s the summary. We could talk about it for a half an hour just this piece. But cost, if you’re setting your prices based on your costs, you could be setting prices that are unacceptable to the client because the cost sort of insists that you mark up your time and then let’s say we get to, just to throw it around, remember $10,000. Well, if it’s not worth $10,000 to the client, it’s not an acceptable price. They’re going to say no. But if you work backwards and you find out what your assistance is likely worth to the client, maybe it’s $5,000. It’s only worth $5,000. It’s like, okay, for 500 or 1,000 or some fraction of $5,000, what could I do to help this client move the needle? Probably not the thing they asked me for in the first place. But this is a complete 180-degree mental shift from setting prices based on what it’s worth to the client instead of how much it costs you to deliver.

Well, let’s get this quickly out of the way then. Why is Hourly Billing such a bad fit for expert-based work?

Well, because if you know what you’re doing, you’re probably really fast at delivering good outcomes. You’re getting penalized for getting better at your job. Probably everyone listening has experienced, if you’ve been doing it for a while, you’ve experienced someone much younger than you getting jobs that you really should have gotten because their hourly rate is lower. When you put yourself out there with an hourly tag assigned to you, it’s just begging the client to compare you apples to apples with everybody else, which completely ignores how fast you are and how good you are and the kind of results that you typically provide to your clients. It just ignores all the important parts and says, I’m an apple, I’m 50 cents, that apple is 25 cents, you’re going to buy the 25 cent apple. Yep.

All right. And on the opposite spectrum of that, what are some of the big or hidden incentives that are created by growing the value base?

Well, the joke is if you get paid by the hour and you want to raise, it just works lower.

Right. If you think about it, charging by the hour incentivizes the executioner, if you like, of the work to take longer. It’s immoral in that sense. Why would you incentivize something that actually then decreases in value to one part of the team, but then increases the value to the other? So it’s and vice versa. It’s funny enough, I work with a few agencies and I had this situation recently where I was on this project. And there was a prickly conversation with the salesguides who had just sold this project. And they said, Matt, this kind of X amount of weeks that you wanted to do the strategy on, we’ve had to squeeze because the client’s budgets are not where we needed them to be. And so I said, why did you squeeze them? Surely we should have expanded them and dropped the price. In other words, why would you automatically go to squeezing a price because they assume the time that you’re going to spend on it is less and therefore the cost is less? Well, no, that’s not the case actually. But anyway, it’s such a difficult thing for people to get their heads around, isn’t it? Why is that? Why did it start, Jonathan, in this? Why have we got ourselves in this pickle?

Yeah. If I just look at myself as the test subject, this was not obvious to me until I was managing people at a dev shop. My background is in software development. When I was an employee and then I started working at a firm, I still had that employee mentality like, I put in the time, you owe me the money. It’s a salary question. Back then, this is like the early 2000s, late 99, 2000, 2001. The deal is, but in seat from nine to five, $50,000 a year or whatever it is. Inside of that, you just make sure you don’t do anything that’s going to get you fired. So if you keep up your end of the deal and they keep up their end of the deal, then everybody’s reasonably happy. And if you want to overachieve, that’s up to you, but it may or may not increase the amount of money you get, regardless. Okay. And probably a lot of people worked for someone and had a salary or something like that. I think it might come from there because that’s the piece that I find I have to sort of de-brainwash people out of, like the ones that did have a job job. Because when you meet someone who has been entrepreneurial all along and had a paper route and then, you know, mowed lawns and all that stuff, hourly seems insane to them. But there’s just not that many. There’s just, it’s a smaller pool of people who have kind of been entrepreneurial from a young age. So you come out of corporate or you come out of an employment situation. And I did it. Everybody does it. They say, oh, my salary was $100,000 or let’s, for easy numbers, my salary was $120,000 a year. So I need to make $10,000 a month. So I want to work this many hours per week and, you know, per month and if there’s four weeks, then they just divide. And like, here’s my hourly rate, you know, $120,000 divided by 2,000 hours. Boom, that’s my rate. Okay. And so now they’re thinking like an employee. They show up, they put in the time, that’s the deal. And the whole concept of outcomes is invisible to them. It’s totally invisible to them. And as long as that’s invisible, you don’t know what else to price. You just don’t know what to price. Everything seems… People who are listening to me right now that are like, what are you talking about? You’re the person who needs to really listen. Cause we’re, hopefully we’ll unpack it and make the light bulb go on. But if this, if you’re like, there’s nothing else to sell. I put in the hour and I do my job and that’s what they’re paying for. It’s like, that is not what they’re paying for. You just can’t see the thing that they’re buying.

That is so true. That is so true. So I used to run an agency, right? And we came across this massive problem where I was in this trap like you were talking about, right? So I had a team, we had a team of 12 and we would, you know, to cost out the project, we would kind of work out all the tasks and figure out how many hours we reckon they would take. And then we had an, I can’t remember the hourly rate at the time, I don’t even know how we came up with it. It was just like finger in the air. We think we’re worth this, we can get away with this, this is our hourly rate. And then what would indefinitely, will happen on some projects was, for whatever reason, particularly creative, right? Like this is a challenge because sometimes clients don’t like something that they see. They might have described exactly what you produce, but then they look at it and they go, don’t like it.

That’s not it, yeah.

Right, so then there’s this argument, because you say, well, I spent the time on it, as per my quote, and they say, yeah, but actually you didn’t deliver what you said you deliver. Now, who’s right? Now, what that showed me over years, and it took me years as well, and a near breakdown to figure out, there’s such a mismatch here, because the client is buying a result, and I’m selling hours, particularly like you were saying, the salaries and that kind of thing. Then what happens is, is that the agency doubles down and has to, and then you get the account managers having to have these really awkward conversations with clients. The whole thing is a mismatch, and it often ended in tears in one way that the agency or for me as the agency owner, I was crying, right, or the client was crying because we were enforcing the rules that they’d actually signed up for but didn’t really understand until they entered the process. So the whole thing is like for me, and I learned the hardware is not healthy for client, for agency or deliverer of the work, it’s bonkers.

So that’s nuts, it is nuts.

It is nuts. I wonder if only we had someone to talk to us about how nuts it is, Jacob, that would be so helpful. That’s basically what we thought. And then we thought, Jonathan could come on and discuss this. So I guess the question to segue into is like, OK, if that’s not a good system and if let’s assume we’ve some of the folks on this show have started to kind of get their head around that, what’s the better way? What’s the what’s the promised land? How do we shift out of this trap of selling time?

There are a bunch of ways, but just I’m going to stick with the value pricing concept. You guys brought that up first. There are other ways of price that I also like. Hourly is just you just got to stop doing hourly. But in the particular situation you’re describing, you did a bunch of work, you did what you said you were going to do, it ended up costing this amount of money. The client sees it and they’re like, this is not what we wanted. And I’ve seen this. I’ve seen people get fired over this. I’ve seen lawsuits because they spent hundreds of thousands of dollars. And then when the project is launched or whatever the outcome is, when the deliverables are delivered, and then the CEO shows up for the first time and is like, this is garbage. What have you all been doing? This is nothing. How much did I pay for this? Right. So if you just, it’s so bad. It’s so painful. Probably anybody listening that’s been in business longer than a few years has probably experienced this. It’s brutal. And you don’t want, no matter what you do at that point, the customer is going to be mad. You’re not getting a referral. Maybe they’ll pay you, maybe you’ll split the difference, maybe you don’t get sued, but it’s not building your business. So let’s unpack actually what’s happening here. In the scenario rolls into the room at the last minute and says, this is garbage, what is happening? What is happening is you’re having the conversation that you should have had before you started, before you even decided to take the job, because ultimately it’s got to go through the buyer, the economic buyer’s filter. And if you do not satisfy that person, you’re just shooting free throws with a blindfold on. Like what are the odds of getting a basket? It’s impossible. It’s next to impossible. When it happens, it’s by accident, because you don’t know what you’re shooting for. So if you move that conversation from the end of the project to the beginning of the project, then you can find out, first of all, if what the CEO wants is even realistic, if the project that they’re asking you to do is you even believe will potentially lead to the outcome that they want. If there’s any reason, there’s some other questions. So basically, you just take that conversation that happens at the end of the project, you move it to the beginning, and you have the CEO convince you that this is a good idea. And through that conversation, I call it the why conversation, it’s got some other components, you find out basically what the outcome is worth to them. And then based on what it’s worth to them, whether it’s $1,000 or $100,000, then you can easily set some prices based $100,000. Okay, $10,000, that’s a price. If the outcome’s worth $100,000 to the buyer, then $10,000 is definitely an acceptable price. But then you say, at a $10,000 price, what costs are justified on my end as the seller? So if I’m gonna get $10,000, and that’s it, no change orders, nothing, $10,000, what can I do that would be fist-pumpingly happy to do for $10,000? That will move the needle closer to the desired outcome of the CEO, and is a big win for me, and is a tenth of what the outcome is worth to them. Am I gonna get them all the way to the finish line? No, but branding people can’t get someone all the way to the finish line anyway. They can only contribute to a desired outcome, and that level of contribution has to be discounted because you’re not in control of everything along the way. If you could give them $100,000 for, you know, guarantee that they’re gonna get $100,000 a year over your benefit from your branding exercise, you could guarantee that. Well, yeah, you could probably charge $200,000, but you can’t guarantee it. There’s a lot of things that can happen. So you discount, as Blair says, you discount it by uncertainty, and at the $10,000 price point, you’re like, well, I could do a branding workshop. I could teach your internal people how to do this. It’ll take a half day, 30 day follow up. We can review what your team put together. And I’d be fist-pumpingly happy to do that for $10,000.

So I guess the other question here is like fixed fee pricing. And how do you separate them for someone that just pulls a number out of the air versus value base?

So value based pricing is a way to calculate a fixed price. So fixed pricing is sort of like a bigger level. It’s a higher level category. You can set a fixed price by rolling some dice. You can base a fixed price on how many hours you think it’s going to take. It’s still a fixed price, but it’s based on hours. Or you can base a fixed price on the value to the client. And like you said earlier, your hourly rate, you basically picked it out of the blue. It’s not based on anything client specific. It’s not based on any particular project. It’s mostly like an ego thing. Like, I think I’m this good compared to, you know, that person charges 100. Right, right, exactly. I’m way better than this person who charges $100 an hour, but I’m nowhere near as good as this person who charges $200 an hour. So my hourly rate is reasonable. It’s reasonable for me to charge $150 an hour. This is pulled out of thin air. And then you multiply it by another number that you pulled out of thin air, which is how many hours you think the project is gonna take. And if you only did an hour or two hours or maybe even, I don’t know, any unpaid amount of discovery, you have not uncovered all of the scope of what they’re trying to ask you to do, at least not in software. In software, it was like impossible to uncover enough scope in a couple of meetings.

Yeah, that’s where I transitioned a while ago. A lot of listeners will know interconsultancy. And so completely changed my model and the way I think about it. And a lot of times now clients come to me for the very reason that you’ve just said, which is that we don’t know how the next three months are going to pan out, right? We’re going to start this together in a partnership scenario with an objective to aim towards, like you were saying, which is usually a new rebrand positioning, whatever it might be. But on the journey, how many customer focus groups do you want? It’s like, well, how does that map out? We don’t know precisely at the start if we might need one in six weeks time to expense check something that we’ve come up with in the workshops or whatever it might be. So that kind of ambiguity, as you say, it’s better to just price in because what then happens is, if you don’t and if you’re on this line by line scenario, then every time there’s a change order, someone has to go, well, Mr. Client, Mrs. Client, unfortunately, that’s extra work and now you have to pay a bit of extra money. And you get this kind of impression that the relationship with the client comes down to, oh, here we go, they’re going to charge us again for this. And again, that’s where the relationship starts to sour. Whereas if they’re paying you an equitable amount for the outcome that they’re looking for, and as you say, it’s well within the realms of what you find worth doing, then you don’t get those issues because you’re getting paid so much, quite frankly, to add an extra workshop in or something, it’s not a big deal. In fact, you want to do it because you want the client to be happy. So it’s a completely different setup, this methodology that we’re talking about now. Having gone through both, like you have Jonathan and obviously not to your extent, like in the way that you’ve documented and articulated it, everything you’re saying now from a practitioner’s perspective, myself, I can verify folks, so definitely listen to this. I could probably learn from it. I’ve got a few questions as well, because I find that question at the start around the value to the client, probably, and I totally agree, you need to bring it early, but it’s still quite hard to get them to even pin clients down on a number. They may not really even know. So I just wondered if you’ve got any tips, like how do you, let’s get practical, right? Let’s give us a practice. Let’s imagine we’re in a sales conversation. What sort of questions do you recommend people ask to kind of try and unearth that value to the customer, to the buyer?

So yeah, it’s super important, and it is difficult to learn how to do this. It’s sort of a performance art. There’s some science to it, but it’s very much a performance art, and you need a fair amount of at bats to kind of get good at it. But the alternative is so much worse. It’s that CEO at the end saying, this is garbage, start over, and we’re not paying you another dime. And then now you got a tough decision to make. So the beauty of this is that it dramatically, I didn’t realize this, I didn’t expect this, but when I first started doing this, an unexpected but welcome side effect was my clients all chilled out because there was no micromanaging, there were no time sheets, there were no questioning anything. And the deadlines, a lot of deadlines disappeared because to them the deadline was a cost control. But now all of a sudden when they don’t have to worry about a cost control, they’re like, well, you know, it’s done when it’s done, we don’t want you to cut corners, we want it to be good. So they really calmed down. There was a lot, it was just much more comfortable, it was a much better working environment. So that was huge. So but, but it is difficult to uncover value and there are a number of people, Alan Weiss, Blair Enns, there’s a bunch of them who talk about how to do this in a sales interview. So the way that it worked in software with me, and it’s the same structure for any professional service, is you want to talk them out of hiring you, which is polar opposite of what you’re used to doing probably. Probably you’re used to spending all weekend to put together a great pitch deck and come in and do the beauty contest against three other agencies that are waiting in the waiting room. This is the polar opposite of that. You go in and you first, they’re going to brain dump for a few minutes about what they, maybe up to 20 minutes they’re going to say, ah, this is what we want to do, we’re all excited, this is new thing, dah, dah, dah, dah. And that’s great. And then they might get very specific about, then we’re going to want a logo and we’re going to want, I don’t know, you tell me, you get all this list of deliverables and so on and so forth. And so you write all that down diligently taking notes and it’s like, okay, this is great, this is great. Yep, we can do all these things, but you’re really just not saying much. And then once it seems like they’ve got everything off of their chest and they’re kind of like, they’ve kind of cleared the decks, then you say, okay, this is great. Can we back up for a second? So I’d like to know more about the environment this is going to launch into. And good clients will say, yes, let’s talk about that. They’ll be like, ooh, this is interesting. Bad clients will be like, no, we told you what to do. That’s what we want. Just give us a price. And like, that’s not a good fit for value-based pricing. So if they are willing to go up a level with you and talk business or strategy and allow you or help, really, you’re helping them uncover why they should do this at all. This is going to be expensive. It’s going to be time-consuming. It’s going to irritate your employees. It’s going to, you know, all of these things. So why would you do this? You know, like what’s, why not do it some other ways? Couldn’t you just spend a bunch of money on ads? Or couldn’t you whatever? Couldn’t you hire an internal person to do branding for you? Like you told me you have a bunch of designers, why don’t you just have one of them do it? You know, and you just keep presenting cheaper alternatives and they will bat them away, or they wouldn’t be talking to you in the first place. And they’ll say, no, we can’t do that because of this reason. We can’t do that because of this other reason. And if we do that, it would actually look really bad for us if we spent all that money on ads or for some strategic reason, we’re not going to be giving money to Metta, whatever. And you’re writing all of this down as close to verbatim as you can. And you’re like, okay, why do this now? Why did something change? You’ve been probably talking about a rebrand for 18 months. Why are you pulling the trigger now? Couldn’t you study the market for 18 months and do it later? AI, can’t you just do it with AI now? It should be so easy for you since you know what you want when you see it. Why don’t you just do it with AI? Just wait for AI to get better for 18 months and then do it later. They’ll tell you why they can’t. There’s some reason why either it’s the board or the market or some competitor has done something that they’re afraid of. There’ll be almost certainly there’ll be some reason why this is urgent. Then you’re like, why would you hire me to do it? There’s probably, you could probably choose from 100 people like me, why are you talking to me? Why not, like I said, outsources to your cousin Vinny or some internal employee or offshore at somewhere. Then that’s where you learn how good your positioning is. With the answers to those things, you’ve now got a really good idea of where the target is. Where’s the bullseye? What are we shooting for here? Unless I was convinced at that point that their expectations were realistic, that the timeframe was reasonably realistic, and that I really was the best person for the job in their mind, then I’m going to write a proposal, because now I have a lot of pricing leverage. Not necessarily, which isn’t to say that I can set the price astronomically high. I just know that I just have an idea of what some acceptable prices would be, and then I can reverse engineer scope based on those prices and present them with three options. So it’s a process of uncovering. Like you said, they couldn’t blurt out a number. If I said, oh, how much is this worth to you? They’d be like, I don’t know. I don’t know how to process that. So you have to go through this process of Socratic questioning and kind of like, they know in their gut that this is the right thing to do. You and they need to pull all of that out of the junk drawer and put it on the table and basically inspect the decision at the components of the decision and find out why this, why now, and why me so that you’ve got some. It’s the only way to convince you to take the job. If you don’t know those things, you don’t know what the desired business outcome is or how realistic it is. So without doing that, if I didn’t do that, I wouldn’t be able to write a proposal. Like I don’t even know what I would put in it. But if you do do that, the proposal writes itself because they’ve given you all the reasons why they have to work with you.

That’s brilliant. Folks, that was a masterclass. I hope everyone’s been taking notes.

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I’ll just throw another thing in there and see what you think about this. The other thing I find in that early conversation is when they make statements, is to challenge that, obviously positively, you don’t want to be a jerk, but to be like, so how do you know that? What have you done to verify that? Oftentimes, I find clients will expose the fact that it’s a hunch or it’s like a guess that they’ve done and then if you want to add a value-based question in this, like, well, what would it mean to you if maybe I came in as an outsider and we started to verify some of this before we actually start taking an action? You get a sense of them like leaning in being like, oh, would you do that? That would be amazing because I always think, particularly from a consultant’s perspective, you’re acting like a doctor, right? Like, you don’t go to the doctor and go, doctor, I’ve got a broken leg and the doctor immediately just whips out a cast and just like puts it on your leg. The doctor says, let me just check that first. We’ll go get an x-ray and then we’ll have a diagnosis. So I often find people come with a pre-baked diagnosis. Sometimes they’ve done some verification themselves. Most of the time, though, they haven’t really done it. It’s just the gut that that’s what they think is happening and they’re hiring you to solve that. So you can add even more value if you verify the problem is as bad or as worse as they think it is in the first place. So I don’t know what your thoughts are on that, Jonathan. Do you think that’s a good point?

Yeah, I mean, if anybody who’s listened to me on my show will hear all the time me say, it’s like someone running into a doctor and saying exact same thing. It’s like running into a doctor saying doc, I need a triple bypass and the doctor’s not going to say, jump up on the table. I’ll go get my knife. Right. That would be malpractice. And I, and it, I don’t want to put too fine a point on it, but I think it’s malpractice in all the professions to prescribe before you diagnose. I mean, like they are not the expert. That is why they called you. So for them to be, you know, not to mix my metaphors, but well, I’ll stick with this one. For them to tell the surgeon how to do the surgery, or if the surgery is even required, is insane. It doesn’t make any sense. But I know that people, like there’s people who are more junior, and people who are just people pleasers, and people who are used to being an employee and doing what they’re told. This is another big mindset shift is like, no, you are the expert about branding or design. They’re the expert about selling tires or manufacturing tires or whatever. So you’re not going to tell them anything about how to do that. And they might even be an expert about what their customers want. But you’re the expert about design. You’re not going to tell them how to make tires, and they’re not going to tell you how to do a brand guideline or something like that. So it’s like you need to own that piece. And if they’re going to boss you around at the thing that they’re supposedly bringing you in to do, it’s almost guaranteed to fail because the wrong person is driving the taxi. They’re like backseat driving the whole project. So of course, it goes off the rails. Of course, it goes over time. But the incentives, back to the financial incentives, if you get paid more and more and more as that backseat driver, you get the meter running, backseat drivers like, maybe take a left up here, maybe take a right. They haven’t even told you where they want to go, by the way. They’re just bossing you around, you’re driving around, and then eventually the meter gets to a point where they’re angry. So we’re not where I wanted to go yet. It’s like, well, you didn’t tell me where you wanted to go. It’s like, well, you didn’t ask me. It’s like, ah.

Ah, yeah, for sure. That’s crazy. Just one other quick thing, just on this sales question, if you don’t mind, Jacob, because I just want to ask this question. Do you find that there’s different layers of value that you can uncover? And what I mean by that is, so if I tell you where I’m going with this, I often think that there’s value to the buyer as an individual, and then there’s value to the business. And sometimes those two things have different nuances. Imagine a CEO would be telling you the problem from my perspective, the growth opportunity and that we’re not aligned around the growth plan and the brand and the way it’s positioned and blah, blah, blah. So that’s the business challenge. And then I would say to them, but what does that look like for you? And they might say, oh, every board meeting I go into, every leadership meeting, everyone’s fighting each other and I’m just spending all my time dealing with squabbling people and lack of priorities and all this stuff. Now I’ve uncovered what I would call like a soft value, like a value for them, which is misalignment and the stress of having to handle the leadership team. On top of the hard value, which is to the business itself, which has got hard numbers and growth opportunities and total addressable markets and all this good stuff. So what are your thoughts on that? Do you see different grades of value and do you have any thoughts on how to uncover that and what’s worth more? I don’t know if you’ve got any thoughts on that.

Yeah, there’s a couple of things. Probably the first thing I would say is there can be a difference between the person who’s going to decide to hire you and the person who approves the decision. And it feels a little bit like it’s in the territory you’re talking about. So where you’re in a bigger organization, you’re talking to, I don’t know, you tell me, a SVP of Finance or something, and they are at a credit union and they want to redo all of their member onboarding. And it’s not like an overall rebrand of the entire business. It’s specifically to their business unit and they’re responsible for it. And maybe they have budgetary discretion over it to say, like, no, I don’t have to take this to anyone. I can run with this. So in effect, that person is kind of like the CEO. They are both the economic buyer and the person who gets to make the decision or recommend. You know, basically, if the price is right, the recommender is going to get what they want. But this person is basically like a CEO inside of a larger company because they can decide to hire you and they don’t have to ask for anyone’s permission. A lot of times, though, it’s to different people. And this is much more tricky. And you described it very well. You described that you want to know what the person who’s deciding, you want to know what their personal motivation is, which is not the same if we’re assuming an employee in sort of a Fortune 500 or something. It is not the same thing as what’s good for the business. On the surface, they’re going to say, oh, it’s good for the business, but that is not actually the thing that’s going to motivate them. It’s something like you just said, whether the misalignment or I keep getting yelled at about this thing, or I really want to, you know, I’m going to be up for promotion in a year, or my budget, my bonus is at risk or whatever. There’s going to be some personal frustration or opportunity that they’re experiencing. I still, in a situation like that, I still get really nervous when I can’t also talk to the economic buyer because we’re opening ourselves up for that meeting in six months where the CEO rolls in and says, this is garbage. And I don’t even care that I’m not going to get blamed for that because the SVP is going to get blamed for it. But I don’t want to be part of that. I don’t want to be in that meeting that I want their logo on my website with a glowing testimonial. So it is, if at all possible, first of all, work with companies that are of a size where you can always talk to the economic buyer. That might mean working for smaller companies, but you’re a higher altitude of person you’re talking to. But the other thing is, if you really got to believe that the economic buyer is going to be on board with the outcome, otherwise you’re just opening up to that risk. But yes, it’s almost like in that scenario where there’s two different people, it’s like you got to satisfy the decider’s personal goals and then give that, and you can’t talk to the CEO or the person above them, you need to give them a story as to why this is a smart thing to spend money on, that they then pass up the food chain. That totally works, makes me nervous personally, but it does totally work.

A question on the opposite end, we’re talking about value, but if you had smaller projects or smaller clients, for example, how would you usually handle that?

I love that question because it’s something that people don’t usually see when they hear me talking about value pricing and it’s a license to print money and I can increase my rates dramatically. No, it cuts both ways. If the value is not there, you can’t set a price higher than the value. The value is what it’s worth to the client. It’s worth, let’s say, $10,000 to the client. You can’t roll in there and say, well, it’s going to take us this long, so it’s $50,000, take it or leave it. They’re going to say no, it’s not an acceptable price because the value is not there. There’s no way to escape this. To me, it’s just like, well, you might as well find out the value first. Then you’re pretty much guaranteed that you’ve got some acceptable prices. Then it comes down to the benefits at each price tier if they see those benefits as meaningful. With a small client or a smaller client, they’re going to get less value out of it because it’s multiplied by fewer, it depends on what you’re doing, but it’s multiplied by fewer employees, customers, revenue, it’s multiplied by smaller numbers. The value is automatically lower even though you might do the exact same thing for a mom-and-pop pizza place that you would have done for Domino’s. The acceptable prices that you put on your proposal, they have to be lower than if you were proposing to Domino’s. You can still do it and there’s no way around them making a value-based decision, so you might as well ask, what is this worth to you? They’ll say, they might have asked you to do $50,000 worth of work to you. They say, well, it’s only worth $10,000 to us. If this went like a home run, it’s only worth 10 grand. Then you say, well, the thing that you ask for then is just out of your budget. So what if we did something for $1,000, which is way smaller than what they wanted, but you can explain to them how it would move the needle in the way that they want it moved. And at $2,200 and at $5,000, still all lower than 10,000, you’re giving them three things to choose from. The prices are lower than what it’s worth to them. But your scope obviously has to be really, it’s gonna be really small based on those price points. You’re not gonna do the thing they asked for. You’re gonna do something that can still help them though.

It’s a good segue into positioning. So you talk about pricing is positioning. So if the market sees you as interchangeable, then you’ve already put yourself in a pretty bad situation. So how much of pricing power, value-based pricing comes down to positioning? I know it’s like one of those three big questions, it’s like, why this, why now, why me? But the why me is so important because it comes back down to how you’re positioned and how you even got the call in the first place. So yeah, how much pricing power comes down to positioning?

I’ll give you a formula, the idea. I don’t want people to plug numbers into it, but it’s just a formula to help create a mental model of what’s going on in a situation like you just described. So you’ve got three components. You’ve got desire, you’ve got money, and you’ve got options, DMO, desire, money, options. And desire times money divided by options. If you’re taking notes at home, I’ll go slow. But the idea is, if they want what you do, let’s just call it branding. That’s not what they want, but let’s just say, we really want branding and we want it really bad. What they really want is some outcome that they believe branding will lead to, but I don’t know. It’s going to be different client to client. But they want some outcome of branding and they want it really bad for some reason. And you know that reason because you had the why conversation with them. If they have a ton of buying power, it’s a public company and you’re talking to the CEO, it’s dominoes, they have a ton of buying power, those two numbers multiply, roughly speaking. You know, again, this is not math, I’m just the mental model. Those, the desire and the buying power, the money, have a multiplicative effect where every incremental dollar means a lot less to them than someone who has less money. So they’re willing to write a bigger check because they don’t really care. They just want this thing that they want. And so if you have a Fortune 500 company that wants to do a complete re-brand, they’re probably going to spend at least a million dollars on it, right? For sure. But then you’ve got the dividing line and underneath that is options. And if they have a whole bunch of options that are less than a million dollars, but you know, they believe or they can’t tell the difference between the rest of the options, they all seem good, what is the last thing that everybody understands, it’s the price. So if I can’t tell the difference between these three branding agencies and one of them was like five million, one of them was two million, and one of them was 900,000, they’re probably gonna, actually they’ll probably pick the middle one, but they might pick the cheapest one, but they’re almost definitely not gonna pick the top one if they see no meaningful difference between the three agencies. So it is critical for that five million dollar one to be meaningfully different from the other two. And I keep saying meaningfully because it has to mean something to the buyer. Not because we won an award, we have been in business longer than the other two, or whatever it is, those are not necessarily meaningful to the client. If they are, they are, but if they’re not, they’re not. You need to be unique in a way that wipes all the other options off the table. And if you do that, then that desire times money is not getting divided. It’s essentially undivided. It’s one. You put a one in the denominator, and your desire and your money, the client’s desire and money, are multiplied and not diluted by competition. So what this means is, you don’t want to be just one of many. You want to be the one and only, which is positioning. It’s like you’re known for this one thing.

Yeah. It’s notoriously difficult to get to that point. Just for listeners, are there some great examples that come to mind for you, of people have really nailed their positioning. They are that one unique agency.

Yeah. I’m not super familiar with branding. You guys probably be better at picking that out of a hat. But I work with a lot of people who have laser-focused positioning, that gets down to the psychographic level around the buyers. So for example, I have a student named Geraldine Carter. You go to her website, geraldinecarter.com, you will instantly know that she is not for you, that there’s nothing she can offer you. She might be a good guest, but there’s nothing she’s going to offer you. She’s not going to sell you anything. There’s nothing of value you could really buy from her. But the other thing you’re going to know instantly is exactly who would. And that is a solo CPA firm owner or maybe a very small firm who is doing maybe around a million dollars a year, possibly with one employee, or maybe $250, $300,000 a year if there’s no employees, and they don’t want to build an empire, they want their life back. They don’t have a leads problem, they have tons of business, they have more business than they know what to do with, but they’re working 80 hours a week during tax season and they’re working 60 hours a week the rest of the time. And they hate it and they want to quit. That is her customer. So anybody, next time you talk to a CPA, you’re going to be like, I wonder, how much do you work? It’s almost like the positioning is so laser focused on, it’s an industry and a psychographic, it’s like a desire and an expensive problem, which is that they are slave to a business that was supposed to bring them freedom and they were better off in house. So that person, if you go to her website, there is a wall of testimonials of people saying, and this is an important point that I’m skipping ahead, but this is a critical point, is results. Testimonials are results. So it’s a wall of testimonials of like, I work half as many hours as before and I increase my tax bracket by three ticks, working less. One after the other, after the other. Videos, all results, results, results. So when you find yourself in that position or when someone shares her information with you, it’s like, you’re kidding me? There’s no, who else is, there’s no one. There are other people who speak to the space and I could go down a list of three more and say how they’re different in a meaningful way. So, you know, that’s a, she’s a really good example, but there are plenty of, there’s plenty.

We actually had a guest, Emily Penny, and she looked at all different agencies in the UK, hundreds of them, and the thing she found was that they’re all so the same, like all saying the same thing. And there was only a small handful that had a very unique point of view and were actually positioned in a way that was memorable and meaningfully different. And the others just kind of blended in and it’s funny because that’s what we do as professionals. We help position other brands and it comes back to ourselves. And we just failed to position ourselves well.

There’s a well-known positioning fear reflex. I think that term was coined by Philip Morgan. And you have this automatic feeling that at the core of positioning is strategy. It’s strategic level marketing. And the core of strategy is saying no to things. And people who are struggling to meet payroll don’t want to say no to anything. So the idea of niching down or specializing in some smaller market, so your total addressable market is smaller, is terrifying. Because I’m only getting a lead a month now. If I target a much smaller market, I might only get one lead a year when, in fact, it’s a paradox. And the reverse is true. Because if you target a specific kind of… Let’s use a… This is probably sort of a… I don’t like hunting metaphors, but it’s a great example. If I said to you, what kind of bait should I use to catch what? Right. Yeah. You can’t answer. It’s an unanswerable question. So when people get on my mailing list, I say, what would, you know, who are your dream clients? And they’re like, oh, I work with anybody. You know, any kind of big problem. I love solving big problems. And it’s like, but what should I do? I’m not getting any leads. It’s like, well, maybe you should be able to first pick who your ideal buyer is. That would help you get them. Again, it’s like you’re shooting baskets with a blindfold on. How are you gonna, it’s just luck. It turns into referrals only. But picking feels very scary because then you feel like you’re gonna starve. But it happens over and over and over when someone picks a really good, tight positioning that says no to 90% of businesses that still leaves like 10,000 businesses that would make perfect clients. And now your website can actually have some meaningful copy on it. You can finally pick images that make sense and aren’t just like smiling people shaking hands and something that’s much more specific to their industry or the person that they’re trying to attract. It’s like you can’t know what kind of bait to use if you don’t know what you’re trying to catch. So, you know, I understand why it’s scary. It’s but and it’s really hard to read the label from inside the bottle, which is why branding agencies are so, everyone’s bad at it. I’m bad at it. You have to get feedback from the outside. Like I could we could do an exercise right now. I won’t drag you through it, but I could ask you guys, well, who do you think I, what do you think I’m the one and only of, you know? But people listening, we’ll leave it as an exercise to the listener. What do you think I am? Right? That’s my positioning right now. Whatever I think it is, doesn’t matter what I think it is. That’s, you know, it has to come from the outside in their language and in their from their viewpoint.

And I think it comes out to simple ideas. I think you’ve done it brilliantly with the Hourly Billing Is Nuts, it’s relatable, it’s memorable, and you’ve written a book on it, and you’re standing against something which opens up deeper conversations on what the alternative is. So I think it’s brilliant, and you’ve made your way here, so well done.

We appreciate it, yeah, for sure.

All right, so change your gears a little bit. I guess we want to build authority, so we can position ourselves well. And authority is not fame, you know, it’s been known by the right people by, you know, for a specific point of view, like you’ve done around a certain problem. So what is a business of authority actually look like for people that want to really get this positioning perfect?

Okay, good question. Which part of the business, like the business model piece or the offerings or the marketing?

Oh, yeah, good question.

Well, I’ll just jump in. So I’ll skim across and then you can ask questions. So a business of authority. First of all, I know this is hard to hear if you already have a lot of employees, but maybe most people listening don’t. I think it’s a bad sign if you’re hiring a bunch of mini-me’s to do basically what you do. That is not an authority business. That’s an execution business, which is fine and you can make money doing that, but it’s not really an authority-based business. Not to say the positioning doesn’t help those kinds of businesses too, but when I see an authority business, it’s the kind of person who’s like author, speaker, consultant. Maybe they have an assistant or they have, but there’s not a big team of people doing what they’re good at. From a headcount standpoint, it’s usually pretty small because scaling by adding bodies is just a completely different approach. It’s a cost-based approach. It’s an arbitrage thing where you’re just trying to hire cheap hours and sell them at a markup. So your inventory is hours. So probably low headcount, very low. A lot of times just one person. The product service, I call it a product ladder. It’s usually at a high level, it’ll be some sort of advisory projects. Maybe there’s some hands-on work, but it’s usually strategic or there’s a strategic engagement first like some kind of a roadmap or diagnosis like we were talking about before. It’s the kind of person who would maybe get hired as an expert witness in a trial, like they’re recognized as an expert in the space. So they probably do custom consulting projects that are advisory in nature. They might do advisory retainers on a monthly basis for, not for hours, but for access to their expertise. They probably have some diagnostic service that’s a productized service, which we haven’t talked about, but it’s like a fixed price service that you publish at a given price on your website, so people can just buy it or not buy it. They probably have a book. They might have other info products like a video course or maybe a community, but that’s getting into the coachee space. So that’s sort of a list of sort of headcount, product and service mix. And then revenue-wise, I’ve seen soloists doing plenty of, all over the board. I mean, of course, there are ones that are struggling, but I’ve seen them as high as like, I think the highest soloist I’ve talked to is like 1.5 million, just them, working like 20 or 30 hours a week.

You know, AI is the buzz topic, right? Like, how do you think AI can assist and help people with their pricing? And have you got any thoughts on that?

Let me clarify, help setting their pricing or help?

Yes, I guess setting, like, can it help people set pricing? And like, I imagine it might be more that, you know, your AI agent can help you better set up your proposals and sales call conversations. But just wondered if you had any thoughts on that and whether you sort of seen anyone using it well?

Tons of things there. So first, I’m not really an AI maxi, I use it all the time. If it went away tomorrow, that would be fine too, but I’m not against it. One failure mode that I have been seeing over and over again is when people try to outsource the really hard thinking work that, the thing that they’re good at, they try to outsource that to the model instead of outsourcing the tedious administrative stuff that probably no one wants to do. So, and you actually already teed up my answer, which is I probably, I would never use it for pricing, but I might use it for drafting the proposal. I almost certainly would if I had, yeah, but I have a template. It’s already easy. It wouldn’t be that much. But yes, having a draft of the proposal is fine, but it’s the reason why it’s so easy to draft the proposal is that- You’ve done the hard work. I did the right, I did the hard work, right. Okay, all of that said, I do think you can use it as a learning tool to get better at the why conversation. So I haven’t done this too many times, but it’s given me good results so far. It’s really hard to get enough sales calls that you are not desperate to land for you to get enough practice at getting good at this. So you have to walk into that meeting not caring if you get the gig or not, which is very hard if you’re not sure where your next bull of Cheerios is coming from. So you can use it as a sparring partner, and the beauty of it is, like I’ve tried to do this in person, like one-to-one, do role-playing, but the person who I’m trying to train already by definition doesn’t know enough about their client’s businesses to even do a decent job of role-playing as the customer, because the whole problem is they don’t understand their customers or clients. But the AI does understand basic business principles, and so you can get into a why conversation by saying, pick a business that looks like one of your past clients or a client that you’d really like to land, give it as much, have it research it, you don’t have to give it any information. Say, okay, so imagine I’m talking to this SVP, here’s their LinkedIn profile, and they have called me in for these reasons to talk about a branding exercise. Then I don’t care, upload my book and say, read about the why conversation, I’m going to try and do a why conversation on you, and they’re going to throw stuff at you. It’s great because you don’t have to do it in real time, you can really think about your answer before you chat back to it. It just gives you practice, it’s a way to practice going through it that’s low-stakes and reveals where you chicken out. Even against the AI, you’ll chicken out. You’re basically role-playing the sales interview. I think that’s really useful for people.

Yeah.

But outside of that, just have to do administrative stuff and don’t outsource your job to it. I mean, that’s the thing you love doing. Why would you let someone else do it?

Right. That human connection with the buyer, I think is crucial. Don’t outsource that bit like you were saying. You cannot substitute that conversation that we’ve talked about, the why conversation is also where you build rapport and people connect with your energy and your personality. Particularly, if you’re solo like me, that’s where I can build. I can tell if there’s good chemistry there or not early, and no doubt the buyer can. It can win you the gig just by showing up and being smart and asking intelligent questions like you’ve highlighted. Really great tips. Really, really great tips. Cool. I think we’ve come to the end of our time, and I think I just want to thank you so much for coming on, Jonathan. It’s been such an important conversation to have. Folks, I hope you’ve enjoyed what Jonathan’s had to say. Definitely, I’m sure we’ve all been taking notes all the way through. I certainly have. I’ve got a whole ream of notes in front of me. It’s been brilliant. Thanks so much for coming in.

Anytime. My pleasure. Thanks for having me.

Just one final question. Where can people connect with you and what should they be doing if they want to actually start moving away from Hourly now?

Well, if you go to valuepricingbootcamp.com, it gives a six-day free email course that goes more in-depth into some of these issues and considerations and it comes straight from my… I mean, yeah, it’s automated, but it comes from my email address. So if you reply to any message, I’ll get it. I try to respond to everyone and it’s a great place to start a conversation.

Awesome. I highly recommend Jonathan’s email. I’ve been on it for years and years. You send an email every day, which is… Yeah, well done.

3,567, I think, right now.

Yeah, that’s bonkers.

Can you do a few more?

I don’t think you’re doing enough there, mate. I just think put it out there.

You got to repeat yourself. It doesn’t sink in right away.

That’s true.

Amazing stuff.

Thank you. All right, guys, we’re going to wrap it up here. Jonathan, thank you so much. We’ll look these up in the show notes as well. So thank you. All the best.

Thanks, guys.

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