Embracing Outcome-Based Pricing and Ditching Hourly Billing with Jonathan Stark

Jonathan Stark is a former software developer who is on a mission to rid the world of hourly billing. He is the author of Hourly Billing Is Nuts, the host of Ditching Hourly, and writes a daily newsletter on pricing for independent professionals.

In this episode, Jonathan highlights the drawbacks of billing hourly which can reduce your value to just a commodity. Instead, he suggests pricing your services based on the outcome you deliver, thereby providing maximum value to your clients.

What you will learn from this episode:

• Discover the top reasons behind the shift away from hourly billing
• Find out the advantages of choosing outcome-based pricing over hourly billing
• Uncover why positioning your service effectively can have a significant impact on your pricing strategy

"Positioning is critically important for any kind of upward lift on your fees."

- Jonathan Stark

Topics Covered:

01:04 - What got him into pricing

03:35 - The problem with having an hourly rate

06:11 - Pricing uncertainty in the case of a car diagnostic

08:45 - What makes it better charging fixed price upfront

10:33 - Why positioning your service is crucial in pricing

12:59 - What hourly rate appears to be on the label

16:15 - Touching on the 'Experience Economy' [pricing transformation]

19:06 - Formula for value or the maximum price

21:36 - The best reason to not use hourly prices

24:22 - Solving the scope problem with knowing the desired goal

29:21 - Jonathan’s pricing advice

30:38 - How to connect with Jonathan

Key Takeaways:

"If you sell somebody an hour, you cannot make it more efficient. It takes an hour to deliver it. It artificially limits your income." - Jonathan Stark

“The way I do it [on the scope problem], I don’t scope first, I scope last.” - Jonathan Stark

People / Resources Mentioned:

• Alan Weiss: https://alanweiss.com/about-alan-weiss/
• Joseph Pines: https://strategichorizons.com/pine-and-gilmore/joe-pine/
• How to Measure Anything: Finding the Value of Intangibles in Business by Douglas Hubbard: https://www.amazon.com/How-Measure-Anything-Intangibles-Business/dp/1118539273

Connect with Jonathan Stark:

• Website: https://jonathanstark.com/

Connect with Mark Stiving:

• LinkedIn: https://www.linkedin.com/in/stiving/
• Email: [email protected]