Member Anne Bisagno Speaks: Make Sure Your Customer is Winning, Too

The Challenge:

The case at hand was brought by the CEO of a service business who wished to switch from an “hourly billable” to a “fixed monthly price” model. However, he had reservations as to the feasibility of such a transition, both for his customers and employees.

If you were in this situation, what would you do?

If I were captaining your ship, I’d ensure that a fixed monthly price model offers a significant win for the customer. If not, you’re just dreaming.

The appeal of getting your customers to pay a flat monthly fee is certainly alluring. Your business would be easier to sell and staff, with greater visibility into future revenue. However, if I could offer a word of caution as someone who recently saw my own company through this transition: talk to your customers and inquire whether a fixed model would bring enhanced value. If their response is anything but a resounding “yes,” then stop there. As much as you want the transition, if it doesn’t present a significant win for your customers, you are going to lose those who pay your bills. If you get the green light, then determine whether there is a viable body of work to be completed and define it to the nth degree so the scope is crystal clear to both your customers and employees.

Remember, it takes years to transition from one model to the other. Your first guesses at scope and pricing will almost surely be adjusted as you continually evaluate the profitability of your fixed-fee contracts. Internally, you can expect pushback from employees who currently earn large paychecks by billing mountains of hours. Don’t flinch, though, and make sure you change your employees' pay structure to competitive, fixed rates. You may lose some of your people, but the attractiveness of stable pay and predicable work-life balance will bring in more than enough talent as replacement.