Recently, I had a rather verbal disagreement with someone who was interested in making use of our services. Specifically, the gentleman in question wasn't happy about my intention to bill their company for travel to a first meeting (with the time spent on the meeting however not billable, as I'll explain).
To set things straight with those who questioned my logic, I decided to explain the modus operandi (actually, forget about fancy words, let's just call it "way of working") that I put forward when engaging new clients . The extract below has been slightly adapted to fit here, and also bear in mind that everything is outlined in a neat document which is provided to interested parties beforehand:
If you're interested in working with us, we'll gladly schedule an initial 1 hour meeting to discuss your requirements with you, at our offices, free of charge. If travel to your premises is preferred, travel costs are billable.
After the initial meeting, all other in-person meetings to discuss the project are billable - regardless of whether such meetings are on-site or at our offices. Phone or e-mail discussions are however free of charge, with our compliments.
OK?
Now most people immediately argue the following (which is, expectedly, roughly how it happened):
"You can't bill someone for a first meeting! You should be glad for the opportunity to get their business! Are you telling me that you don't need the work? That you've got enough work, and spending time with new clients isn't important to you? You should expect to spend money getting business - do you know how much money I spend getting new business?"
To which I politely counter-argue the following:
I'm sure that you spend money getting new business. Everyone does, myself included. However, I'm also sure that you probably account for that time/money spent in either of the following ways:
- You write it off as part of general marketing, effectively spreading the cost load across your entire business (or business unit, department, or whatever)
- You build the cost into the project, effectively billing the client for it in the end anyway (but only if they do become your client)
In both cases, someone has to pay for the time spent serenading prospective clients. With option 1, all the business's clients are effectively paying a small percentage of the cost of each new client signed up. With option 2, only the specific client is paying - but (and it's a big but) only if they actually become a client. If they don't, everyone else once again pays.
With me? Good, because there are three points I'd like to highlight.
Firstly: Allocating expenses to indirectly related areas (or clients, or employees, or whatever) is fundamentally not a sound principle. No one likes hidden costs, and by loading the cost of the first meeting into the project bill, you're effectively saying to your client: "Haha, you thought you got it for free - guess again sucker!". That, and the fact that in many cases your loyal, trustworthy clients end up paying for someone else's royal treatment expectations. Not good, don't you think?
Secondly: If you're in the business of billing for hourly skills (as opposed to producing and selling products), you literally are directly remunerated for your time, and spending time delivering skills without billing reduces your profitability directly. Doctors and lawyers are good examples - they sell their time, because they have special skills. To illustrate, I'll base my example of the ridiculousness of expecting free "serenading" from a doctor. If you were expecting the possibility of being ill in a week's time, it would certainly be very nice to be able to call a doctor in to visit you in the comfort of your home to explain the services he'd render if you were to become ill. The same would be ultra-convenient for legal services, wouldn't it? Unfortunately, most doctors (and lawyers) would simply laugh at you if you expected their time for free. Still with me?
Thirdly: Expecting a service provider (or vendor, or supplier, or any other other supply-side party) to be desperate for your business is a bit silly. It's like saying that the market is driven by demand. Which, funnily enough, many people actually believe to be true. In reality, market utopia is a balance between supply and demand. In practical terms, this means mutual agreement between a consumer and a producer to do business on terms that suit both parties. Not one, but both.
OK, so we have the principle of time as money (literally), together with the principle of mutual agreement on exchange. Both are, IMHO, equally important. However, I'm suspecting that you might have an objection... Doctors and lawyers are extreme examples of time-based billing I hear you say? Possibly, in some instances. And so, because it's all about balance (the market remember?), I think it's only fair to make a concession from the supply side - which is exactly why I believe in not charging for the first hour of a first meeting; granted that I don't have to incur a travel expense.
At this point, I'd like to make a very carefully considered statement: No one should ever do business if they feel that the value they're either offering or gaining is unreasonable. No consumer has the right to demand that he be served in a certain way, and no producer has the right to expect a consumer to consume what he's producing without question. Both have to compromise, otherwise the value sphere gets warped. Give a little, get a little, so to speak.
In my opinion, offering anything for free (or cost-loading something else to make up) is just plain bad business. When value and remuneration become disconnected, borders between priorities begin to blur. Value starts evaporating through all sorts of little cracks, and everyone starts losing out. It's a slippery slope which tricks the unwary into a state of complacency about the value they're adding, inevitably causing a loss of intent, something which I personally regard as fundamentally important. Without intent, entire systems of trade become mindless capital exchanges.
Amazingly, there's one simple thing every businessperson can do to avoid value evaporation: Never dilute what you're offering, no matter what. Easy, really.