Pricing models are a hot topic in the professional service industry – especially when it comes to the traditional hourly based pricing model vs. the value-based pricing model. Value-based billing is attractive to both clients and service providers as it offers cost consistency based on a predetermined rate for the perceived value of the service. The opportunity to provide quality service increases when the client is not worried about being charged for that 15-minute phone call!
If your business just converted from traditional hourly based billing to value-based pricing, you might be tempted to ditch the timesheets. Is time tracking still relevant with this new, service-based approach? Absolutely! To grow a successful business and to make smart decisions, you need solid data…and that includes how you spend your time.
Time tracking can benefit value based service providers by helping them:
Identify ideal client profiles. With traditional hourly based billing, your biggest invoice usually represented your most profitable account. This is not necessarily the case for value-based billing. A detailed time log will allow you to compare the hours spent on the account to your monthly retainer fee. Based on your findings, you can determine each account’s profitability and ultimately define your ideal client profile based on that data.
Predict Availability. Time tracking will take the guess work out of determining if you have enough bandwidth to take on another client. Is your team maxed out or do you have some wiggle room? With access to your documented work history, you will know exactly how long it usually takes to onboard a new client and maintains existing accounts. Without this accurate information on hand, you will not be able to plan strategically for future growth.
Properly allocate resources. Time tracking not only shows how many hours you work but delivers a breakdown of HOW you allocate your time among various tasks. Do you spend enough time providing value to your clients or growing your business? Or, do you get caught up with administrative details, accounting, or marketing tasks? If you (or your team) are not spending time where you’d like, it may be time get some additional help or remove barriers to productivity. Make smart hiring and outsourcing decisions based on your established records.
Determining future pricing. When it comes time to renew contracts, analyze your time logs to determine profitably and future rates for your clients. Establishing this baseline will support you in determining pricing packages for future clients, as well.
Tracking the way that you and your employees spend their time is a huge investment that cannot be ignored. As they say, if you can’t measure it, you can’t improve it…and I think we can all agree we’d like to improve our business (and our bottom line)!
ClockShark is the #1 time tracking and scheduling app for construction and field service companies! To learn more check out the video below. To get a free 14-day trial visit www.clockshark.com