How to Respond to a Prospect Who Wants Hours

In response to a question posed by one of the participants at a recent Project Management Boot Camp I conducted, Organizational Provocateur, Tom “Bald Dog” Varjan of Dynamic Innovations Squad wrote what I think is a great response.

First here is the original question:

Have pitched one of our first value billing non-hour engagements. We have done a very detailed scope document and the customer is looking for a time and cost break down for each task. Suggestions on dealing with this one.

And now Tom’s terrific response:

Dear Prospect,

I understand that you may have never faced this situation of paying for value. The reason we’re doing pricing this way is that by focusing on hours and costs, we are forced to shift our sights off the results.

We pride ourselves on managing our projects with the precision of brain surgery. In any project there can be only so many variables to focus on. We’ve chosen this pricing model because we are on the same side of the table as you and want to focus on the results you’re seeking.

People don’t go to brain surgery for five hours of fiddling with their gray matter. They want to get healthy.

Similarly, no one wakes up in the morning saying, “Let’s hire an IT firm for 10 hours of server tweaking.” They have specific problems.

Unfortunately, we believe the hourly pricing model you’re requesting is unethical to clients. Basically, the longer I can prolong your problems, the more you’ll pay me. We’re proud to operate as trusted advisors to our clients who seek us out for care, protection and guidance on their IT issues.

There is a key distinction. Professionals who set value-based fees focus on the outcome of the project, that is, the improvement in the client’s condition. Professionals who set time-based fees focus merely on selling more hours, which may or may not contribute to the end result. Value-based fees are client and outcome-centered, hourly fees are self-centered.

I know this approach may be new to you, and sadly ignored by our industry, but from the ethical standpoint, this is the only way we can sing the same song.

With hourly pricing you and your IT firm not only struggling to sing the same, they are not even on the same page of the song sheet.

In your lifetime, you’ll meet many people who try to sell you “time” and expect you to pay them, but you’ll find only a handful of people who can help you to achieve specific business objectives.

At the end of the day, clients buy results not time chunks. Working on a value-pricing basis is an investment. Working on a per hour basis is just another cost.

Hope it helps a bit.

As they say on the Guinness commercial — Brilliant!


  1. Excellent post Ed. I’ve been telling customers and prospects that I don’t like to talk about hours. I’m going to modify this letter to be appropriate for a CPA Firm. Thanks.

  2. Tim McKey says:

    Hi Ed, Hope all is well with you. I have been successful in the past discussing with clients the difference between “efforts/hours” and “true results” but prospectively I will elaborate a little more as I “borrow” some of Tom’s language…it is brilliant! Talk with you soon.


  3. Tom Varjan has made some excellent observations and analogies. His approach resonates with what I have been doing in Australia for many years. Great stuff, Tom. My professional experience has been that accountants will listen to you with open-minded scepticism. Open enough to consider and sceptical enough to test it to try and prove it won’t work. Unfortunately, most lawyers can’t even get this far along the thinking of value-based pricing.

  4. Very well constructed response and my first preference is value-based pricing. And this comment isn’t meant as a “but” …”but” the response I hear occassionally from prospects on the fixed price approach, is “don’t you have an incentive to rush my project through to completeiton and thereby improve your net profit i.e. effective rate”?

    I address it by reviewing the scope, resources and project plan; along with case studies and references. But I am curious if others have found a more effective response.

    Is it simply taking a stand/position (value versus hours) knowing each may lead to one of these client perspectives?

    The fixed price approach (to be succcessful profitably and satisfaction-wise) also requires a solid understanding of the task at hand. This is not always as easy as it seems especially given we must rely on the clients perspective of how things work today. Many times they are sadly misinformed about current state conditions – especially the larger the organization and the higher they are within it. This can lead to an invalid scope and pricing.

    Thus another benefit of the value-pricing is the appropriate assessment on the front end it requires to be sure the client conditions (and the basis of the scope) are validated (or at least conditioned upon the clients presentation of current conditions).

  5. J.R.,

    I think we are on the same page here. At VeraSage, we would NEVER advocate a fixed price (value or other-wise) without a fixed scope. Included in scope is what we call the Scope Statement which address the project triple constraint (we call it the Triangle of Truth) of scope, resource (of which price is an element) and time (meaning completion date).

    For further reading, see my posts on the Triangle of Truth and Elements of Scope.


  1. July 18th Show Notes: The Second Law of Marketing: All Prices are Contextual

    In our July 11 th show we discussed The First Law of Marketing: The Value of Value . The Second Law

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