A few years ago my friend Greg Kyte:
- CPA, Thriveal member
- twice ranked in Accounting Todays Top 100 Most Influential People in the Accounting Profession (he asked me to pop that in)
- former math teacher
- current stand up comedian
- proprietor of Bob's BBQ
- winner of the “G. Robert Newhart Non-Value Added Fellowship” from the VeraSage Institute,Blackberry aficionado
- cartoonist
- dad
- husband
- value pricing devotee; and
- opening bat for the Salt Lake City Cricket Club (OK I might have made up this last one)
with the help of his wife Laura, made this wonderful video clip about clients of professional firms playing the Billable Hour Scratch & Win game.
If you have not watched this short video before, have a laugh and watch it now.
This video would be even funnier if it weren’t so true.
Like many others, I’ve shown this video to countless clients of professionals around the world, including in-house counsel, and the response is always pretty much the same: "that's me, but I have never experienced the win yet!"
So why is it our customers rarely, if ever, experience "the win"?
As Greg says in the video; "before any engagement, I always ask them for an estimate of how many hours it is going to take. And they always tell me an estimate is just an estimate. So that means they could be over, or, they could be under."
Yet professionals are rarely "under" and that is because when we base our estimates of price in relation to time and only time. Being human, we always, always underestimate the amount of time it is going to take us to perform any task.
In everyday life and in our everyday purchases, that underestimation of time often doesn't matter so much - unless of course the price you or your customer are paying for something, is pegged to time.
Again, as Greg Kyte points out in the video; "…of course they're (professionals) experienced enough to give me a fixed price, but if they did, that would take away the rush of finding out how many hours they actually billed me for".
The calls for the professions to move away from the 20th century time-based billing model are not abating, notwithstanding the resistance from the bulk of Oldlaw and other professionals who still prefer to continue to leverage their people x time x hourly rate.
As Matt Fawcett, General Counsel of NetApp, recently wrote in an excellent post titled "Things Lawyers Do":
"It’s 2017 – why are the clear majority of law firms still stuck in same billing model? Why are they still selling me their time? This makes no sense."
No Matt it doesn't make any sense to either the professionals or their customers to think they are selling or buying time, but most in the professions continue do it because… they can!
Greg Kyte, as much as I love him, made a couple of mistakes in his video.
- One was asking his professional providers to give him an estimate of hours (or even an estimate period) and fail to ask them for a price up front.
- The other mistake was to call his video "Billable Hour Scratch & Win". There is no win for anyone long term under the time-based billing model. A more appropriate title would be "Billable Hour Scratch & Lose". Sorry Greg, careful what you ask for.
And professionals, next time one of your customers asks you for a fixed price and you can't provide one, don't be surprised if they go to a professional who can. They exist and they are coming for you and your customers.