61. Do you do fee per hour type work? Ever thought about giving a ‘quantity’ discount? Yep? Read on…

If so, the client might have said something like this:  “I’d like to commit to buying 20 hours of your time every month, for one year, but rather than pay $150 per hour for that I’ll give you a rate of $100 per hour. Deal?”

Gulp.

On the one hand, you think it would be great to have regular work and regular cash flow. It would certainly ease your soloist worry of where the next dollar will come from. Plus it would save you marketing time – 20 hours a month that you don’t have to go and find, phew.Then there’s also the 20 hours the client will purchase in the December Dearth-of-Work Zone. This is starting to sound like a great deal!

But then you get a little nagging voice in your head. “But what if I get busy? What if I have to turn down work that pays a great hourly rate because I’m committed to my $100 per hour client? What if I want to take a big holiday? What if I don’t enjoy the work?”

It’s not an easy decision.

I think a good way to approach the quantity discount dilemma is to calculate the opportunity cost of taking on the job. There are all sorts of ways to do this, but you can keep it simple with a little bit of common sense

Let’s say, in the above example, that you take a look back at your track record and work out that if you took on this client you would probably have to say ‘no’ to about 10 hours a month of $150 per hour work, and that that work would have come in at no marketing cost.

If you accepted the ‘quantity’ work then you would be giving up a likely 120 hours of work worth $18,000 (10*12*150) for the security of a locked-in 200 hours work earning $24,000. It then just becomes a question of choice – are you prepared to work the extra 80 hours, at an effective rate of $75 per hour (calculated as $6000/80 hours) for the peace of mind of regular income?

How about a different scenario? Say you thought that by spending $5000 on marketing you could probably fill the 20 hours with $150 per hour work, but only for 11 months of the year (December would still be empty).

If you opted for the ‘quantity’ work then you would be trading a probable 220 hours of work worth $28000 ($20*$150*11 less $5000) for a committed  240 hours of work for $24000. So you’d effectively be accepting less money and working more hours, but you’d have the security of knowing the work exists.

These decisions aren’t easy but if you do the calculations you do at least get a sense of what the options are costing you. And it’s worth doing; I know a few fabulous soloists who’ve discovered that the ‘quantity’ client has cost them dear.

Of course there are other things to add into the mix too that can’t be measured, like whether it’s an interesting project and a good client to work for. And then there’s also the final, gut-feeling, piece.

Finally you’ll get to an answer something like this:  “Yes, I’m happy to work 80 hours at an effective rate of $75 an hour to earn an extra $6000, because the total contract assures me $24000 of work, it’s a good client, I like the work, and yes, it’s worth it to me”