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Time vs. Value: Billing for Features

Published 8/21/2015

Today I'm going to be sharing the simple perspective shift that helped me understand how valuable programming is. In this episode, I'll go over how to shift your thinking from time in relation to money to value in relation to money. I'll go over problem solving improvements, and proposal writing language to help you make that shift in mindset from time to value pricing.

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I hope you enjoyed this episode. Until next time,

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Transcript (Generated by OpenAI Whisper)
Hey everyone and welcome to Developer Tea, my name is Jonathan Cutrell and today I'm going to be sharing the simple perspective shift that helped me to understand how valuable programming was. When I was 16, I worked at a company called Atlanta Bread Company. I really enjoyed it because I made money. I spent my time working hard and interacting with people and it was simple math and taking money from people, putting it in a register and giving them their change back, making sure they got their orders. And in fact, I was lucky enough to have good managers at Atlanta Bread Company. I was able to give people refunds and give them free things when things went wrong and do right by my customers. Now I always had been taught that my time was what I traded for money. And this is a fairly common perspective. You have an hourly rate and you charge that hourly rate or you charge whatever your hourly minimum wage is in the country or a region that you live in. Those are how you are making money or trading your time for money. And that was certainly true when I was at Atlanta Bread Company. Most people could accomplish the job that I accomplished working as a cashier at Atlanta Bread Company. And certainly some people would do the job differently and perhaps there would be some people who do it more efficiently or less efficiently. But overall, the time is traded for the money. Now, I want to share a simple perspective shift with you today. This doesn't matter whether you're a developer or someone else. This is an episode that you could share with everyone you know and it's relevant to everyone in a given industry that goes beyond trading your time for money. The shift in thinking is very simple. To create the most value in my job, I must do work that most others either won't or can't. I must do it to a quality that most others will not achieve or cannot achieve. And I must do it faster than others are able or will do it or a much shorter way of saying this is I must do something that others cannot or will not do. If I can do something better than everyone else or if I can do something that no one else is willing or able to do, then I am no longer paid for the time that I spend doing something. Rather, I am paid for the thing that I am doing. And that shift in thinking is monumental. It makes such a big difference simply because what you are doing is the value that you are creating. You are no longer a utility. Can you arrive at this point of being able to do something that few or no others can do, then people pay you for your knowledge and for your charisma and for your ability to handle problems in ways that no one else can handle them. Another way of looking at this is that you should be paid for the value you are creating for someone rather than the hours that you are spending for someone. And certainly this is not an easy thing to accomplish. In fact, it is perhaps the hardest part about being a contractor or a freelancer is getting yourself to the place where your expertise is specific enough that no one else can compete with you. But implementing this mindset, even on a smaller scale, even if you don't want to be the only person who is able to do something, perhaps you can consider this idea of delivering value rather than delivering time. Again, it is a simple mental shift, but it can make a monumental difference in the way your clients perceive you. It can make a monumental difference in the way even your boss perceives you. I am going to take a quick sponsor break and then I am going to come back and talk about a very simple way that you can change your work proposals to allow for this change of perspective to occur. And all it is going to take is a very simple shift in the way that you structure your proposals. We are going to talk about it in just a minute. Today's episode of Developer Tea is sponsored by DigitalOcean. DigitalOcean is simple cloud hosting built for developers. They are dedicated to offering the most intuitive and easy way to spin up a cloud server. In just 55 seconds, you can deploy a solid state drive cloud server. Plan start at only $5 per month for 512 megabytes of RAM, a 20 gigabyte solid state drive, one CPU and a full terabyte of transfer. In addition to offering simple and affordable SSD cloud hosting, DigitalOcean is dedicated to building out a strong community and supports open source software. They offer a vast collection of hosting tutorials and invite Developer To submit articles and they pay $50 per published piece. Deploy your SSD cloud server with DigitalOcean a day by going to DigitalOcean.com. Now DigitalOcean has been kind enough to provide Developer Tealisteners a discount of $10 when you use the code Developer Tea. So go to DigitalOcean.com and use the code Developer Teato get $10 off today and you'll get up and running with your own SSD cloud server in just 55 seconds. That's DigitalOcean.com. So we've been talking about shifting our thinking away from trading our time for money to trading our knowledge for money or trading who we are, our charisma for money and for value. If you are delivering a massive amount of value to your boss, in fact, if you are delivering more value every year to your boss, then it's likely that you should be getting a raise every year. But I want to shy away as far as I can from any sense of entitlement. This is hard work and you shouldn't feel entitled to anything until you can actually prove your accomplishments and until your work is truly, measurably good and it's making a difference monetarily for a business. But I want to tell you just a very simple way of shifting your proposals, shifting the way that you propose a given project if you're responding to an RFP, for example, I want to give you a simple shift in language that can help you shift yourself away from trading time for money and instead shift into trading value for money. That simple shift is to simply bill for features instead of time. And the reason that this shift is so important is twofold. Number one, estimating time is notoriously hard to do. We've talked about this on the show many times and it's been proven many times over estimating time is incredibly hard to do. But perhaps the more important piece of this is that if you frame the conversation with your potential client in terms of the value that you deliver rather than the time that you spend specifically, if you frame the conversation in terms of the actual features that you are delivering rather than the time it takes to do that delivery, then your client is going to be thinking about the value of those features rather than your hourly rate. I would even be so bold as to say, especially if you are an independent contractor that you should consider giving up your hourly rate and instead pursue this idea of billing for features rather than for time. Now I also think this is more fair to both sides. I don't think you're trying to trick anyone into giving you more money. If it takes you a significant amount of time, in fact, if it takes you a very long time to develop a feature that provides very little value to your customer, if you estimate that it would take significantly less time than it does, then you actually aren't delivering them value and they shouldn't be delivering you value in return. That's very simple economics in this way, but if you are delivering a high amount of value, it doesn't really matter how long it takes you to deliver that value. It's a very simple shift, start billing for the features rather than the time. Take this with a grain of salt. Of course, you need safety clauses in your contracts that define what those features and what the limitations are in terms of time for a given proposal. This is something where a lot of people go wrong. If they go down this path, it turns into an endless cycle of revisions with the client. Be sure that you are taking the proper measures to protect yourself in those situations against an infinite amount of work for a finite amount of money. But the principle still stands if you can begin to shift your client away from thinking about your time in relation to money and instead thinking about the value that you are delivering in relation to money, I think that would be a major shift for most independent contractors in terms of what they are able to generate in income for themselves. That's a long way of saying I think you're going to make more money and I think your clients are going to be happier if you start framing your contract proposals in this way. Thanks so much for listening to today's episode of Developer Tea. I hope it encourages you to start coding a little bit earlier because we have all of these resources that are available to us. Speaking of resources, check out Digital Ocean today's sponsor. Today provide a very fast and easy way to get up and running with a Cloud SSD. Just 55 seconds and if you use the code Developer Tea, today you can get $10 off. So go check that out. All the links will be in the show notes. Thank you again for listening to today's episode and until next time, enjoy your tea.