Padding vs Adding

I hope that the person reading this right now is starting a BRAND NEW business because this lesson is going to rock your world, and possibly save your relationship and sanity.

I started working for myself seriously in 2011 after leaving (getting fired) from a full time job at a PR agency. Since then, I’ve run my own agency for 7 years, was part of the leadership team for another agency for a year and a half, and now run my own business where I coach freelancers and entrepreneurs, consult with large companies, all while I help run a Brand agency.

I’ve learned a significant number of lessons throughout all of this experience. Here’s a big one:

Project timelines are, at best, educated guesses. At worst, project timelines are the reason you’re losing money, losing team members, and suffering from crippling anxiety.

Let’s say you have a project that you know should take you one week, assuming everything goes right.

Ha! Got you! Assuming everything goes right? That’s the trap…it never all goes right!

• Clients take too long to get you feedback.
• Your client was sick. Your client’s boss got sick. Your client’s web developer’s girlfriend’s dog got sick.
• The client had a key team member give their notice.
• The client forgot to tell you something important during discovery and now need to start over or add a whole bunch of new deliverables to the project.

…you get the point. Things, happen.

You thought you had it all figured out. You thought that having a tight project plan would fix this. You plan all of your projects according to how long things take, and you’re charging a fair price. It all looks so good in that spreadsheet!

Play this out. Imagine you have 10 clients, all with beautifully crafted, super-tight, project plans. What happens to your timelines when one of those projects gets pushed back by a month?

All of a sudden, EVERY project is off track.

Even in scenarios where it is my “fault” that the timeline gets altered, I see no benefit in building a project timeline that doesn’t allow for me to have a life or deal with unforeseen events.

The Solution: Pad or Add

The way I see it, all business owners who are overworked, over-budget, and out-of-scope have precisely three options to deal with it:

• Pad your pricing for unforeseen changes
• Add to your pricing for all unforeseen changes
• Suck it up and lose profitability

I’ll explain…

Padding

Padding your prices means building into your initial scope (at the beginning), additional labor hours and additional (time) flexibility in the project plan and deliverable dates to allow for things to go a little off track. It’s a buffer for protecting against the inevitable and because it’s agreed to in the beginning, it’s guaranteed.

THIS is my preferred options among the three.

Adding

Adding to your pricing means going back to the client, and letting them know that the project has gone over-budget or out of scope, and submitting a change order or new SOW to compensate for the time lost or additional work. This often creates an awkward and uncomfortable situation as clients generally prefer to know how much they are investing at the start of a project and rarely welcome additional charges later on. Some clients are super understanding about it, but it’s still never fun.

The best method for dealing with this is to establish an understanding at the outset of the project for how additional fees work in the event that the work goes out of scope, or the timelines run long.

This is the second best option, but it is a distant second place.

Suck it up

The suck it up option is awful but I bet it looks very familiar. Even though you were supposed to have wrapped up the project 2 weeks ago, the client just got you the revisions late last night, so…

• You spend the extra time on the project
• You work late for a few nights
• Maybe you work on a weekend
• You get the work done, you give the client a pass, and you hustle until things are back on track

I have a motto that has served me well.

“Money never comes out of my pocket…unless I’m the one who messed up”

Working extra hours is money out of my pocket and I don’t work to lose money.

If you do not plan for project timelines to go off-track, or extra work to be required, then aside from the dent it puts in your wallet, the relaxation and sleep it robs you of, there’s a third problem that arises from sucking it up: the client’s respect for you diminishes.

There are, of course, exceptions to what I’m saying here. Maybe you have a client that loves and respects you. A client you’ve been working with for 10 years. They will probably respect you more, for going above and beyond.

For everyone else, you just showed them how you (don’t) value your time and you just taught them that it’s ok to miss their deadlines or expect extra work for free.

Pricing & Labor Value

Let’s take a quick detour…

In our (capitalist) society, labor and value are not directly linked. This means that the price you charge is not a function of the objective value of your labor but rather the subjective value of your labor.

Said differently, you can set your prices however you like, barring any specific regulations, and that is totally acceptable provided that someone is willing to buy it. If you deliver a service at a certain price and your buyer is happy, then it is a fair price…to that customer.

I mean, look at this KEYCHAIN that Tiffany sells for $250.

…a keychain

Because of this, you get to play the supply and demand curve until you find the maximum amount of money you can charge for what you provide. At the same time, you get to define what people get in exchange for that investment. Finally, your Brand is a direct contributor in determining how much you can charge (see Tiffany above).

All of these factors intersect.

Bringing it all together

I’m not suggesting you raise your prices to the point of ripping people off. I’m not suggesting you be an inflexible jerk who charges for every phone call when a timeline goes long.

Please don’t misunderstand the point of this.

I’m telling you to stand for the value of your time. I’m telling you to do outstanding work so that your reputation affords you the ability to tell your clients how YOU work best. I’m telling you to expect that things will not go according to plan, and you should build that into your pricing, because you value your time, and that the client should agree to it, because they value your time and abilities.

• Charge a little more for what you do.
• Add more time into the project plan.
• Be extremely clear about the details and boundaries of that project plan.

By doing this, you will find the clients who don’t mind paying that little bit extra, who are patient enough to do things right instead of just doing it fast, and who will respect your professionalism.

Now, if things go off track, you’re still being compensated for your time and the project timeline has already accounted for it.

Then, if everything happens to goes smoothly, then you get to deliver the work early.

Way to go, rockstar!