Value-based flat fees should not just reflect the initial time estimate. As a business becomes more efficient and reduces the time required for a task, the flat fee should remain the same. This allows the business, not the client, to reap the financial reward of its accumulated experience.

Related Insights

Instead of a cost-plus model, Baer justified her high fees by framing them as a bargain against a client's ongoing monthly mortgage. This value-based pricing positioned her service as an investment that saved clients money by selling their homes faster.

Standard SaaS pricing fails for agentic products because high usage becomes a cost center. Avoid the trap of profiting from non-use. Instead, implement a hybrid model with a fixed base and usage-based overages, or, ideally, tie pricing directly to measurable outcomes generated by the AI.

Don't let your personal perception of what's 'expensive' limit your earning potential. Set your price high based on the value you provide. It is easy to lower a price that gets no buyers, but impossible to know if you could have charged more if you start too low. Never say no for the customer.

To set your price, ask clients what they would do if your service didn't exist. Their answer, like hiring a full-time employee, reveals the 'replacement value.' This figure provides a concrete benchmark for your pricing and uncovers powerful marketing language.

When starting out, don't just charge a low fee. Instead, state your full market-rate price and offer a significant discount (e.g., 50%) as an introductory offer. This establishes your true value from the beginning while still winning the client. Then, systematically raise your price every few clients.

Constantly delivering custom solutions is inefficient and destroys profitability. Instead, define a standardized, repeatable service package that can be sold and delivered consistently, maintaining high margins and simplifying operations.

Service-based businesses often miscalculate profit by omitting their own time and labor from revenue-generating costs. Treating their payroll as an operating expense instead of a direct cost inflates gross profit margins and masks the true cost of service delivery, leading to poor pricing decisions.

A single hourly rate prompts a binary yes/no decision. Offering several packages changes the customer's question from 'Should I hire them?' to 'Which option is best for me?' This assumes the sale and focuses the decision on the method of engagement.

Unlike law or accounting, marketing is a "fat-tailed" domain where a few big ideas generate most of the value, often for years. The shift to hourly billing is catastrophic because it rewards incremental effort, not the billion-dollar ideas that create lasting value but may have taken little time to conceive.

To see if an offer is scalable, factor in your own labor as a direct cost. Ask, "What would I have to pay someone to do this work?" Including this "founder salary" in your unit economics reveals the real profit margin and whether you can afford to hire help to grow.

Flat-Fee Pricing Allows Service Businesses to Profit from Their Own Efficiency Gains | RiffOn