You Sell Time. That’s the Problem.

Here's a test. To make more money next year, what has to happen? If the answer is I work more hours or I hire more bodies, one for one, then you don't own a business. You own a job that happens to have your name on the building. Because the day you sell your time, you cap your income, you flatten your margin, and you build something no one will ever want to buy. Today, how to stop selling hours and start selling outcomes so the business finally makes money whether or not you're in the room. Welcome to From Burnout to Bought Out, the podcast for business owners who are tired of being the hardest-working, lowest paid employee in their own company. I'm John, joined as always by Ryan, and together we've spent years inside owner-led businesses helping founders go from running on fumes to running a business that actually runs without them. Every episode we break down the real problems nobody talks about. The burnout, the bottlenecks, the blind spots, and show you what it looks like to build a business that's profitable, sellable, and doesn't need you in the building every day to survive. Whether you're grinding through a plateau, thinking about an exit, or just trying to take a vacation without your phone blowing up, you're in the right place. Let's get into it. Awesome, this is gonna be a good one, Ryan. I hope so, John. You never know until we get there. Okay, well we'll see how it turns out, but the subject matter is a good one.

Yeah, I think so. This affects a lot of companies out there and how they do their pricing model. Yeah, excellent. Let's get straight into it. Plenty of business to sell time. Lawyers, agencies, trades, consultants. So why is it a problem? So composite everything, you know. So we'll talk about a four million dollar professional services firm. Great reputation, booked out, there's owner and a few senior people build their expertise by the hour. We've all heard that the same thing. Legal offices do this all the time. $650 for the lawyer, $400 for the paralegal, you know, or crew hours for trades. But in order to grow, they have two levers. Work more hours or hire more people, right? Double the revenue meant roughly double the bodies. That's not scale, that's just a treadmill with more payroll. Because the margin never moved. Every new dollar of revenue dragged a new dollar of cost right behind it, right? Here's something to look at. If your revenue chart and your headcount are on the same trajectory, you're selling time. And just, you know, growth means just more of you, more bodies. But here's the quiet killer. A business whose revenue depends on specific people showing up isn't an asset. It's a job with employees and buyers price that in. This is something that's typical where it's just the wrong design. And we're going to be here to help you fix it. Yeah, and this is huge. A lot of the industries we work with have this problem. We're going to get on to the solve a little bit later on. But when you're just, your wagon is hooked to time, all you can ever do is sell the time you've got available. How do people who aren't necessarily time based, understand that they're in the trap? Right, you mentioned time and payroll, or payroll and staff. So it's usually built in their quotes, it's going to take me X amount of time to get there. You know, do these things, fractional folks do that a lot. Okay, it's gonna, I'm going to dedicate 20 hours a week to this client. So that to do my math round up a little bit run down, whatever that is. So that's usually how it is like, you know, I don't know if you remember the, the book, the firm, right, where the attorney was in a plane, and ended up being able to build more than 24 hours in a day, because he was in a different time zone. Right? Like that's that trap that that people fall into is time is money. Right? And literally, that's how we're basing a lot of our quotes is based on our time.

Yeah, yeah, I mean, all you can do is overlap your hours, right? And then that causes a huge problem of actually delivering. So let's keep going on it, you say, and the quotes, obviously, if the first thing you do, when you put a quote together is you go to time and materials, and you're in that loop, agencies are in that loop, right? Now, what's our what's our blended hourly rate? And how many hours do we think it'll take to do that? Right? So, you know, all the same problem. So you're saying a buyer prices time and their their business like a job, just unpack it a little bit more. How does selling hours really crush this crush the valuation on it? Yeah, so a potential buyer isn't buying last year's revenue. They're buying the confidence that the revenue keeps happening after you're gone, right? You're going to be exiting, they need to know that the revenue is going to be there. Simple as that, right? But what we generally see is that we're walking through there, and it's determined on the the crew members that we have, right in the leadership team, and all those kind of things. But it's still based upon hourly billable hours, right? And so you have better technicians who might be able to get a little bit more done, those kind of things. But we're we're talking about human beings here. And when a buyer walks in and sees this type of setup, what they're really doing is they're financing a hostage situation, they're hoping these folks stay around. And that doesn't necessarily happen when we transition to a new buyer is people want to leave and a lot of folks Well, you know, it's recurring ish, right? We know that this is going to happen, but that's not recurring, right? clients come back because they like Darryl or Cindy or Sally, they have a relationship with them, not your business. So if they leave to somewhere else, because again, pay more, guess who's going with them? Right? Those customers, those clients, and the discount is absolutely brutal and real when we do these things, right? Because now we're squashing our margin. And there's no way to make it up because there's only so many hours in the day. So that's not scalable either. And we and we did that in the past episode, right where we talked about low margins and discounts and how it's not very good. It's the same kind of methodology here because you have just a set margin that you can deal with. So if we have two different companies with two different pricing models, right, and one is based upon hourly rates, and the other one is based on a quote, we're going to have two different sets of profit margins, dependency on people dependency on the amount of time it takes something to get done. Right. Gotcha. Yeah, there's a bunch, there's a bunch of minefields to navigate just in order to, to generate more value for your business overall. But if there's a straight link to time, there's a straight link to individuals who provide the services who may move on there that have those client ties, then it just it causes discounts and anybody coming in to purchase your business. Think about you, right? Like, I have a financial advisor. Right? I like the financial advisor. He gives me good advice. Right? We've had a long standing relationship, and he moves firms. And then I have somebody else I have no idea who doesn't know my family doesn't know my history, all that kind of stuff. I'm moving with my financial advisor. Right? I'm not staying with that that company. I have no idea. And no one's ever talked to me before besides that person. Yeah, that's it's a discount, right? People, it's a it's a risk to somebody coming in and evaluating, you know, purchasing, purchasing your business. It is time for Ryan's fun fact. Right? Fun fact, billable. Our timekeeping was basically invented by lawyers in the mid 1900s. And even the profession that created now openly admits it's rewarding. It's rewarding being slow. So the more inefficient your attorney is, the bigger the bill you get.

The whole model pays you to be poor at your job and take longer. That's which is, which is a perfect example of selling your time, right? By getting better, better and faster at the work. I'm literally earning less. That's a broken scorecard. Right? And most owners inherit it and just continue on doing it. There you go. There you have it, folks. Be worse at your job than you are now. Charge more time if you're in a time based model. That's absolutely that. That's what I aspire to. You're hitting the nail on the head.

All right. Now a moment from our our sponsors today. The NTC, the New Testament Church up in Messina in the North Country. And it fits this episode more than any sponsor we've had. Because this whole hour is about time. The one thing you can't make more of. NTC is a place built around a bigger question. What is your time actually for? And quite right, that's the part nobody puts on a scorecard. You can optimize every hour of your business and still have no idea what the hours are in service of. NTC exists for that, not the tactics of a life, the meaning of one, people, faith, purpose, the stuff underneath the calendar. If this episode has you counting your hours, they're a good place to ask what they add up to. Awesome. New Testament Church, Messina, New York. You can find them at NTCMessina.com. They always have an open door and embrace your faith. I'm happy there's no phone number to read out. I get a break. We're going to start singing. 105 gone. Yes. We're going to start singing phone numbers. I had an epiphany earlier on today. We're going to take turns. We're going to sing it. Remember, folks, we do have these segment breaks where you can just skip over. All right, back to it. Let's get on to the fix. How do you break the link between hours worked and dollars earned? Let's talk about some mechanisms here. So I think this is the whole game, is that you have to create value that keeps earning after the hour is over, right? And I think there's five ways to do it. One is price the outcome, not the hour, right? A fixed price for a fine result. But getting faster makes you more, not less. So your efficiency becomes your margin. So I'd like to give an example of an HVA shop that sends two texts for $145 an hour plus whatever we find, right? Well, what if we just started selling a flat rate at $850 for a diagnostic service call, those kind of things, right? Now there's no cap. If I finish it in 15 minutes, if I finish it in five hours, it's one flat rate, here you go. Get the yes before you leave the schedule the text. Two, productize, right? Turn your custom service into a named repeatable package with a fixed scope of price. And we talked about that, John, in your marketing. So an example would be in manufacturing, fab shop that sorts two years of orders by configurations, finds three clusters covering most of its volume, and turns them into three named models with a published price and lead time. There you have it. You know, they used to call them custom jobs, now they have a name for it. Three, build recurring. And what I mean by that is convert one off work into a retainer or subscription. This is going to be revenue that shows up whether or not the phone is ringing.

So example again, an HVAC shop is, you know, selling a service agreement at the end of the completed repair. You get two visits, priority dispatch, billed monthly by ACH, helps pay your payroll in January. Four, create leverage in delivery. We're talking systems, templates, tools, but junior people able to deliver senior design work, that's the expertise in the system, right? And so that's the example of an attorney who takes you on as a client, the paralegal does most of the work, the attorney reviews it for a couple hours, they charge you as if the attorney was doing the work, right? That's how you build the margin through that. And the fifth is turn knowledge into a product. You've got training, IP, software, a course, a licensed method. Those are things that, you know, sell while you're asleep. So yeah, for example, an equipment builder that bolts on a sensor kit to every machine, but sells the uptime dashboard monthly per machine. So you have hardware business selling software revenue. And, you know, some of the work that you're doing is genuinely custom. But I bet you, you can find 70% of it that isn't, that every single unit you're doing needs, every single service that you're doing needs, and then customize a 30%. But you can get a lot of revenue out of that 70%.

Awesome. Awesome. A number of steps there. One, price the outcome, not the hour. Two, productize. Three, build recurring services. Four, create leverage in delivery. And five, turn your knowledge into a product. You got it.

Just wanted to summarize there. Yeah, and your example of, like coming in and doing an assessment for 850 versus, oh, there's a call out fee for an hour. And then we think the job can take two hours, it might, you know, we might have to send two men, etc, etc. It provides certainty. So if people know there's a hard price, that's awesome. And you can, you can be creative with how you present that price as well. So it could be, hey, I'm gonna charge you 850. And then if you proceed with the work from us, you get an X amount discount off the job as well. So I mean, there, there are tons of marketing ideas that spring to mind for me of how to how to leverage that, and disconnect those hours. So awesome. So one of the things, john, that a lot of our listeners, all three of them probably have is they send over a tech or somebody over there, you know, and the homeowner or the business owner says, Well, why are you billing me for seven hours when you guys were only here for five, right? They didn't take in time, you know, consideration the time from one job to another, or that they had to go to the supply shop to get this certain fitting, that's only unique to them, you know, those kinds of things. So you stop the haggling, say, you know what, it's 850 bucks for us to come out there and diagnose it and fix every anything that we see, excluding x, y, and z. Yeah, really good point. Those service areas stuff, hidden charges, like really piss people off, like those, those are the big complainers, right? Oh, you quoted me this price, or you quoted me an hourly, and then I got this bill. And you know, and they're the ones that jump onto your Google reviews and complain. And that's the worst thing you need, because that affects your inbound business coming in.

So everything that you can put up front should be put up front, makes a ton of sense. Let's keep going on productizing. Because this is I think, is the area most people struggle with, how do they turn custom services into actual products? So easy exercise, I think, find your most repeated job, the thing that you sell over and over again, that has very little or small variations. That's the product you should focus on. The first thing you do is name it, right? A name to offer feels like a product, not a favor, you know, the 90 day turnaround or meet Wally or whatever you want to call it, right? It's a name, it creates something in in the mind. And then scope it to find exactly what's in and what's out. How many times has scope creep come into play? Right? Well, can you just do this? Or, you know, I know you came here for this, but can you just look at this for a second and and fix that, right? Literally time is money at that point, because you've been middling by the hour, right? So make sure that you're guarding the edges. And if it is a scope creep, be forthcoming, right? Be assertive. And then price it on value, right? Fix price based on the outcomes worth, not your estimated hours, right? What is completion to these folks? What does it make them feel like at the end? Not how long it took you, what does it look like at the end? And then systematize it. This way you have a document, you have a process, you have a delivery method so that everybody is trained on that. We always talk about writing a process followed by all, right? And that way we can send a junior tech, a senior tech, whatever it needs to be, everyone's doing it the same way every single time. And that's the way that you do it. And I know it feels generic and backwards, but what you're doing is you're solving problems for your clients and you're getting there in a different billing route. And this is also going to help you and more importantly is protect your margins. Now it's not that headcount revenue, right? Now I can have somebody who's getting paid a lot less, do the same job as two people or three senior people, whatever. Now my margin is increasing without having to add that headcount. Love it. Love it. Something I like as well is coverage. Coverage on things, you know, say if it's a plumber's plumbing business and just giving a monthly fee and you get a certain discount on the call-out so people get their money back and they get a discount on the job as well. That separates as well some of the hourly. So like you say, pick your number one service and productize it. But then also think about ongoing recurring services that you can charge that just bring an extra, you know, 10, 20, 30% into the business. And again, you're not connected to hours at that point as well. All right. Emtow, marketing tip of the week. You still haven't found a name for it, have you? You haven't named it. No, I think Emtow's unique. Of all five of our listeners. Yes. Yeah, it just increased two. We just got two more in that segment there. That must have been a good segment. Holy crap. Okay, this one pairs perfectly with productizing because when you're packaging up your offer, when you're presenting it on your marketing materials, your website, etc., etc., give one clear call to action, one next step. So often we've got call us, email us, fill out the form, book a call, follow us, do this, do this. And it gives so many people different choices that they just kind of freeze and do nothing. And the last thing you want is them, is spending money on your advertising, getting them into properties, and then decision paralysis. Because it kills more conversations than a bad offer does. So pick one. One offer, one button. So the single action of the week is go to something like your website, webpage, or look at your marketing materials you're sending out. Count the calls to action. If there's more than one primary one, cut it all down to one single obvious step, and then watch what it does to your conversion. Good stuff, John. Leads us into our second sponsor. One more moment with our partner, NTC Messina New York. We spent today teaching people to stop trading your hours away, but that raises the harder question NTC actually deals with. Once you get the hours back, back, what are you gonna do with them? What are you gonna fill them with? Freeing up time is a finance problem. Knowing what it's for is a soul problem. S-O-U-L. And a business podcast is generally not equipped for the second one. The community of faith is. That's right. That is the honest version of it. NTC is people wrestling with meaning, marriage, purpose, and faith together week after week. The depth stuff. The part that doesn't fit on a scorecard or in a podcast. And I know you have thoughts about the community up north. Of course.

As a Canadian, I'll just say the healthiest people I've ever known were the ones who belonged to something bigger than the work. A congregation, a town, a ring full of people, of course, who'd notice if you stopped showing up. That belonging is not a small thing, and that's my one. That's your one, and it's a good one this time. NTC Messina New York. NTCMessina.com. Go find what the hours are for. Invent a phone number and sing it. All right. So it's not just the owner's hours that we're talking about, though. As the owner hires a bunch of people, he's selling those hours, spends a lot of time selling those, etc. But even with a big team, you can get stuck. How does this trap, this hour's trap, survive scale? So you can have 50, 100 people, right? But if every dollar of revenue still requires a proportional dollar of labor, you didn't escape the trap. Right. And so if your revenue goes up 20%, but your staffing goes up 20%, right, now your margin is stuck together, right? Real leverage means the business earns more per person over time, not just more in total. So per cost, per revenue dollar per employee continues to increase, right? That's where efficiency comes into play. That's where this modeling comes into play, because that's what we should be seeing. And where we can really leverage the team, like you said, is making sure that there are systems in place, there's cross-training in that respect, so everyone can go on vacation, they don't get burnt out, and it doesn't matter who's going to go and do that service call, they're going to do it the same way because it's systematized, right? So, and I want to be very, very clear here, hiring isn't the enemy, but hiring the one-to-one revenue to staff ratio is. And that's the trap that you'll be caught in, right? We want good employees, we want efficient employees, we want to reward them when they make a direct impact, right? In our business, on the bottom line, that's all the good stuff. But, you know, what we have to think about here is that if our output per person is not increasing because of the revenue, right? Because revenue is the same amount, right? Then we're stuck in the revenue trap, it's not a system, right? We're not quoting $1,000, we're saying, okay, it's $100 per hour. And I think that's where we have to talk about is, you know, operations and marketing can meet together if we have a systemized delivery with a packaged offer that's named, that creates the value to the customer, and it's perceived value, right? That's why Ferrari can charge more than a BMW. It's because of that perception.