Interesting. I'm tempted to want to take this post with a grain of salt.

I systemize and automate businesses for a living. With software. Since the mid 90's.

Why a grain of salt?

TIME IS YOUR ONLY PRODUCT AND ASSET. In a consulting business, that's how it is. Why ignore your asset and only product. That's it. Time is finite and it seems to be the major missed point in this article.

A CONSULTING BUSINESS IS NOT A SOFTWARE PRODUCT BUSINESS. The cost to scale a software business is negligible, compared to consulting where you grow relative to the number and quality of people you can find.

I'll say it again, the amount of time you have to sell is relative to the people you have, and how efficient/good they are, and how efficient your management overhead is to leave people free to bill hours.

EVERY BUSINESS IS NOW A SOFTWARE BUSINESS. It doesn't matter what industry they're in. Either they get it, and get with it, or they're gone in 10 years when someone's eating their lunch with little to no effort thanks to a great systemized + automated software system. In many ways, software is the next industrial revolution.

CONSULTING'S HOURLY BREAKDOWN IS DIFFERENT THAN PRODUCTS.

Every consulting dollar is generally cut into 3 parts:
- get the work
- do the work
- manage the work

At a $100/hr rate, you see it's not so pretty when it's more than one or two people.

What does this formula have to do with how you price a software product? I do both and know the difference. :)

CONSULTING PROFITABILITY IS IN SYSTEMIZING AND AUTOMATING, LIKE ANY BUSINESS. Manage each area the best it can be (via enough, but not too much systemization and automate the sh*t out of everything) and you can get a 60-70% profit rate.

I FIND IT HARD TO CONFUSE CONSULTING AND PRODUCT BUSINESSES. With this article, for a consulting business that switched to a product business and then look back and talk about consulting, it all seems a little confusing to me.

WHY? While smaller businesses might be able to get away with a mindset of "it's not important" for a little while, growth unfortunately makes this a "cost of doing business" to manage the "bottom line".

WHAT? Just like we systemize and automate our software products to do everything, administrative minutiae too, can and should be systemized and automated.

HOW? Connect a business' preferred project management tool to billing and accounting systems automatically. This is what I do. I manage several projects with a few hours of time a month that I get paid for dozens of hours of work via my developers. My system is honed and works.

ME: I don't die to track every second, but you better believe I have to track my billing unit, the hour, or fixed price.

There is truth to the idea, though that having to track every second or micromanage means you have the wrong person. You do, however, need some checks and balances to keep things moving on their own for everyone's piece of the pie, and a big part of that is "are we on schedule".

TRICKS: I'm constantly working on my systemization and automation. It will never end, or be perfect because there's always new tools and technologies and processes becoming possible.

Forwarding your receipts to one address, PDF printing all purchases, and writing a quick web app that downloads credit card statements and asks you to link them up to whatever (whether it's the book keeper or not) isn't stoneage thinking. It can be simplified, and should be.

THE ONLY TRUTH I KNOW IN BUSINESS: We still have these business problems. They're not a technology problem, but technology can help.

THOSE MAGICAL PEOPLE WHO SIGN THE CHEQUES. Consulting issues of tracking time are another. Not all customers are comfortable with flat rate. It's easy to puff our chest once we have a practice up and running, but the reality is pricing in consulting is one of the toughest things to get a handle on relative to the place(s) you work, and for the type of work you do.

Finding a middle ground with new clients (seeing if the client is more comfortable with per hour vs fixed fee) is far more important. I always suggest doing a small fixed fee project to build trust in the beginning and make sure both sides are happy. After that being comfortable enough to say "I think I can save you money hourly" is fine. Or not.