Why Being A Service Provider Is A Huge Mistake

I’m just going to say it. You can’t build a brand that attracts your dream clients and makes good money if you’re a service provider.

Now, I know that’s hard to hear, considering our jam is 1-3 person service-based businesses, but hang with me here...

A “service provider” is someone who does tasks for someone else. Usually, they charge by the hour, and they’re told what needs to be done. They have some skills, but ultimately they’re an employee of the person who hired them. There’s no way to have a profitable brand when you’re just doing someone else’s bidding.

Our goal (and the goal of our clients) is definitely NOT to take orders. It’s to figure out how to make more money and have more freedom. And that requires you to be an expert.

In contrast to a service provider, an “expert” not only to executes the work but shares valuable knowledge about how and why to execute in a specific way. When you're an expert, you're leading clients through your proven process.  You know the best practices because you've done this thing many times. In turn, clients respect your knowledge, get more value out of the experience, and become raving fans.

It’s a small, but critical, distinction. And an easy one to tease out. In short, it’s all about the way you approach clients with your offering and how you charge them. So, let’s take a look at some critical distinctions.

Experts Own a Process

From the very first conversation with a client, your job is to figure out the biggest problem they face and give them solutions to fix it. Take a web developer, for instance. Asking, “What pages do you want?” is a perfect example of being a service provider (and a mistake far too many make). Conversely, an expert asks, “What's the goal? What's your biggest challenge? What problem are you looking to solve?” Then they work backward and use their expertise to address those challenges and goals with a proven process.

Leading with your process – versus, say, a price point – keeps everyone focused on the outcome. It allows you to manage and anticipate how long things take. And, best of all, your compensation isn’t tied to time.

If your income is based on spending time working with clients to increase your success, you will tend to take on too many hours, and too many clients.

But if your income is based on results and providing value, you will spend your energy looking for ways to increase the value you provide, and not, necessarily, the time you spend doing it. Essentially, you become more profitable means because you’re increasing value and streamlining processes, not fulfilling orders.

And, the more you streamline your processes, the higher prices you’ll command. If you're decreasing the time and increasing price, that's where you increase your profit margin. That is the freedom of being an expert.

Experts Give Strategic Opinions and Take Control of the Process

When people hire experts, they are looking for someone who can take the lead. A service provider tends to be a “yes man,” where an expert will tell a client if something should be done a different way.

Put simply, experts lead.

Tell them how it’s going to work. Say, “You're going to do this, this, and this. I'm going to do this, this, and this. I expect this from you. Here are timelines. To do this well, here are the dates I'm going to deliver these things. Here are the dates I'll be expecting them back from you.”

Lay the whole thing out, so they have no questions about how your process works. And when they do have questions (because they always do), those questions will be centered around high-level problems rather than a back and forth about scheduling or deadlines.

Experts Charge Flat Rates

The way you charge says a lot about the value you bring. When you have an hourly rate, it's much easier for clients to compare pricing. Plus, if you're stuck in that hourly grind, you'll always have a cap. People who can’t transition from service provider to expert will never raise their rates more than $200/hour. Three hundred, maybe.

That’s why experts charge a flat fee. I not only encourage people to position themselves as experts as a way to build brand reputation and respect, but also to build profitability. The benefit is that you can continually increase prices because money isn’t tied to time. You're charging based on value.

Most people think charging hourly is better because then they know they’re always getting paid when they’re working. But it creates an unnecessary tension. As the client, I wonder if they are working efficiently or not because, let’s face it, efficiency is not in their best interest.

I recently hired someone who insists on being paid hourly. Fine. That’s how they like to do it; I’m not going to argue. But I'm not a big chit-chatter, so when they spend the first 10 minutes of our weekly calls asking me about my day, I'm like, “Get to it! I'm paying you for this time.” I hate that. And it makes me a bad client because I’m always watching the clock.

Transitioning To Expert Rates

Okay, so you’re convinced. Now what?

If you want to start moving from service provider to expert you need to come up with a proprietary process. It’s easier than you might think.

Say a client comes to you and says they need X, Y, and Z. What would be the first step of that of delivering that? Write it out. What steps would you take them through? Essentially you're just writing a proposal for a make-believe client (or, you could channel a previous client’s needs).

From there, calculate what it takes to do it. The easiest way to figure this early on it to take your current hourly rate and multiply it by estimated time. So, if you’ve been charging $50 an hour and you think it takes 3 hours, tell them it’s a $150 flat fee. But stop saying, $50/ hour. This subtle shift will train you to start thinking differently.

And if it takes you longer than 3 hours, that's okay! You’re turning yourself into an expert. There will be bumps. If it takes you twice as long, you know you need to charge more. But you shouldn’t beat yourself up over “losing money.”

I tell people to look at a quote loss as healthy experience. Sure it was done at a monetary loss, but what did you learn from that? The price you didn't get is an investment in yourself as an expert. Sometimes that needs to happen so you can re-evaluate rates and processes. Once you get over the initial hump of figuring out your general process and what it takes for you to deliver it, then you can start scaling up your value and pricing and start increasing your profitability.

Believe me, I've worked too cheaply for many clients, but I got invaluable information from every single one and I didn’t let that go to waste. Experts know short-term losses are the price we pay to be better. Every one of them is an opportunity to be better. So if you’re waiting for the right time to shift from service provider to expert, there’s never been a better time than now.

To learn how to get out of the grind of being a service provider, watch this free masterclass.