Climbing the Ladder

Three Rungs

Every hour I sold in my first year of consulting was gone by the evening. The invoice remained, the client remained, but the hour itself had been used up, and the next morning I had to sell another one. That is the nature of the first rung, and there is nothing wrong with it. It is simply where the ceiling is lowest.

The Ladder has three rungs, and you climb them in order.

• Custom service. You sell your time, shaped to each client. Meera doing whatever the Oadby dental surgery needs this month, at £70 an hour, is custom service. Every job is slightly different, and so is every invoice.
• Productised service. You sell a fixed piece of work at a fixed price, done the same way each time. The client buys an outcome with clear edges, not your hours. Somebody still does the work, but it follows a Run Log and the price does not move when the work takes longer.
• Digital product. You make something once and sell it many times: a template, a course, a guide, a small piece of software. The thousandth copy costs you almost nothing to deliver. It also teaches you almost nothing about your customer, which is why it comes last.

Income detaches from hours a little more on each rung. The cost is that you also lose some contact with the people paying you, and on the top rung you can lose it altogether.

That is why skipping the first rung so rarely works. In 2016 a former colleague from the export office in Pune spent four months and about ₹2,40,000 building an online course on import paperwork for small Indian manufacturers. He had never done that paperwork for a paying client. The course explained the forms beautifully. What it did not cover were the three questions every real manufacturer actually asks, about late shipping bills, mismatched HS codes and a customs broker who stops answering the phone, because he had never been in the room when anyone asked them. He sold six copies, four of them to relatives.

The service rung is where you hear those questions. Meera's fifteen-step onboarding, with its seven buried decisions, could only have been written by someone who had onboarded clients by hand. Everything she later sold was cut from that material.

My colleague still has the course files on a hard drive. He keeps them, he told me, as a reminder of what four months feels like.

Fixing the Scope

Meera built her first package from her own timesheets rather than from what competitors charged. Across three months the Oadby surgery had taken an average of 6.5 hours of monthly work, and two smaller clients about 4 hours each. At £70 an hour, the surgery's bookkeeping came to roughly £455 a month. She set the package at £450, fixed, and added a one-off onboarding fee of £600, because her timed Market Harborough onboarding had run to 580 minutes, a little under ten hours, and she was tired of giving that time away.

The price was the easy part. The edges took her three drafts.

Her first version said the package covered "monthly bookkeeping". That phrase, she realised, would cover anything a practice manager wanted it to cover. Her second version listed tasks, and it read like a menu with no prices on it. The third version described limits in numbers a client could check for themselves:

• one business bank account and one card account
• up to 200 transactions a month
• monthly reconciliation and a profit-and-loss report by the 10th
• quarterly VAT return preparation
• one 30-minute call a month

Below the list sat the sentence that did most of the work: "Anything not on this list is a separate job. I will quote it in writing before I start, and nothing begins until you have said yes."

The sentence is plain on purpose. It does not refuse extra work, and it does not make the client feel greedy for asking. It moves the conversation from "can you just" to "how much", and most people, faced with a number, decide they can live without the thing.

The practice manager tested it within a fortnight. She wanted the associate dentists' expenses tracked separately, by person, every month.

"Is that included?" she wrote.

"No, but I can quote it," Meera replied, and quoted £90 a month. The practice manager accepted. I find that the part people least expect. A clear boundary is often what makes the extra work billable at all, because it gives both sides a line to point at.

I would add one caution. A transaction cap only works if you count. Meera checks the number each month in her Run Log, and twice in the first year a client went over 200. Both times she sent the overage quote the same day.

The amended agreement for Oadby is two pages long. The £90 line is handwritten in the margin, initialled by both of them.

Making Something Once

Meera's templates came out of her inbox. Through her first year on the package she kept a note at the bottom of her Run Log headed "asked again", and every time someone emailed a question she had already answered, she added a tally mark. Most of the askers were not clients. They were sole traders, a mobile hairdresser in Wigston, a man who repaired bikes from his garage, people turning over less than £30,000 a year who had heard she was good and could not begin to afford £450 a month. She had turned away twenty-three of them.

Three questions carried most of the marks. How much should I put aside for tax? How do I log mileage so it survives an inspection? What counts as an expense? She built three linked spreadsheets that answered them, with her own £50 rule rewritten for people who had no bookkeeper to send the difference to, and priced the set at £24. The first person she emailed was the hairdresser.

I learned this rule by breaking it. In 2020 I spent about sixty hours on a Board Meeting Pack for Small Firms: agendas, minute templates, a resolutions register, all nicely formatted. I priced it at £39 and was quietly certain it would sell. It sold nineteen copies. Nineteen times £39 is £741, which over sixty hours comes to £12.35 an hour, before the storefront took its cut. The reason was plain once I looked. Not one of my consulting clients had ever asked me about board meetings. Most of them did not have a board. I had built the product I thought a serious business ought to want.

My best seller had a much duller birth. Between 2014 and 2017 I was asked some version of "Could you send me the invoice template you use?" about forty times, usually at the end of a call, almost apologetically. I had answered it by attaching the same file forty times. In 2018 I cleaned it up, added the VAT version and a credit-note sheet, and put it on sale at £49. It has outsold everything else in my catalogue combined, and it is the bundle that later went to every buyer in A4 by mistake.

The board pack is still listed. I have never taken it down. Last March it sold its twentieth copy, to a firm in Swindon, and I felt oddly grateful to them.

Revenue per Hour, Revisited

Ratings feel good, but the metric settles arguments, so I asked Meera and Daniel to rerun their sums after each rung, using the same method as in Chapter 1: monthly revenue divided by every hour they personally gave the business, including the unpaid ones.

Meera's hourly year produced £24.06 for every hour of attention, against the £35 she thought she was earning. Twelve months on the package she had nine clients paying an average of £430, plus the Oadby £90, which came to £3,960 a month. She logged 118 hours. That is £33.56 an hour. The price rise explains less of it than you would guess. Most of the gain came from hours that simply vanished: no more haggling over invoices, no more evenings spent explaining why a quick question had taken forty minutes. Her chasing routine, once a constant leak, now ran on fixed days.

The templates looked trivial by comparison. In their first three months they sold 41 sets, £984 in total, about £328 a month. But they cost her roughly two hours a month in support emails. Added to the package, her monthly figure rose to £4,288 across 120 hours, or £35.73. Not dramatic. What struck her was the ratio inside it: the spreadsheets earned about £164 for each hour she gave them, five times what the package did.

Daniel's numbers moved the other way first. His subscription brought in more revenue, and in the first two months his hours rose with it, because every request still passed across his own desk before it reached the queue. His figure fell before it climbed. That is the honest shape of a rung: you pay for the new structure in hours before it pays you back.

I take one plain point from all of this. A higher rung gives you room to earn more per hour. Whether you actually do depends on who handles the work once it is on the rung.

This Week

Go back to your diary from Chapter 1 and your Run Log from Chapter 3. Work out your current Revenue per Hour of Attention, honestly, unpaid hours included. Then choose one recurring task that a client has paid for at least five times and write a one-paragraph package for it: the price, the limits in numbers, and the sentence about what happens to anything outside them. Do not sell it yet. Write in the margin the figure your hourly rate would become if the package took a third fewer hours.

Daniel did this on a Sunday night in May. Beside his figure he wrote one word, queue, and circled it until the pen went through the page.