Your Fee Structure Was Built for a Different Economy

For decades, time and materials billing rested on a simple assumption. The hours a firm invested were a reasonable proxy for the value it delivered.

That assumption is becoming harder to defend.

AI is accelerating work that once took days into hours. Analysis, drafting, modelling, reporting, coding and documentation are all becoming faster.

If a deliverable that used to require forty hours now takes twelve, what should happen to the fee?

Bill forty hours anyway and clients will eventually question what they are paying for?

Bill twelve hours and your revenue falls, even though the outcome may be just as good or better?

The industry has done it to itself in some respects by slavish adherence to time and materials pricing.  And training this approach in with our clients. As a result, I am not seeing enough firms treat this as the strategic issue it really is.

Many leadership teams are focused on selecting AI tools. That matters. But the more important question is this:

If AI compresses the effort behind our work, what exactly are we charging for?

The firms that answer that question well will increasingly price around outcomes, judgment, expertise, accountability and risk transfer.

The firms that do not may find themselves trapped in a model where becoming more efficient simply means becoming less profitable. Recruitment, retention, inability to invest and myriad other problems result. 

This is not really a conversation about billing.

It is a conversation about how your firm defines value.

Because clients were never buying hours. They were buying confidence that the right outcome would be achieved. AI is simply making that distinction impossible to ignore.

Has your firm started rethinking its fee model, or are you still measuring value by the hours it takes to produce it?