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The Sage Advice Podcast is dedicated to the possibility that entrepreneurs continue the work of creation. We celebrate them by allowing them to tell their stories and share their knowledge with others. In doing so we energize the success of businesses around the world through the imagination of our people and the power of technology.

May 1, 2019

Ron and Ed answer the following email:

Your TSOE episode on the death of the timesheet was very thought provoking.  I’m 99% with you on the idea of killing hourly billing, and could be with you on killing timesheets except I don’t know how to answer one question.  How does a company determine Willingness to Accept (WTA)?  
In every negotiation, the buyer has a Willingness to Pay (WTP) and the seller has a WTA.  This is easiest to understand in products.  If a seller has an ongoing business and can buy a product for $100, their WTA is almost certainly some number above $100.  Usually they have a margin floor, say 20%, so their WTA would be $120.  If the buyer’s WTP is $300, there will likely be a transaction, hopefully at a price significantly higher than $120.  However, if the buyer’s WTP is less than $120, no transaction will occur.  
In accounting or similar service type businesses, how do you know your WTA?  It seems you need an estimate of time, (even though you would pay that accountant’s salary even if you didn’t land that job).  If you need to estimate time, wouldn’t having timesheets to track actual vs estimated in after action reviews be helpful?  As you point out, they are probably not accurate, but is there a better way?  I’m looking forward to your answer.  Feel free to answer on the air if you’d like, perhaps on free rider Friday?