Overservicing Clients - Risks & Opportunities of Exceeding Expectations

Going above and beyond is a noble pursuit and a motto of many service providers – until it starts messing with your bottom line. Exceeding expectations is not as rewarding as it may sound, especially when you find yourself habitually overworked and underpaid.

Steering your service biz to success is about finding balance between making an appealing offer and staying profitable, i.e., ensuring you earn more than you expend. Otherwise you’re stuck in a cycle of winning new business, only to find yourself at a loss for profits.

Let’s roll.

The promise of exceeding expectations

Sacrifice is at the heart of excellence – or so late capitalism will have you believe. Jokes aside, exceeding expectations is a virtue celebrated in any professional setting, in the service industry more than anywhere else.

To quote Salesforce, “exceeding customer expectations is becoming table stakes for businesses to compete”. It’s not enough to deliver on your promise, going above and beyond is what it takes to win new business.

80% of customers say the experience with a service provider is more important than the service itself. Unless you’re an industry giant like Apple, there’ll always be fierce competition to beat. The promise of exceeding expectations is that you’ll stand out from the crowd of similar service providers and ensure customers’ loyalty.

With the rise of review platforms and publicly available ratings, exceeding expectations has become a currency to trade. In fact, we at Memtime never miss an opportunity to showcase our excellent reviews, especially whenever exceeding expectations is mentioned. Why would we resist the temptation to bathe in our glory when the praise is well deserved 🙂

Exceeding expectations comes with its undeniable perks. But it also comes with a price to pay, and the hit is harder on freelancers and small-time agencies that don’t have a long track record to add to their credibility and have to, therefore, earn it the hard way.

The reality of overservicing clients

First off, let’s define overservicing. It’s a practice of undercharging clients for the actual work done, most often unintentionally. Overservicing encompasses any amount of work done on top of what’s agreed upon (without subsequent compensation for overtime). A classic example of overservicing is the hours that go into revisions and iterations, unaccounted for.

Overservicing does not necessarily mean undercharging, as some service providers actually bill for overtime and recover lost revenue. More often than not, however, overservicing ends in undercharging because of 2 reasons:

1. You don’t know how long you actually work on a project because you don’t track time or do it poorly.
2. Even if you reclaim a portion of that extra time later you don’t charge for all of it, e.g., small tasks like emails slip through the cracks and add up into unbilled hours.

When it comes to profitability management, the killer combo is underestimating and overservicing. On the one hand, you estimate that it’ll take you less time than actually needed to complete a project. On the other hand, you have no working system of time tracking in place and don’t even realize how overboard you went with the allotted hours.

This scenario is way too common for digital agencies, freelancers, and even law firms. Scope creep is everywhere and it costs service businesses more than they can afford.

How to exceed expectations without overservicing

Exceeding client expectations is an expectation in and of itself, so how do you accomplish that while staying profitable, i.e., without overservicing and undercharging clients? We’ll now look at the strategies guaranteed to help you both exceed expectations and keep profit margins high.

A note before we begin: in order to exceed expectations, a service provider needs to do at least one of the following:

Let’s now tackle the strategies to exceed expectations without overservicing.

1. Overestimate tasks

A no-brainer way to deliver faster than expected is to overestimate tasks and projects at large. If a project is estimated to take 3 months to complete but you manage to deliver within 2,5 months, the client’s expectations are exceeded – as simple as that.

This is where project and task tracking is indispensable. Only by tracking your time can you know for sure how long it takes you to complete tasks and projects. Based on those insights – time data, not your gut feeling – you can accurately predict how long similar tasks will take. And then add buffer time to that baseline until you reach your personal threshold of overestimating.

The better data you have on your past performance, the more accurate your project and task estimates get. If you use Memtime, you can track your project hours retroactively down to the minute, establishing your baseline estimate and perfecting the art of overestimations.

Another way to exceed expectations through delivering faster than agreed upon is by getting more efficient at completing tasks, i.e., do the same in less time. Time tracking alone does not guarantee improved performance but a better understanding of your peak productivity times, distractions, and workload is an excellent starting point for building a better routine.

2. Switch to hourly pricing

Choosing the right pricing model for your service business is a critical decision that directly impacts your profitability. Below is a brief overview of the commonly used service business pricing models and their impact on your capacity to overservice/undercharge.

Pricing model: Hourly rate

• Pros: Protects from undercharging
• Cons: Requires more admin

Pricing model: Flat rate

• Pros: Less admin, easy estimates
• Cons: Susceptible to overservicing

Pricing model: Value-based

• Pros: Easy to adjust by client
• Cons: Complex calculations

As you can see, the only pricing model that truly protects you from overservicing by minimizing undercharging is the hourly model. The logic is straightforward: if you account for every hour allocated to the client you can charge for 100% of your time, therefore avoiding overservicing.

Both the flat rate and value-based pricing are susceptible to overservicing and undercharging simply because once you’ve agreed on the price it’s a lot harder to go back and renegotiate a higher check to compensate for your overtime. It’s not impossible – especially if you track time and have precise data on your utilization – but it’s much harder (and can cost you client loyalty).

The only disadvantage of charging an hourly rate is that you need to do more admin work, i.e., track your time and fill out timesheets. The good news is that with timesheet automation through seamless activity tracking you delegate the pesky admin to a piece of software. The only job left for you is reviewing your activity log and syncing time entries into your project tool.

3. Invest in your people

As banal as it may sound, the success of any service business is determined by the quality of its workforce. The more qualified your staff, the more likely you are to exceed client expectations with the quality of your service.

Hiring the right people is a big predictor of success for any business; however, the nature of service businesses is such that you’re trading in someone else’s time and expertise. If you have people who will go above and beyond for clients you’re guaranteed to exceed expectations.

Your job as a manager is to find the right people and establish a good benchmark for utilization, specifically billable utilization if we talk about profitability. It’s also your job to build a culture where excellent performance is acknowledged and rewarded, while burnout is prevented. You know where I’m going with this, right?

Automatic time tracking is your #1 friend when it comes to team utilization. Tracking time across teams and projects is how you determine which projects are profitable and which teams are overservicing clients. You can then make adjustments to your pricing and make sure your people are compensated for the extra effort.

A bonus system for excellent reviews is common practice for service businesses striving for excellence. If you decide to make exceeding expectations the new norm for your service business, make sure you set your people up for success.

Final thoughts

Like many things in life, going above and beyond comes with its rewards and setbacks. As a service business owner, however, the question of exceeding expectations is not that of personal preference but one of market demand. Your profitability is at stake when it comes to going above and beyond for the client.

In this article, we dived into the pros and cons of exceeding expectations, as well as reviewed the strategies to achieve one without the other. Use the tips highlighted above to build a culture of exceeding expectations without overservicing. Then, you’re guaranteed to win your customers’ hearts without breaking the bank.