The AI negotiation your clients are about to start

Strategic Sunday Conundrum: Where did all the hourly billing go?

Picture the scene in your boardroom: It’s the last item on the agenda at a customers quarterly review, the kind of meeting that has run more smoothly than a Swiss Watch for the last three years. The client’s FD closes her laptop, smiles, and poses a closing question:

“Out of interest, are you using AI on our work now?”

Your sales director leans across the table and says:

"Yes, a bit, here and there, the team has been experimenting."

He can feel himself talking slightly too fast. Then the follow-up from the FD arrives:

“So where does that show up on our bill?”

The sales director doesn’t have an answer. If we’re being honest, neither do most of us.

That moment is uncomfortable for reasons that go a long, long way beyond the bill.

Behind the question about AI enhanced productivity lies a more honest one: is the client still getting what they hired? Behind the directors hesitation lies something he’d rather not verbalise: he had assumed the time AI saved would stay inside the business as a little breathing space and a slightly better margin, and that nobody on the other side of the table would think to ask.

At least not yet. We're still in the early days of AI.

But, clients have always noticed when work arrives faster, or with different packaging. Now they know why; because they use the same tools in their own business too.

And the industry numbers suggest your clients are closer to asking you this question, than you might expect.

I dug into the data; and what I found for firms using hourly or daily billing, is that clients are asking this question in Britain earlier and with more force than almost anywhere else, and very few leadership teams have a prepared answer.

Seventy-one per cent of UK professional firms say clients are pressing them to act on AI, against 22% in the US. In legal services, where the data is richest, around seven in ten in-house teams expect their outside advisers to change how they charge as AI use grows, while fewer than three in ten firms have changed anything at all.

KPMG, of all businesses, pressed its own auditor for a lower fee this year on the grounds that AI should make the audit cheaper, and the fee came down by roughly a seventh.

Most of us price by time because time is easy to count and work out, and for decades the hour has done a reasonable job of standing in for value. The problem with this now, is how do you measure what an hour of an AI tool's time is worth?

AI strains the hourly arrangement beyond breaking point:

A piece of analysis that took five hours now takes one, and under a time-based model the reward for getting better at your job is an 80% pay cut. Nobody signed up for that. The counter, though, is that it took all of that persons knowledge, expertise and know-how to understand the perfect prompt to make the AI tool do that work properly in the first place.

It's a very, very difficult position to reconcile.

The encouraging part is that the client asking the question usually wants a good deal more than a smaller invoice.

When a large UK survey asked clients what would make a service better value, only 28% put lower cost first. Nearly two thirds pointed to speed, communication, ease and feeling understood. Among UK corporate buyers, 78% say AI-enabled improvements in quality are essential or very important, and one in five plans to start reconsidering, within the next year, relationships with firms that can’t show what AI adds.

Read those numbers together and the larger risk is actually not having a plan, or at least trying to come up with one.

The leaders I’m seeing who handle this well start with a question for themselves before any client hears from them: where did the hours go?

If AI saved your team a day a week on a client’s account, that day went somewhere. Perhaps into deeper analysis the client never had budget for, a faster turnaround, an extra review before anything leaves the building, or a proper phone call in place of another document.

Hours that went into better work give you a story to tell.

Hours that went into Bob browsing Instagram Reels... They didn't do anything for your business.

Once you know where the hours go, the commercial conversation gets much easier to have:

• "We use AI, it gives our analysts more time to spend getting deeper into your data"

• "We deployed an AI transcription tool, it helps us create your marketing collateral in your brand voice first time"

• "Claude now does your reconciliation checks so we can proper time looking at your numbers and how we can make your business be more efficient"

Work with a genuinely uncertain scope can stay as time and materials, and most clients understand why. Nobody asks a locksmith for a refund because the door opened in ninety seconds (they’re paying for the ten years it took to learn which way to turn the pick). Your clients will accept the same logic, provided you explain which parts of the work AI touches, which parts a named person owns, and who checks everything before it reaches them.

Then decide, deliberately, what share of the gain you want to pass on and in what form: Faster turnaround speed, extra analysis depth, or a lower fee on the routine work. A share you offer before a client asks lands as an act of generosity and good faith, and clients remember who made the first move when it mattered.

Every business reading this should also take a moment to consider this: you are also a client.

Your accountant, your solicitor, your marketing agency and your IT provider all have access to the same tools your team uses. Think for a moment about which of them has told you how AI shows up in the work they do for you, and what it has done to the fees. For most of us the answer is none, and the small flicker of suspicion you might be feeling right now is precisely the feeling your own clients will have about you.

Here's one question to put to your leadership team: if a client asked tomorrow how AI shows up on their bill, what would we say, and who would say it?

Whoever answers that question first gets to set the price of your expertise. In most businesses, right now, that’s the client. It needs to be the other way round to win.