value pricing - theory & practice
DESCRIPTION
Begin an exploration of the true sources of value; Begin to understand the implications for your business model & the firm of the future; Have a core methodology to begin applying value pricing in your practice. (Presented for Thriveal Academy)TRANSCRIPT
Value Pricing:Theory & Practice
with Adrian G. Simmons
Chief Creative Designer Elements, CPA LLC
Practicing Fellow VeraSage Institute
Director of the Lab Thriveal Laboratory
Poll Question
“Pricing isn’t about cost justification, it’s about value creation.”
“What a dead squirrel taught me about value pricing”—Fast Company
Ronald J. Baker Founder VeraSage
Ed Kless Sage Partner Development
“Business is a double thank-you event, not a zero-sum game.” —Ed Kless
—Michelle Golden
Value
Tangible Spiritual
DynamicSubjective
“People aren’t buying hours, so let’s stop selling them.”
Revenue = People Power x Efficiency x Hourly Rate
Profitability = Intellectual capital x Effectiveness x Price
~ versus ~
Services > Cost > Price > Customers
Customers > Value > Price > Cost > Services
What kind of price is it?
Yes
NoDo you give your customer a price before you start the work?
Do you base the amount on anticipated (or past) time spent?
Lawyers, accountants, consultants, and other professionals are under pressure to dump the antiquated billable hour and start pricing like the rest of the world does. But there’s a lot of misinformation, especially from so-called practice consultants, on what “value pricing” means.
You could go to a two-day seminar on “alternative fee arrangements” or “alternative billing” and come away stupefied by terms like hybrid fees and risk collars and blended rates and “80/120” (whatever that is). Or you could follow this handy flowchart. I don’t know about you, but the flowchart sounds more fun.
Yes
Yes
No
Yes
No
Yes
Yes
No
No
No
No
Is the price the same for all your customers?
It’s a fixed price. That’s a good start ...
It’s a value-based price.You suddenly seem smarter.And better-looking.Oh, and happier.
It’s billing, not pricing.And it’s not 1919 anymore.Put down that buggy whip.
It’s billable hours in drag. Who are you fooling?
It’s a menu price. Just like McDonald’s. Yay.
It’s billing and ducking. Um, surprises are supposed to be fun.
Michelle Goldengoldenpracticesinc.com@michellegolden
Jay Shepherdjayshep.com@jayshep
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Is the price codeveloped with the client based on desired outcome or perception of worth?
Is the adjustment based on actual time spent?
Does the client approve the price change before additional work begins?
Yes
Are bills adjusted when more (or less) effort was required?
—Michelle Golden —Jay Shepherd
“Value pricing is about putting you and the customer on the same side of the table.”
8 Steps to Value Pricing
1. Value conversation 2. Value council 3. Develop & price options 4. Present options to the customer 5. Prepare Fixed Price Agreement 6. Project management 7. Scope creep, change orders 8. After action reviews
Value Conversation
If price were not an issue, what role would you want
us to play in your business?
How will the services we provide add value
to your customers?
What growth plans do you
have?
What keeps you awake at night?
Value Council
What are the customer’s value
drivers?
What different price levels make sense for this customer’s
experience?
Who should be on the
value concil?
Develop & price options
Gold Silver Bronze
Value
Pump fist
Hope for
Walk away
Present options to customer
Prepare Fixed Price Agreement
Project management&
Scope creep, Change requests
DurationCapacity management
Team coordinationScope seep
After action reviews
1. What did we expect to happen?
2. What actually happened?
3. Why was there a difference between the two?
Making the transition
Psychology
Vocabulary Skill set
Strategies
www.AdrianGSimmons.com