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