How Do You Move to Value Pricing?

How Do You Move to Value Pricing?

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Becoming client focused in pricing is not easy. It sounds simple, just price based on the deliverables that the client receives. Right??

Wrong. Value pricing is not that simple. Our natural tendency is to dwell on what we’re going to have to do to create those deliverables. The more we have to do, the higher we feel the price should be for it to be “fair”.?

As an example, think about what the benefit of incorporating a new company is for the client? There must be a fair price for this. At the same time, in the background, your inside voice will be telling you that you should be paid for the time it takes to do this, and that you shouldn’t “work for free”.

So how do you reconcile what you have to do with what people actually get??

These are two competing forces - the desire to be paid for the time required to complete a task, and the desire to be client focused in setting the price.?

You have to consider your inputs and costs, and also consider the value of the deliverables to the client. Only then can you land on potential pricing options.

I am going to give you one tip that I think will really help you move away from the billable hour model and to a much more value based, collaborative pricing approach:

TIP: Separate your thinking from your conversations with clients.?

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First, before you meet the client, you need to consider all of the inputs it may take to get a project done. Reflect on the value being delivered to the client in various scenarios. And finally, arrive at potential pricing options.?

Then, have the conversation with the client.?

This will allow you to have much more client-centric conversations, when it comes to scope and price.?

The better the system you have for determining price, the easier it will be.?

Trust your system, and then learn, recalibrate and price the next project.

Good luck in moving away from the billable hour!


Until next time,

Digby

Scott Leigh

Co-Founder + CEO at AltFee

1 年

Trying to find ways to bring system to your pricing approach is so important. Separating the scoping of the project from the value focused conversation with a client is a great way to look at it. The high percentage of firms that take value into considerations when pricing has inspired AltFee to create a feature exclusively focused on assisting customers with this challenge!

Marc Stoiber

Brand Strategist || I build simple, powerful brands that raise the valuation of entrepreneurial companies. Investors and M&A specialists call me their value enhancer.

1 年

Oh man, there has been so much ink spilled, and so much soul searching done, on this topic. If pricing can be broken into hourly, project and value, I find myself constantly striving for value, constantly refusing hourly, and all too often falling into project.

Bradley Miller

Helping Create a Better Legal Profession | Happy Lawyers → Happy Clients | Legal Counsel for Franchisees and Small Business Buyers & Sellers | #LawyerDad #LawyersWhoWoo

1 年

I actually like to do it the other way around. I don't want to think about input until AFTER I have spoke with client. Otherwise, I find that am thinking about what the work will entail rather than trying to determine the scope of the prospect's situation and the value of a solution to them. Outside of making sure I am charging enough to be excited to work on the matter, the actual work I do is irrelevant to determining a price. Then when I do think of my inputs, it is only in the context of scoping the representation and ensuring I have the bandwidth to do the work and meet the required deadlines. Anything beyond that, and thoughts of how much work I am going to need to do and how much that is worth can creep in.

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Susan Trivers

Pricing authority for Professional and B2B services firms. Set prices/fees according to the life changing differences (IMPACTs) you deliver. Fees rise as IMPACTs increase. It is never time/tasks, always about IMPACTs.

1 年

Digby R. Leigh I really love your point about separating your thinking about and calculating fees from your conversation with the client. Whatever goes into your fee --the tasks, time, overhead costs-- is your internal business. The conversation with the client must be focused on how the client benefits from your work for them. One way to make this mental switch is to think about eating dinner at a restaurant. You choose your meal based on the pleasure you are looking for. The restaurant serves it to you and never tells you the cost of the ingredients and the time it took to prepare.

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