Michele Riffe: The 6 Month Value Pricing Update
Six months in, Michele has explained the concept to her customers and is now happily able to provide them financial guidance on their business instead of worrying about task tracking.
All of my current existing customers have been converted to fixed pricing. It has taken me approximately six months. That also included maybe getting rid of some of the customers that weren't on board. Once you weed out them, it cuts down on who you have to convert.
I comprised a letter and sent it out to them and explained to them what I was doing, the process I'd gone through, why it was a benefit to both them and to me, and I just told them what the new price was going to be, and all of them converted over quite easily actually, so now with every new prospect I have a conversation prior to starting work, and they agree to what I'm going to do before I even start doing it. We agree to the outcomes, the scope of work, and the price and they pay for it before I even begin the work.
The challenge with presenting a fixed price agreement is the customers are so used to being charged by the hour that it's a pretty new concept to them until you can go into explaining and sometimes even convincing why you're going to do this. Once you can present the why and they understand logic, I actually think they like it better, too.
I have increased my rates. I am very happy with where my rates are now. My only regret is that I didn't do it sooner. I feel like I am making more for less stress, maybe not less work, but less stress, and it's because of the getting paid at the very beginning of the project or at the beginning of every month. It's also smoothed out my income.
My goal all along has been to be not just a bookkeeper or an accountant or the person that does the payroll for my customers. My goal has been to aid the business owner in understanding their financials and that's what we get to focus on now instead of how much money they have to pay for it.
My advice to anybody that is considering value pricing is you need to do it. You need to do it yesterday. It's liberating. It takes your firm to the next level as far as the compensation that can come in. You're not limited. If you are billing by the hour, you are limiting your income, and who wants to do that? That's the equivalent of working for somebody else and collecting a salary.
Value pricing has been a blessing when it comes time to do invoicing. I can honestly say I do not like tracking or writing down every single little task that I did for somebody just to justify the invoice that I send them. If you are at a point in your firm or your business where you feel like you are working way too hard and way too much, but you're not really seeing the results in the form of increased revenue, value pricing is something you should definitely consider.