Value Pricing: One Professional’s View
We have all heard the phrase “value pricing your services”. There are many people that have embraced the theory behind it. But what does mean to Value Price your customer?
One question that I have heard is “Am I gouging based on what people can afford to pay?” Another question was “Am I setting up a menu pricing scheme that encompasses the masses?” Or another that went “Am I taking my total hours that I think it is going to take to do the job, multiply that by an hourly rate then adding costs?"
There are variations in the methods, just like there are differences of opinions so let’s look at some ways we can value price.
Mark Wickersham – Pricing in the Cloud
When you are starting out researching value pricing, you are going to find differing opinions as to what this phrase means and how to apply value pricing to your firm or business. First, lets look at what Mark Wickersham has done. He has created a web based program called “Pricing in the Cloud” that is flexible enough for the user to create a value price that factors in the costs of SaaS programs, your time, the price you put on your time and a possible mark-up or down based on your clients ability to afford your quote.
This is all wrapped up in a well designed, functional and visual tool that you can use to quote your client while sitting with them. When you are starting down this avenue for pricing, this is a good way to get your feet wet. It begins the conversation and you begin to become comfortable with not pricing hourly for the services that you provide.
Ron Baker – The Champion of Value Pricing
Another proponent of value pricing is Ron Baker. Ron has been championing doing away with time sheets and implementing value pricing for many years. I won’t go into a full review of all the books he has written on the topic but suffice to say that he has spent a significant amount of time dedicated to the research and the implementation of value pricing. And that is not the only medium that he uses to share his knowledge on the subject. You can easily find more information on YouTube and the IPBC website.
Ron does make it easy for the student to start implementing value pricing by giving a starting point for you to build upon. It starts with an hourly figure (remember, this is only a start), adds in other SaaS costs but then educates the reader how to increase the price to the customer by the value that is offered.
For instance, do you offer yearly and monthly payment terms? That is a value point to the customer, and your monthly price should be higher to reflect the value offered to the customer. What about unlimited phone calls? Making yourself available to your customer at their leisure does cut into your planned day. And that is a value to your customer. Therefore, that too can and should increase the price that your customer pays.
Finally, perhaps you are the liaison and provider of referrals for other professionals that understand what your customer is trying to accomplish. Let’s be honest, they are busy building their businesses and at times do not have the resources to find sources they need. That is an added value, and if that is what your customer is looking for, then that too adds more to the price that you offer your client.
These are just a few examples of adding value to your customers and there are many more you can add to this list.
Value pricing has been touted as a way of pricing not only the bookkeeping and accounting industry but other industries as well. We are currently in the process of introducing value pricing to a full-service daycare for example. Which includes to potential of eliminating timesheets.
Now that is a game changer.
Ultimately, the choice is yours. Whether you price using a program or you analyze the customer and base the price on the value you are offering them. I have learned that regardless of your decision, you will find that this method will increase cash flow for the business, it allows you to focus on increasing what you bring to the table for your customer, and you now are able to differentiate yourself from your competition in the market.
And really, isn’t that the reason we do what we do?