I first started hearing about value pricing in early 2015. My first reaction was concern that value pricing was unfair to my clients. I was bound to the idea of trading dollars for time. I thought that value pricing would need to be an estimate of the time related to the project. If I over-estimated, then I was cheating my clients. If I under-estimated, I could lose my shirt on the project.
It was time to re-frame these ideas. I needed to get out of my own way and start bringing more value to my clients. I’m hoping that sharing this experience can help re-frame some of these ideas for you. Value pricing is an amazing tool for just about any service-based industry.
I have spent tons of “non-billable” time researching and learning new software apps that make our bookkeeping work take less time. In turn, I saved our clients time and money. Then I had to bring on new clients to fill the gap. No matter how many hourly clients I took on, there was always a cap on how much I could earn.
Time was limited. As a result, I was punishing myself for doing great work.
I showed more value to my clients, I did more continuing education, but I was making less money. I was the little bird flapping ever harder just to continue losing altitude. It was exhausting and disheartening, and I didn’t even realize it. I thought that was simply how things were done. Then I found another way.
At Scaling New Heights 2015 I took Ron Baker’s course on Value Pricing. It rocked my world. I realized that I had been drastically undercharging for my services. My invoicing methods were creating a situation that encouraged my clients to question my integrity and complain. I was creating this stressful situation with my own limiting beliefs.
When I returned from the conference, my team and I decided to give fixed prices a try. We rolled out proposals one client at a time. As we learned and changed little things with each one, the results amazed us! Clients who had previously bickered over 15 minutes on our bill were now thrilled to have a package with us.
The clients that were not thrilled were the ones that were a headache to work with, anyway. We saw that they were never going to be happy, no matter what we did. Not wanting to switch to a fixed-price package just reinforced that we were not the best fit for each others needs. That made it easy for us to let them go. It was time for them to find someone else to help them. There were many clients that we didn’t even bother to offer packages to; we just sent them our termination notice and moved on.
The clients we love most went for our packages without hesitation. They more than made up for the revenue loss of the ones we let go. Now, we are so much happier to ONLY be working with our favorite clients.
One year later, we have let go the bottom 30% of our clients.
We encouraged them to find a better fit for their needs, allowing us to do the same. We are now providing deeper relationships to fewer clients. In the process we have more than doubled our gross revenue. In addition to better relationships, this has also saved us two full days a month on invoicing and receivables activities. We use Practice Ignition as our fantastic proposal management app. We set clients up for ACH payments, and then we don’t have to worry about them until the scope of our agreement changes.
Here is one great take-away for companies struggling to adopt value pricing: Use fixed price agreements as a stepping stone to work up to the value price agreements. We set up easy packages that worked well for us and our clients, thus making sure not to get bogged down in “analysis paralysis.” If you experience failure to launch, just start with one, then try one more.
Many of our clients are still on fixed price agreements. Over time, we will work our way up to real value pricing with them. We will always have a great deal more to learn about value pricing. Our team is excited for this ongoing challenge.
We love Rob Baker’s tools, and we are excited to continue our education on value pricing! Do you want to hear all about it from the man who literally wrote the book on value pricing? Check out Ron Baker’s awesome webinar series on the Intuit Firm of the Future website.