Value Pricing What’s it Worth in Your Forest
How I Transitioned My Firm to Value Pricing
Becoming the King of Your Forest: Why Courage is the Value Pricing Savior
Implementing value pricing today is simpler than when I lead my firm through the metamorphosis from hourly billing and timesheets to value pricing. It may be simpler; however, the challenges are not physical, they are mental. Ultimately this is and always has been a leadership issue; you must want to choose change. 1
I spearheaded my firm’s conversion nearly twenty years ago. Shortly after meeting my VeraSage Institute co-founder, Ron Baker. Why did I leap into the unknown of Value Pricing? Because I inherently knew it was better. I understood it aligned better with our customers. I realized that without the cancer of the timesheet and all its evils (lying, confusion of efforts over effectiveness, chest puffery, stupid compensation models, and most notably a spurious waste of time and firm resources) we would be more attractive to experienced new team members that wanted to escape the six-minute measurement of their value to a firm.
Oh…..I was correct. It worked! And, although I had one partner that for a short time maintained a secretive timesheet, even he gave it up with an awaking of the realization of how our conversations and services improved when we took the great wall of time-based billing out of the customer service equation.
People have great value. Customers are valuable and important. I may be cavalier with pricing but never service. We dedicate significant firm resources on pro bono and deeply discounted services to allow those that need us but cannot afford us to receive needed services. Value Pricing isn’t about money, it is about aligning our interests to serve our customers.
Here is how we converted from a firm of the past (historian based pricing) to a firm of our future (pricing for and with purpose):
- The services we currently offered vs the services we could or should be offering (this is known as the services gap)
- We certainly reviewed their past year’s invoices
- We considered what our competition might charge should we overreach (this is really not important as the reason CPA firms are hired and fired have little if anything to do with pricing or quality. It is all service (communicating, demonstrating interest, being engaged, volunteering ideas, etc.)
- We added services we felt were valuable including:
- Unlimited meetings, phone calls, and related support
- Service level guarantees where we would back our services to our customer’s unilateral satisfaction whereby they could retrospectively adjust our price to the value they determined (note in nearly 20 years, we have had this trigger pulled less than five times and two of them were for solid reasons and I believe the premiums we earned far outweighed the pain of returning funds).
- We added planning and projections to nearly all engagements as an included service as we believed if you didn’t need planning or projections you likely didn’t need our services
- We met with our impacted customers. We explained we wanted to improve our services and the value they received from our expertise. That we understood they have budget constraints and that there were services they wanted that we hadn’t either provided or that they hadn’t previously requested. We wanted to be their business advisor and not merely their historian.
- Once we had an agreement of scope, price, and terms we met as a team to outline how we would deliver value, how we would measure ourselves against our objectives. We tracked the following:
- Turnaround time – how long has a project been in-house before it is completed
- We tracked new contacts by the customer for meetings, emails, conference calls (their number not their duration)
- We tracked new projects (change orders or special projects)
- We tracked referrals
The realities of transitioning are far less scary than thinking about it. Customers really appreciate their firms. They trust us and want more rather than less from us. They are human and they detest paying by the minute for simple questions and hence under a time-based model they don’t call when they should. Under a value priced model, they are more likely to call and even more important, we are internally more likely to call on them. And if you want to expand your practice, get out of the office and go see your customers and find out what is going on in their lives and then help them achieve their dreams, all the while being paid fairly for what you do without thinking about how long it took you as time is not a measure of value. Time is merely time and you are running out of it.
Morris+D’Angelo is the industry-leader for many High-Wealth Customers and Organizations.
707 SW Washington St., Suite 1100
Portland, Oregon 97205
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Photos: Bureau of Land Management; Right Richard P Curnow, Glentress Forest track↩