11 Ways to Move to Value Pricing

Plus: 13 benefits clients will happily pay for.

By Rob Nixon

As you go through the journey of value belief and client value perception, you have to be conscious of price parity.

MORE ON STRATEGY: Are Your Prices Too Low? | 6 Steps of Moving to Value Pricing | Feel Good About Yourself | How to Build Enduring Relationships | They Should All Be ‘A Class’ Clients | Accountants Are the Last Trusted Advisors | How to Structure Your Firm for Success | Why Average Project Value Matters
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If a client has been paying $5,000 for your service and even if you feel it is worth twice as much, the client may not pay much more for it – particularly if it looks like the same service. Your client might pay 15 percent or 20 percent more, but double? – give me a break. Unless you completely redesign your product offering so it looks completely different, your current client will have a hard time paying the price.

But when it comes to new services that the client has never bought before – different story. There is no price parity with a new service that has not been purchased before – charge at will!
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Are Your Prices Too Low?

Businessman sleeping with a giant dollar bill for a blanketHow much value do you create for your clients?

By Rob Nixon

The most popular question I get is, "How do you determine the price?"

MORE ON STRATEGY: 6 Steps of Moving to Value Pricing | Get Rid of All Your Rates | You Can’t Lavish Time Unless You Have Time to Lavish | Changing Accountants: 2 True Tales | Your Clients on Your Terms | How Much Should Partners Make? | Be a History Maker
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Unfortunately, there is no easy answer to that. If you were in the commodity business (selling the same things that others sell) then it would be relatively easy – see what your competitors are selling their comparable product for and price yours higher or lower based on the quality of your product and service.
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6 Steps of Moving to Value Pricing

Chart depicting margin progression as outlined in articleYou'll end up with 4 main KPIs.

By Rob Nixon

The idea of value pricing is that your clients know how much the price will be before the work commences and you get a healthy margin in return for your intellectual capital/property.

MORE ON STRATEGY: Get Rid of All Your Rates | Never Charge by a Time Unit | Put Your Own Oxygen Mask On First | Define Client Wants Vs. Needs | The Entrepreneurial Accountant: An Oxymoron?
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With the implementation of value pricing your average hourly rate (AHR) should increase dramatically. There are two ways to measure AHR.
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Get Rid of All Your Rates

$50 bills in a wastebasketIf you have them in mind at all, you'll try to keep using them.

By Rob Nixon

I think this entire method of pricing by time is not only bad for you, it is bad for your client. It is highly unethical. There is no winner. There has to be a better way.

MORE ON STRATEGY: Never Charge by a Time Unit | Feel Good About Yourself | How to Build Enduring Relationships | They Should All Be ‘A Class’ Clients
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The good news is, there is a better, more ethical way. It’s called value pricing.
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Never Charge by a Time Unit

Money on one side of scales, watches on other3 flaws with this business model.

By Rob Nixon

I would love to meet the person who invented time-based billing. I think this person is a complete business moron and I would have much pleasure in highlighting the unethical behavior that this method causes. This is probably the same person who invented write-offs as well. What a complete idiot.

The premise is that if you get the charge rate right and the time to do the job right, then the price is right. Nothing could be further from the truth.

MORE ON STRATEGY: Feel Good About Yourself | You Can’t Lavish Time Unless You Have Time to Lavish | Changing Accountants: 2 True Tales | Your Clients on Your Terms | How Much Should Partners Make? | Be a History Maker | Why ‘Steady as She Goes’ Isn’t Enough | How to Calculate a Value Price | Boost Efficiency and Your Bottom Line | Marketing Must Generate Leads
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Time-based billing does not value the project. The only value of a project is what the market is prepared to pay for it. I am going to challenge your thinking of time-based billing and encourage you to adopt a new model of value pricing.
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Feel Good About Yourself

Male and female runners silhouetted against London BridgeLessons learned when my wife signed me up for a marathon.

By Rob Nixon

To do what you want, when you want, with whom you want in a manner that you want then you’ll start feeling good about yourself. If you do not feel good about yourself then you will probably hate your clients.

MORE ON STRATEGY: You Can’t Lavish Time Unless You Have Time to Lavish | Put Your Own Oxygen Mask On First | Define Client Wants Vs. Needs | The Entrepreneurial Accountant: An Oxymoron? | Growth Is All About the Clients | Order Takers and History Writers | Why Old Pricing Models Are Unethical | 8 Ways to Improve Firm Profits | Be an 'Object of Interest'
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You need to be happy with what you see in the mirror. You need to be fulfilled and you need to be excited about life. You need to be happy with the way that you execute your goals.
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You Can’t Lavish Time Unless You Have Time to Lavish

Clock facesOn the chopping block: time wasters and toxic relationships.

By Rob Nixon

To do what you want when you want means you need to MAKE time available to do what you want to do.

MORE ON STRATEGY: Put Your Own Oxygen Mask On First | How to Build Enduring Relationships | They Should All Be ‘A Class’ Clients | Accountants Are the Last Trusted Advisors | How to Structure Your Firm for Success | Why Average Project Value Matters | Do Your Clients Want More?
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There are many excuses that people make for not doing something. The poorest, weakest excuse that has no meaning is, "I didn’t have the time." How can anyone not have the time when we all have the identical same amount of time to use? We all have 24 hours in a day, 168 hours in a week and 52 weeks in a year. No one gets one second more or one second less.
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Put Your Own Oxygen Mask On First

Woman resting feet up on globe with hot air balloon in distanceEveryone has a Ferrari.

By Rob Nixon

No doubt you have been on an airplane and endured the mandatory safety briefing. Every safety briefing has the oxygen mask discussion. On every flight I have ever been on they say (or infer) the same thing: "Make sure you put your own oxygen mask on first before helping others."

MORE ON STRATEGY: How to Build Enduring Relationships | Changing Accountants: 2 True Tales | Your Clients on Your Terms | How Much Should Partners Make? | Be a History Maker | Experience Doesn’t Mean What You Think It Does | Why ‘Steady as She Goes’ Isn’t Enough | The Final Critical Traits: How Do Your Tires Look?
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What they are saying is that if you are calm, relaxed and in control you can help others survive. The same applies to the accounting business. If you (as the advisor) are healthy, fit, relaxed, in control, successful and wealthy, then you can help others to be the same.
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How to Build Enduring Relationships

Woman explaining financial brochure to manA 10-point communication schedule and 12 performance standards.

By Rob Nixon

When you get a lead for a new client you are so excited. It’s almost like a potential new love has entered your life.

MORE ON STRATEGY: Changing Accountants: 2 True Tales | Define Client Wants Vs. Needs | Mindset Is Everything | The Entrepreneurial Accountant: An Oxymoron? | Growth Is All About the Clients | Change Is On the Horizon | Order Takers and History Writers
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To seal the deal you really woo the potential client in the dating period and you dance for a few weeks while you make all sorts of promises. Finally they commit to being engaged to you and the client agrees to your promises and charm. You are even more excited.
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Changing Accountants: 2 True Tales

Two men at whiteboardYou have expertise. Use it.

By Rob Nixon

If you ask the right questions in the right order you will find out what your clients really need – not what they want.

MORE ON STRATEGY: Define Client Wants Vs. Needs | They Should All Be ‘A Class’ Clients | Accountants Are the Last Trusted Advisors | Do Your Clients Want More? | Sales Is about Trust | How Offshoring Is Shaking Up Accounting
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Not doing so is doing your clients a complete disservice.
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Define Client Wants Vs. Needs

Woman and man shaking hands across a deskBuild looking for opportunity into every job.

By Rob Nixon

Why do clients come to you from another firm? Okay, I know you are good and the best accountant around but really – why?

MORE ON STRATEGY: They Should All Be ‘A Class’ Clients | Your Clients on Your Terms | How Much Should Partners Make? | Be a History Maker | Experience Doesn’t Mean What You Think It Does | Why ‘Steady as She Goes’ Isn’t Enough | The Final Critical Traits: How Do Your Tires Look? | How to Calculate a Value Price
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Do you ask every client why they left the other firm and chose you? Probably not. When it all boils down, clients leave one firm for another for just two reasons:
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