Ron Baker, the author of Professional’s Guide to Pricing, The Firm of the Future: A Guide to Accountants, Lawyers, and Other Professional Services, Implementing Value Pricing: A Radical Business Model for Professional Firms, and more, has recognized that there is a problem with the current business model for pricing that many professional firms use: the billable hour. To explain, he said:
“When I ran my own accounting firm, I did what I thought I should do and I billed by the hour. So I would tell my customers that I would bill them when I was done, and I found out very fast that was a really bad customer experience. Customers like to know the price of things before they buy them. By billing by the hour our customers don’t find out the price until after the work is done. After you’ve put in the work is a bad time to find out that your client isn’t happy with
your price or your value. So after losing clients because of that way of pricing, I thought to myself ‘there has to be a better way’ and I noticed that other business weren’t having this problem. Then I figured out that was because they weren’t billing by the hour. That’s how I came up with value pricing. So having the discussion of price upfront I found to be a better customer experience.”
As the Founder of VeraSage Institute—a think tank dedicated to improving the profession for posterity by teaching value pricing—, an instructor for the CPA Education Foundation, a faculty member of the Professional Pricing Society, a diligent student of price theory for the last 15 years, and a world-wide speaker, Ron plans to now share his teachings of value pricing at QuickBooks Connect in his upcoming session “Implementing Value Pricing: A Radical Business Model for Accounting Firms.”
To explain a bit about why he thinks the billable hour needs to die and what value pricing is, Ron said:
“The billable hour is insane because the time something takes has no relation to its value. If I spent 10 years writing a book and nobody buys it then I can't expect the world to give me money for that time. Value isn’t an objective measurement, but something that is really subjective.”
He then went on to give an example:
He said, “If you think about being in the desert and you haven't had water for days and you came across a bottle of water you would basically trade your life for it. It's priceless because it could save your life. If you're at home washing the dishes and you are offered the same quality of water then there's less value. If your basement is flooded with water, now it's got a negative value. Notice that we didn't change the product in those three instances. It's still the same product, but what changed was the context."
For firm owners that have been billing by the hour, this new concept of pricing may be intriguing yet worrying for one or more of the following reasons:
- you may feel like it’s a big change and a lot of work
- you may not be sure if this new concept of pricing will work for your firm
- you may be skeptical about this concept or have arguments against it
If you fall into any of these categories then you’ll really benefit from attending Ron’s session. This session isn’t about making you switch, but instead to show you the easiest and least time-consuming way you can gradually change to value pricing (if you want to) and the eight steps to follow when implementing value pricing with your clients. This is also a great session to attend if you’re skeptical about value pricing or want to hear your colleague’s concerns because Ron is very open to Q&A and skeptics. He said, “There are a lot of people that disagree or that say they’ve heard this before, and there's a lot of misconceptions and misinformation about value pricing. There's nothing more fun than converting a skeptic because they usually end up being your biggest fan once you’ve won them over logically and emotionally." This is a session where you’ll not only learn about value pricing from the source, but you’ll also get your questions answered better than anywhere else.
People attending this session will learn:
- the first and second law of pricing
- how behavioral economics influences prices
- how to offer options to their clients
- how to have a value conversation with their client
- 8 steps for implementing value pricing
The 8 steps for implementing value pricing that will be talked about in more detail during the session are:
- Have a value conversation with the customer
- Price the customer not the service
- Learn how to develop and price options
- Present those options to the customer and the best practices for doing that
- Deal with price objections (how you handle those objections of ‘that’s too much’) and the price agreement (what the payment terms are and when you’ll get paid)
- Proper project management (who's going to do the work and what are the deadlines)
- Deal with change orders (when something comes up that nobody foresaw, how do you deal with that, and how does it affect the price)
- Pricing after action review (basically figuring out how you can do it better next time)
The main takeaways of this session will be:
- Understanding why the time sheet/billable hour needs to die
- Understanding why you need to change your pricing concept from the hundred year old business model
For those interested in finding out more about value pricing you can go to Ron’s website VeraSage.com, listen to his radio show The Soul of Enterprise: Business in the Knowledge Economy at VoiceAmerica.com, or pick up his latest book Implementing Value Pricing: A Radical Business Model for Professional Firms, where he has a chapter for each of the 8 steps for implementing value pricing.
Ron’s teaching of value pricing is moving the profession forward to more satisfied clients and more profitable businesses and by attending this session you can become a part of the movement.