How Do You Move to Value Pricing?
Welcome to this month's article of Let’s Be Frank, a monthly newsletter series hosted on LinkedIn and authored by our founder Digby. If you are interested in following along pop over to the Let’s Be Frank LinkedIn page here and hit the subscribe button to have these articles sent straight to your inbox.
Becoming client focused in pricing is not easy. It sounds simple, just price based on the deliverables that the client receives. Right?
Wrong. Value pricing is not that simple. Our natural tendency is to dwell on what we’re going to have to do to create those deliverables. The more we have to do, the higher we feel the price should be for it to be “fair”.
As an example, think about what the benefit of incorporating a new company is for the client? There must be a fair price for this. At the same time, in the background, your inside voice will be telling you that you should be paid for the time it takes to do this, and that you shouldn’t “work for free”.
So how do you reconcile what you have to do with what people actually get?
These are two competing forces - the desire to be paid for the time required to complete a task, and the desire to be client focused in setting the price.
You have to consider your inputs and costs, and also consider the value of the deliverables to the client. Only then can you land on potential pricing options.
I am going to give you one tip that I think will really help you move away from the billable hour model and to a much more value based, collaborative pricing approach:
TIP: Separate your thinking from your conversations with clients.
First, before you meet the client, you need to consider all of the inputs it may take to get a project done. Reflect on the value being delivered to the client in various scenarios. And finally, arrive at potential pricing options.
Then, have the conversation with the client.
This will allow you to have much more client-centric conversations, when it comes to scope and price.
The better the system you have for determining price, the easier it will be.
Trust your system, and then learn, recalibrate and price the next project.
Good luck in moving away from the billable hour!
Until next time,
