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How Can You Implement Value Pricing in Your Business?

11/2/2011 at 7:00 am by

I just finished reading Ron Baker’s book entitled “Implementing Value Pricing: A Radical Business Model for Professional Firms.”

It is available here:
http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470584610.html

The book is fantastic. I had to read a few chapters more than once before I could truly understand Mr. Baker’s theories, but after finishing, we have decided as a firm to eliminate time sheets and hourly billing in our organization and move completely to value pricing. I first read the chapters that I felt were difficult to accept or implement in my organization and then I read the book from cover to cover.

What I liked best about the book are the last few chapters which indicate the eight steps required to implement value pricing in a professional services organization. I found the steps clear and easy to adopt, and the book can be used as a reference guide or manual as we move through the process:

  1. Have conversations with your customers. Discuss what they want more than what they need and really listen to them.
  2. Price the customer not the time spent. Determine the value of the solution to the customer and develop a price that works for both parties. Develop a pricing council to help set prices for the projects and services you offer.
  3. Give the customer pricing options. Like small, medium, and large at a fast-food restaurant. Giving them one price leaves them with only one option for response; yes or no. Most customers like options to help them make decisions.
  4. Present the options above to the customer. This will typically lead to a negotiation of the price, the scope of work, and the project completion date.
  5. Develop a fixed price agreement that includes a service and price guarantee, what service are included, and how unanticipated services will be dealt with.
  6. Manage the project with an issues list. The ultimate goal is to ensure all items on the list are dealt with. The list may include both positive and negative issues.
  7. Change orders. If there are services that need to be performed that are outside the scope of work issue the client a change order so that he can make a decision as to whether he would like the work performed or not.
  8. After action reviews. Once the project is complete, conduct an after action review to determine whether the project was a success. Learn from your mistakes and repeat the correct behaviors on the next project.

I have not done justice to Mr. Bakers book, but I hope I provided you with some highlights so you can appreciate how this book might be useful to your organization. I highly recommend that you read it and evaluate whether hourly billing and time sheets truly make sense for professional service firms in a recessionary or post-recession economy.

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About the Author

Glen is an accountant and Sage Accpac ERP and CRM expert. He has worked in the accounting industry as a public practice auditor, tax specialist, and controller. In the mid 1990s he moved his focus to technology and became an ERP consultant for Deloitte and Touche. He moved to Plus Computer Solutions in the late 90’s and purchased the company in 2003.

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