First, let’s be honest here. Implementing Value Pricing is a tough read. But it’s well worth your time. Ronald Baker of Verasage, the author, indicated that it’s not a “beach read.” This is true.
So are you up for the challenge? I promise you, it will pay off.
The million-dollar question is: What is value pricing?
Here’s my answer, subject to many interpretations that many in the know already have.
Value pricing is assessing your client’s needs in an attentive manner, providing options to their needs, and aligning a value for that exchange before work is commenced.
Many of my colleagues have contested that this is basically a way of ripping off a client. But value pricing is formulated to present options to the client ahead of the work instead of dealing with arrears when the work has been completed. In other words, you have a conversation with your client about the value and scope of your work before starting, instead of handing them a huge bill after the work is done and hoping to heck that you get paid or don’t have to whittle down the total because they don’t understand what exactly you did for that cost.
There are way too many benefits of value pricing to list in a short post; plus, I think you should buy and read the book. Nevertheless, here are a few:
- elimination of timesheet and time tracking
- stronger relationship with your client
- client’s well-being (they know your cost month to month)
- ability to stabilize cash flow for both you and the client
- less squabbling over petty invoices, hours, and “what did you do for that?”
- reduction in accounts receivable management
During an Intuit event earlier this year, I met Ronald Baker. He’s a nice, approachable chap. And very patient with those who are new to the concept of value pricing. For the longest time, I thought my approach to contract billing was value pricing. I even had the audacity to say as much to Ron. He looked at me respectfully, but he obviously knew I really had no idea! Being the kind person that he is, his presentation wasn’t about what I’m doing wrong, how I should change, etc. Instead, he caused us to question our beliefs and relationships with our clients. Yeah! One of those moments where you just say to yourself, I have to read more about this.
Luckily, Baker has his book. I purchased that right away. To be honest, it took me several months to read—not because it was difficult to follow, but because it took time to contemplate every chapter! The experience led me to break down my previous experience and habits, figure out new ones, and then integrate them into my business. It certainly is not a quick process. After all, each client is different, so you have to consider those steps when formulating your value pricing model each time.
I recommend Implementing Value Pricing by Ronald Baker for all industries. But only if you are open to change and getting with the times! If not, then forget about it—until the day comes when you realize it’s what you and your clients really want.