After 14 years and more than 250 professional and business services firm clients, it’s clear what holds firms back from reaching their highest revenue and profit potential.
3 pricing mistakes.
And you don’t have to make them!
- One price for everyone (take it or leave it)
- Hourly billing (all risk is on client; final price is unknown)
- Pricing for features and benefits (what you think you’re worth)
You’ll know you’ve made one or more of these mistakes when you hear these objections or comments from buyers or prospects.
- The price is too high
- Can we get a discount
- We don’t see the value at that price
- Anther company does it cheaper
- We don’t need all that functionality
Who makes these mistakes?
Hundreds of thousands of business and professional services firms!
Accountants, web designers, digital marketers, business coaches, lawyers, bookkeepers, trainers, writers, compliance experts, fractional professionals (CFO, CMO, HR) and others who trade knowledge and expertise for fees.
But your firm doesn’t have to be one of them.
You can avoid the reduced revenue, dissatisfied clients, and disappointing profit with these fixes.
Mistake #1-Take it or leave it pricing
I see this occur in two distinct forms.
The first is the use of fixed fees. A professional or business services firm realizes that certain work follows the same practices every time so it decides to offer that service for a fixed fee. The buyer or client gets all of it, whether they need it or not. There is no option for getting more or less than what’s included.
The second is when the provider writes customized proposals and includes all possible services. Of course the price or fee is quite high. The prospective client either takes everything or gets nothing.
Fix #1-Choice Framework
The Choice Framework gives the client three options.
The benefits of this are outstanding:
- The client has a feeling of agency, which they really like.
- You can show the range of your IMPACTs and the fees in proportion to each choice.
I recommend labeling your choices to convey the different IMPACTs you will be delivering.
I use IMPACT, IMPAC T PLUS, and IMPACT Light.
One accountant uses Core, Growth, Scale.
A lawyer uses Synergy, Synergy+ and Bespoke.
Stay away from Good, Better, Best which suggests that anything other than the Best is inferior. All your options are superb. They differ in the IMPACTs delivered.
Be sure the middle choice promises exactly what the client asked for. Then offer significantly more for your upper level and take away just a bit from your lower level.
The fees for each level must be proportional to the life changing impacts you deliver. They are never about inputs or the quantity of your work.
Mistake #2-Hourly Billing
Billing by the hour is widespread and it is always a pricing mistake!
- All the risk is on the client
- There’s a strong disincentive to work quickly.
- Even worse is that your firm is constantly selling hours. When some hours aren’t sold, you lose money.
Fix #2-A pricing model that equates fees with the impacts your firm delivers to clients.
My preference is IMPACT Based Pricing, where fees are proportional to the significance of the life changing differences you deliver to clients.
Yes, that’s a mouthful!
Don’t let that stop you.
When you start doing it you will find revenue increases, working hours decrease, and you’ll attract clients who want you to change their lives.
A fixed fee pricing model can be a solid alternative to hourly billing as long as you use it with the Choice Framework.
Mistake #3-Pricing for Features and Benefits aka “What You’re Worth”
I hate seeing this advice “Know your worth!” or “Charge for your worth.”
Buyers do not think about, nor are they persuaded by, your calculation of your worth.
The only calculation in a buyer’s mind is “What is this worth TO ME?”
There’s an easy fix.
Fix #3-Use the Issue Chart and Continuum of IMPACT
Imagine the reaction when a prospect gets your offer or proposal and your very first paragraph reads:
“Your firm is losing existing clients which reduces your revenue. Improving retention is on your critical path. From your point of view, successful retention falls at an 8 on the Continuum of IMPACT.
We are pleased to provide our expertise to increase retention which could be worth up to $XX millions in revenue to your firm.”
Using the Choice Framework, you make three offers with fees proportional to the impact you will deliver.
I would recommend that the IMPACT offer is designed to increase retention and revenue.
IMPACT PLUS would go further by focusing on attracting new clients through a well designed referral program.
IMPACT Light would analyze sales figures and provide a report about reasons for losing clients and recommendations for retaining them.
Change your own life
Your firm’s pricing model affects every other element of your company:
- target market
- services offered
- employee compensation
- customer service
- and last but not at all least, your profitability.
Why do all this work and not fix your pricing mistakes?
Text PRICING to 703-801-0345 to start the conversation.