“Okay, Susan, I’m committed to adopting IMPACT Based Pricing for my firm. I’ve got the language (see last week’s three steps). How do we turn that into actual dollars?”
Love this question! Dollars follow commitment and language.
Segment 4 of the 60 Minute Pricing Makeover Mini Course is an analysis of your recent client work. You made a 4 column chart with client name, IMPACT delivered, fee paid, and your estimate of where the IMPACT you delivered would fall on the Continuum of IMPACT. I call this the significance of the IMPACT.
For INTERNAL use only!
The following steps are for use only within the firm to get you started pricing your IMPACTs. (Not your time.)
The best starting point is the fees you’ve charged for recent projects. Yes, these fees are based on time which you are no longer going to do.
However, these recent fees help you see the connection—or lack of connection—between the dollars and the IMPACT.
Create a new chart with the list of IMPACTs, fees, and the significance rating.
What do you see?
Where your lowest fees are associated with IMPACTs at 6 and above, they are too low.
Where your highest fees are associated with IMPACTs at 5 or below, they are too high.
Step #1: Rearrange the IMPACTs from highest to lowest.
Place the highest fees next to the highest impacts and the lowest fees next to the lowest impacts.
This gives you a picture of what IMPACT Based Pricing will look like once you’ve established it.
Step #2: identify 5 other IMPACTs your firm delivers. Give them a significance number and insert them into the list from step #1. Put a fee next to these additions. These fees should be higher than the ones below, and lower than the ones above.
Now you SEE how the differences you deliver to clients has a range of significances (IMPACTs) and how the fees reflect that range.
Step #3: Of course, profits matter, a lot! We’re not adopting IMPACT based Pricing just to stay stuck at your current profit.
I start with assumption that the current hourly fees do generate profits at some level. Therefore using them as a baseline ensures at least that level of profit.
You will build from there.
More to offer every single day
The beauty of knowledge services firms is that you have more to offer every single day.
Each new client engagement is an opportunity to deliver more significant life changing differences and price them accordingly.
Give yourself two months to refine and fine tune your IMPACT Based Pricing.
In the first few weeks you will rely on the recent past PLUS the desires of the clients to make offers derived from IMPACT Based Pricing. Remember, you will do at least as well as with hourly billing.
As you gain experience and comfort with the Issue Chart/Continuum of IMPACT conversation (segment 5 of the 60 Minute Pricing Makeover Mini Course), you’ll feel confident about increasing your Fee:IMPACT ratio.
By the third month, you should be comfortable listening to the client and making an offer with an appropriate IMPACT Based Price.
When should you start?
Seriously, there’s no point in waiting until “it’s the right time.” Calendar has nothing to do with IMPACT Based Pricing.
You are making offers to deliver life changing differences to clients for fees proportional to the significance of the difference.
Get started today and make a difference to your clients tomorrow.
P.S. I know you can do this. And that your clients will be thrilled.
–If you like to work on strategic changes yourself, complete the 60 Minute Pricing Makeover Mini Course. In 5 timed segments you will have the foundation to adopt IMPACT Based Pricing.
–If you’d like some support for your strategy, book a Think Tank with me. It’s your agenda and time to ask questions, talk through your worries and do the math! Text Think Tank to 703-801-0345 to schedule.