Your knowledge based services firm deserves a profit from every engagement.
As the Owner or CEO, you have to be crystal clear in your mind and your heart that you deserve to earn a profit. Profits should not be optional, nor should you see profits as greedy or unseemly. Believe it or not, I hear these objections many times!
- Return on Investment. It costs money to start and run a firm. That money could have been invested in a financial security and earned a return. Since you chose to invest your money in the firm., part of the profit represents the ROI of that financial stake.
- Risk Premium. Your investment in the business puts your money at a higher risk than if you invested in a mutual fund or high performing stock. Thus, you are entitled to a return that reflects the higher risk.
- Funds for growth. Profits create the funds for growth and are the easiest and least expensive way to fund growth. A firm that isn’t growing is dying.
What kinds of firms am I talking about?
“Knowledge based services firms” is sort of a mouthful, right?
These are firms that:
- Are known for solving problems
- Create improvements and innovations for their clients
- Invest in their internal development to remain at the leading edge in their fields
- Deliver value that changes the lives of their clients
- Professional services, such as the accounting firm that changes client’s lives with forward-looking advice using the financial reports they produce.
- Creatives like the design firm that changes client’s lives with the latest in design and user experience whether it’s websites, social media posts, books, or promotions.
- Subject matter experts that change client’s lives with the most current knowledge that ensures every client is at the forefront of their industry.
Your Profits will Be Limited Without the Right Pricing
HOW you price determines WHAT you charge. What you charge determines whether or not your firm will make a profit from every client engagement.
Your firm can charge by the hour and make a profit if the profit percentage is built into the hourly rate.
However, clients are quick to use hourly rates as a tool for negotiating your price down. How do they know that your hourly rate reflects higher value than the competitor’s lower rate? An hour is an hour! The profit is likely less than it could be because you’re fearful about price competition.
When you use Value Based pricing, you charge based on the life changing value you deliver to clients. Therefore, every conversation leading up to the engagement needs to focus on the value you deliver, not on the inputs, especially not the time it will take.
These conversations allow your firm to demonstrate how the deep trove of your knowledge and expertise drives the value you deliver and how that value changes client’s lives. The fee will be commensurate to that value, no matter the time spent delivering that value. The fee will include your profit.
Pricing is Not ‘Set and Forget’
When Value Based Pricing is your chosen model, it requires monitoring and assessing to maximize your clients’ satisfaction and your firm’s profit.
Remember, the foundation of Value Based Pricing is your knowledge and expertise. As your employees gain more of these, the life changing value you deliver increases. Your fees should reflect this but I am not suggesting that after every month you change your fees.
I am definitely urging that you monitor and evaluate your accumulated knowledge and expertise and the value you deliver, so that periodically you check to ensure that your fees reflect that increased value delivered.
Why Trivers Consulting Group?
We have been maximizing knowledge firm’s profits through the successful implementation of Value Based Pricing. It’s what we do every day.
Since 2010, we have delivered life changing value to hundreds of firms. We are up-to-date in every aspect of Value Based Pricing, especially the objections!
We’ll answer questions. We’ll tell stories about firms who make the choice to phase in Value Based pricing. We’ll guide those who have worries.
When pricing vexes you, give us a call. We offer a few steps you can take immediately to begin the process.