Congratulations! Your firm has implemented Value Based Pricing starting with Step 1 COMMIT, through Step 2 PREPARE, Step 3 ESTABLISH, and Step 4 TRAIN.
Your providers are delighting clients with high value for a fee commensurate with that value. Your internal systems are in place ensuring that engagement agreements and invoicing support Value Based Pricing. You’ve stopped emphasizing hours billed and are giving a lot of attention to value delivered.
Now it’s time for consistency.
Step 5 of Crack the Pricing Code is GROW.
Value Based Pricing is forever. You need to develop a consistent process for providing subsequent engagements or contracts when the current ones reach their end date. (Value Based Pricing engagements always have a start and end date).
This starts with the conversations you have in the course of doing your work. This is one of the built-in benefits of Value Based Pricing–you and the client aren’t worrying about the meter running and making every minute ‘pay.’ There is time for conversations and nurturing the relationship.
Talk about what comes next, how the value you’re delivering changes the client’s company and their goals. You will accomplish two objectives with this approach: 1) you’ll avoid scope creep in the current engagement, and 2) you’ll have the basis for future engagements.
Scope creep is when the client asks for value beyond the agreed upon value in the current engagement. It can seem innocuous at first–just a little thing here and another little thing there—until you realize that you’re far outside the boundaries of the current agreed-upon project.
I am not suggesting you should start the dreaded ‘nickel-and-diming’ that everyone hates. Not at all. Be generous. But there does come a time when the scope is at risk of leading to another outcome (value) not in the current project, and you need to address this.
The second part of Step 5 GROW helps you.:
Expand: The providers working with clients are in the best position to hear and observe what their other needs are. Every provider should understand how to craft new value-based engagements for clients. In addition, you may have one or two people who read and analyze current engagements and are able to see what is likely to come next. This product/services development team looks at the current engagements and asks, “What’s next” or “What else?”
They are able to work with clients and providers to articulate the next engagement and deliver new value to existing clients. Keeping a relationship alive and growing is the key to your firm’s growth.
Sometimes the Fit Isn’t Right
The third part of Step 5 GROW is to look at all your clients and identify the ones who are only interested in low value or commodities. These clients may have been part of your company for a while, or they might be new. In either case, their provider, or the chief executive, should engage them in conversation about their needs, wants and desires. And ask, clearly and unambiguously, if they envision asking the firm to help them achieve those needs, wants and desires. If not, they are not part of your future. You should help them find another provider that will give them the basics.
A note here: I do not ever think, talk, or write about ‘firing clients.’ That is so disrespectful and rude. However, with courtesy and firmness, your firm can give them a chance to come on board with high value, or you can help them find another provider.
Take Action to GROW
What are you doing to ensure that your professional or business services firm is getting compensated correctly for the value you deliver to your clients?
Time is not value, it’s a neutral resource. Knowledge and expertise are value. Crack the Pricing Code: Implement Value Based Pricing and Generate Fortunes.