It’s hard to believe but…
Sometimes you’ll have a negative experience related to IBP.
Some people want to do what they’ve always done. That is their rationale and they won’t change it.
Others love to argue. They stand with their point of view and will not let go. No matter how rational or emotional your points are, they’re unmoved.
Others are wary because IMPACT Based Pricing (IBP) requires a period of adjustment and they don’t trust anything that can’t be immediately and precisely implement and measured.
There are a few who do understand the radical impact of IBP and think they can do it themselves after they’ve gotten you to design 3 options for them.
It’s important to have a working knowledge of these experiences so you can be prepared when they happen to you. It’s part of the commitment to stop leaving mney on the table.
Do what we’ve always done
The hardest opposition comes from accountants, lawyers, consultants and coaches who have used hourly billing for eons. It’s ingrained in them, that time is the only proper measure of their value. They’ve convinced themselves that keeping track of every minute and charging for it is the only ethical pricing model.
When I say ingrained, I mean it is core to their identity and self-image. They peg their pride to the amount of their hourly rate. They brag about their meticulous timekeeping as an indication of their ethics. When faced with a client matter, they reflexively think “how many hours will this take?” But they fear their inability to correctly estimate the time, so they mitigate their fear in the name of flexibility.
When I speak with these people about the downsides of hourly billing they simply won’t hear me. They continue to make their points about ethics even when I ask how it can be ethical to charge the client for your time when that means you make more money the longer the work takes, the client has no control over these hours, and no way to set a limit of the fee they’ll pay?
About two years ago I made a decision: I will not engage in a discussion of the merits of hourly billing. The foundation of hourly billing is, to me, the absence of ethics, therefore I cannot argue about it.
That is a position I urge my clients to take as well. There can be no merits to a pricing model that is, at its core, unethical.
You do not have to argue against hourly billing either. State your position that it is unethical and that’s that.
Others love to argue
Many people simply love to argue. There are thrills and an emotional high from the fight. They will take an opposite position because they enjoy the argument. I do not and I don’t engage with arguing for the sake of arguing. As soon as I discern this is the case, I thank the other person for their interest, declare that we are not a good fit, and end the discussion. I encourage my clients to do the same. You’re in business to create IACTs not to argue.
Others are wary
Adopting IBP requires the firm to allow for an adjustment period. During this time, which typically is about 2 months, they are writing their Great Fit Client profile, practicing the discovery call, and learning to design 3 customized options for each specific prospect or client. It remains to be seen if the scope of IMPACTs and the fee are effectively proportional.
I am very compassionate about this concern. Yes, it is scary. When a firm owner tells me they’re not comfortable adopting IBP because of the uncertainty, I work with them to articulate their fears, all that could go wrong, the effect that would have on the firm and so on. We work through their initial adoption period slowly and carefully. I coach them on the discovery call and the easy and hard questions in it. I’ll help them design the 3 customized options and fees. I answer all their questions immediately so they can move forward with confidence.
I urge them to do the same with their own clients who may be uncomfortable experiencing IBP for the first time.
The rate of success within 2 months is high, about 85%! They then look back at their initial fears and realize their own courage in adopting IBP anyway.
The Thiefs
Honestly, this is a fairly new experience for me. But once it happened, I knew I was going to never let it happen again.
A firm owner was eager to talk with me, we had a lengthy and deep discovery call, and he said he wanted to receive my offer letter with 3 customized options. I wrote it as always using the Choice Framework.
We met and he said, “It’s not the right time.” I was disappointed but this had happened before.
Then just a few weeks later I saw that he repositioned himself using the exact language I had suggested in one of my options.
I’m pretty generous when it comes to helping others without compensation. But this felt like theft.
I applied my knowledge and expertise to his situation, proposed creating IMPACTs of varying significance for fees proportional to the significance. And he turned me down only to do the exact thing I suggested.
I won’t let it happen again
I am not so naïve that I don’t think this will happen again. But I am also not so naive not to do anything about it.
This specific experience caused me to make a major change to my own use of the IBP system. I no longer offer the 3 customized options in a free proposal.
Instead, I offer to design a Business Growth Strategic Plan for a fee of $500.00. The fee is payable before I write a word. If the firm owner chooses one of the options, the $500 is deducted from the fee for that option.
This modest fee is not proportional to the IMPACTs my options will create for the firm. But it does make the point that what I offer will change their life and I require compensation for that. If someone participates in my whole discovery process with the idea that they’ll take what I offer and DIY, at least they’ll think twice when I charge them $500.
I’ve supported my clients when they’ve chosen a similar approach. It is not about the money, it is about a prospect understanding that while it may be easy for us to talk about how they can change their life, that ease is the result of accumulated knowledge and expertise. It is not free. Period.
Be Prepared
I love IMPACT Based Pricing and the vast majority of my experiences with firm owners are positive and highly satisfying. My clients feel the same way, But we do have to be realistic that there will be times when we face a negative or disappointing experience. It is always wise to be prepared.
