The training company CEO challenged me: “We’re already doing everything we can for our clients. How can we make more money unless we raise our prices?”
With a few careful questions I helped her arrive at her “aha” moment. The barrier, she realized, was the word “doing.” They were doing it all—by which she meant including every possible input in every engagement.
Instead, they need to deliver value as defined by the clients. In fact, the company does deliver life-changing value, but they don’t think like that and never speak about it.
The CEO correctly understands it’s really hard to justify price increases for doing what you’ve been doing for years.
Customers and clients don’t want to hear about rising costs and inflation because that’s like airing dirty laundry. “Not our problem.”
Speak About Life-changing Value
The CEO told me stories about how her clients resolved turnover issues and low productivity. Employee longevity and productivity increased, and therefore the clients made more money. One won a big contract that would change their company’s future.
“I see it now,” the CEO said. “We have to talk with clients about how they’ll be different and much better as a result of working with us. Not about a list of what we do to make that happen.”
It’s Not the Same Old If You Change Your Point of View
We turned to her original reason for calling me. She wanted her company to make more money in the current year, and in the years ahead.
By “make more money” she meant that the company’s profit would be higher and would grow for years to come.
It was time to ask her HOW she arrived at her prices. This is different from WHAT the prices are.
Like about 95% of knowledge based firms, the CEO simply adopted a well-known and comfortable pricing model, that is, one based on time.
She created a price list for their services. Prices are a combination of the hourly rates she pays her instructors, a sliver of operating costs, and a random “extra” that she hoped would be profit but was really based on an amount she thought her clients would accept.
The prices were not related to the value they delivered. And she saw that if she changed this, she and her associates would build their confidence about value based pricing. It was a radical new point of view.
6 Months Later
She quickly COMMITTED when saw how value based pricing would increase profits this year and that it is a pricing method that makes profit growth likely year after year.
She’s a CEO who practices the “work on your business, not in your business” philosophy, so she was eager to determine the fee-to-value ratio needed to begin value based pricing.
We wrote a plan to phase in value based pricing over 6 months.
I helped her work through the 4 discrete steps to finding her firm’s fee-to-value ratio.
- Articulate value delivered
- Study the past twelve month
- Sort your lists
- Establish fee to value relationships
You can learn to do this yourself, right now, by reading the complimentary Chapter 5 PREPARE
She updated their internal systems to work seamlessly with the value based pricing approach. She asked one of her best trainers to do an internal “train the trainer” workshop which helped everyone fully internalize their new point of view:
“We are delivering life-changing value to our clients. We are not doing things to them.”
What Lies Ahead
The CEO and her associates are inviting everyone they know to have a conversation about what life-changing value would be for them.
They will write offers (formerly called proposals) that focus on the life changing value to the client with a fee commensurate to that value. The fee will include a well-deserved profit for the firm.
They’re prepared for objections.
They know that value based pricing will attract their perfect fit clients who are eager to receive life changing value. And that as their clients grow and improve, new needs, wants, and desires will arise, which will make ongoing work likely
The CEO is ready to grow both her company and the companies they serve.
Are You Ready for Your Own Value Based Pricing Journey?
This CEO had been reading this newsletter for many months and she hesitated to call because I had never told a story about a training company.
She finally called. She realized all knowledge and expertise based companies have similarities, even though they are different. The stories about accountants, web designers, and others are analogous to her company in terms of pricing and clients.
If you’re ready to take the first step—to START—choose a date on my calendar for our STARTER Call. We get started–no fluff or BS to fill 45 minutes. You can go ahead and DIY or you can ask about a formal working relationship with us for a fee commensurate to the value we will deliver to you.