Ok, enough about schedules and scheduling. Though I intend to revisit the topic one more time in a future post. Labor Day weekend is coming up, and I thought discussing how we price our services – specifically pricing options – would be interesting as we ease into the holiday.
About a week ago, I received an accumulation of mail from my mail forwarding service. One piece was the July 2015 issue of the Journal of Accountancy. Starting on page 37, there is a Q&A with Ron Baker, THE spokesman for value pricing. The article is a good review of the pricing principles Ron espouses. You should give it a read.
The power of options
One of Ron’s principles is giving our clients options … a menu of service and fee choices that s/he can select from. The purpose of the menu is to remove (or mitigate) price as an objection to hiring us.
All of my clients get options. Giving my client options about how we might work together changes the client question/objection from Do I want to work with Rod? (which only allows for a yes or no answer) to How do I want to work with Rod? (because I formulated the options so at least one will have some appeal).
Pricing options won’t work for me
You may think pricing options would only work for appraisers who offer consulting services like exit planning … where pricing options are common, if not expected.
Compare that to engagements like fair value/ESOP/tax-purpose valuations … where we proffer our service for one fee that our client accepts or rejects, or accepts only if we lower our price.
Walk with me
Imagine proposing on an engagement for $X. If the client objects, ask them what they would be willing to spend. Clients will say they are willing to spend $Y. Fine, I say. Here is what I can do with that … here are my options.
- Accept the $Y fee if it is paid upfront.
- Deliver the report in 6-7 weeks instead of 4-5 weeks.
- Provide a lesser service (e.g., summary report vs. detailed).
[Note: Clients do not pay for your valuation services. They pay to have their problems solved. So when clients object to your price, they are not saying you’re too expensive; they might be saying their problems are not worth that much to fix.]
It’s a negotiation
When we put forth a service/fee option and the client counters with a lower price, a negotiation has begun. It’s not Game Over. We can counter again with options like the ones I suggested.
Thus, offering options can save us from walking away with our tails between our legs because either (a) we didn’t get the engagement or (b) we took it for a lower price without getting anything in return.
[Note: Accepting an engagement for a lower price than what you wanted may sound ok at first. Bills have to be paid, right? But any euphoria will give way to misery once the engagement starts, knowing that you are working for less than you’re worth. Or imagine the low level of motivation when explaining to staff that you didn’t get the fee you wanted so, you know, go easy on the charge hours.]
What are your thoughts on pricing options?
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