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Deeper Weekend 2014

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  • Adrian Simmons
    Adrian Simmons
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    Scott Kregel

REFM -  Adrian Photo Square - CATOBI met Ron Baker in person for the first time in 2011. Before that, I had read his articles online and attended a webinar he presented. But in 2011, I attended the first Thriveal Deeper Weekend, which was a “Firm of the Future” seminar offered by Ron Baker and Ed Kless. That was two days of brain-crushing, mind-altering, future-shifting learning and dialogue.

 

I immediately started to change things: first with a handful of customers with whom we had strong relationships, then with certain service types, etc. I remember a year later, I’d hardly made the progress I wanted to, and was feeling down wondering if it was ever going to happen. I remember chatting with Ron around that time, and he mentioned in passing that firms usually take three years to fully transition to value pricing. Whew – I was much relieved: I still had time.

 

Three years later, I look back, and boy, there has been such a change between then and now. I’m happy to say, we’re now completely value priced — I’m still learning (and doubt I’ll ever stop), but I feel so much more freed as a business owner having gone through this process. I was recently reflecting on some of the realizations I’ve had along the way and wanted to share them with you:

 

  • Value pricing enables innovation. One of the problems with hourly billing is that it attempts to make every hour profitable. It can work at some level for the tried and tested things that have been done by our profession for the past 50 years (sub-optimally, I might argue). But markets don’t stay the same. And I don’t think anyone would deny the accounting industry is undergoing major changes right now. Innovation, by definition, is unprofitable at its beginning. A pricing strategy that doesn’t recognize this reality discourages us from taking on those projects, instead choosing only those projects that fit its limitations. This means we aren’t investing in the future, which means we’re progressively fading into the past. The value pricing method is designed to enable us to understand where value exists (in the customer), what it is worth (in the eyes of the customer), and to redeploy our resources to create value for all parties in those arenas.

 

  • Value pricing is misunderstood. I’m not sure if there’s a current professional “buzz word” out there that’s more muddled. It reminds me of the term “cloud” four years ago — popular, but most of us didn’t know what it translated into practically. Some think value pricing means how much we can soak a customer for. Some think value pricing means flat fee. Some think value pricing means all-inclusive service packages. Some think value pricing means menu pricing. Value pricing is simply a method to price based on something’s value, not its cost. And that the customer is the ultimate arbiter of value, with whom we must arrive at an agreement on price, before beginning work.

 

  • Value pricing is customer advocacy. The subconscious image in most of our minds for “sales” is “price negotiation” — both parties avoid saying a number first, then the haggling and counter haggling ensues, one party looking to see how low they can take it, the other seeing how high they can go. Value pricing completely contradicts this image — I now figuratively sit on the same side of the table with my customer, together we think through what’s actually going to make a positive difference for them, we get to know each other better, we figure out what that’s worth, and jointly figure out how to structure it. It’s no longer a sales game, and the customer isn’t constantly suspicious of being duped, asking questions about what my cost is, etc. — we’re both focused on what actually matters: the value we can create together, and whether it makes sense.

 

  • Value pricing is freeing. This one is perhaps the hardest to explain, but it’s a mental state of being. Value pricing enables the entrepreneurial mindset that is needed to adapt and evolve our firms. Ideas inform habits, but habits also reinforce ideas — knowledge flows bi-directionally. Hourly billing reinforces the ideas of capacity utilization, people as fixed assets, manufacturing economies of scale, effort as equating to value, day laborer status, etc. I’m convinced these embedded concepts won’t take us to the next level that’s needed for the transformative and creative economy that we’re moving to. Instead, value pricing helps me see time in its proper light: as a resource constraint, not the definition of value. And it is the creativity of our team, and our customers’ openness to letting us impact their lives, where the magic happens. We now keep our eye on that ball, and not on last week’s timesheet.

 

These are just a few of my reflections, but I hope they’ve been helpful for you. I have to say, business is so much more rewarding and energizing than it was three years. I’m not going to pretend like the transition was easy — it was a struggle dismantling the ingrained ways of thinking, and constructing new ways of doing things. But it was worth it. If my story can give you encouragement, please take every ounce of my exhortation to begin and/or continue on the path — there are good things ahead for our profession once we undertake this transformation!

 

Adrian G. Simmons is a CPA innovating ways to put money in its place. After working as an auditor out of college for KPMG, he joined his father in public practice in 2002, and now acts as the Chief Creative Designer there. With the team, he looks for ways to help their customers become financially strong, so that they can focus on what truly matters in life. Adrian is also the Director of the Thriveal Laboratory and a VeraSage Fellow. Adrian likes tech, uses a fountain pen, successfully attempted a half-marathon (and may try another), and prefers dark over milk chocolate.

Category:
Pricing
Comments:
19
  • On 12-01-2014 at 3:54 pm, James Johnson said:

    Great post and very encouraging for everyone learning and working value pricing! I always enjoy reading the stories of other CPA firms.

    The most disruptive thing I see in this whole writing is that you’re pushing the reality that effort nor time equal value. Although true, I find it hard to articulate to others both inside and outside of our profession.

    Would you suggest the method you detailed in the second paragraph to others?

    Reply
    • On 12-02-2014 at 2:30 am, Adrian G. SImmons said:

      Hi James, and thanks for your comment!

      There are different ways to make the transition to value pricing, including: (a) migrate your customers in layers, beginning with the best first, (b) start with just a handful of those who you think would be most open to it, (c) start with those you think would most benefit from it, (d) bring in new customers under the new system, (e) allow customers to self-select into package levels, etc. I don’t know if the strategies have been listed out somewhere, or maybe that might be good for a future post. 🙂

      I’ll also add, there is a change that has to go on in the customer side too: when you want to change value propositions, all your customers won’t necessarily come with you. I wrote a little about my experience with that in this blog post titled: “Leading Our Customers” that might be helpful https://thriveal.com/2013/12/02/leading-our-customers/

      Thanks, and carry on my friend! 🙂

      Reply
  • On 12-01-2014 at 6:34 pm, Kevin McCoy said:

    Great recap Adrian. That Firm of the Future was hands down the best conference I’ve attended. Great learning, great people and great memories.

    Reply
    • On 12-02-2014 at 2:35 am, Adrian G. SImmons said:

      Absolutely Kevin — definitely a turning point for me too. 🙂

      Reply
  • On 12-01-2014 at 9:53 pm, Jason Blumer said:

    Such good stuff, A! This is not only your story, but a small dissertation on the value of innovating in our own firms. Thank you!

    Reply
    • On 12-02-2014 at 2:37 am, Adrian G. SImmons said:

      Thanks J! And yep, I’m convinced that our pricing strategy has to match our business strategy — if the business strategy is innovation, then hourly billing just isn’t going to work.

      Reply
  • On 12-01-2014 at 10:47 pm, Tyler Winn said:

    Adrian, is your firm making more money? I love all these intangible benefits, but it would be nice to know if this translates into higher profits as well.

    Reply
    • On 12-16-2014 at 7:20 pm, Adrian G. Simmons said:

      Hi Tyler — great question! Few thoughts:

      –First, I wouldn’t recommend value pricing for higher profits: not that you won’t get them (because I believe you will), but because I think it isn’t enough of a motivating factor to make the changes needed. You gotta believe it’s right for you, your team, and your customers — that’s the only thing that’s gonna take you thru the breach to the other side in my opinion.

      –To answer your question, yes, but in ways different than perhaps traditionally thought: top line modest growth, while transitioning out a full-time position. And we’ve shrunk our customer base by at least 25%. And we’ve widened the bottom line. Add to that, we developed two new products based on value conversations that we’ve brought online this year and which are demonstrating great revenue potential for the coming years. And we’ve weeded out customers who don’t value us, and dropped services that aren’t valued, freeing our emotional and intellectual resources to apply for those who do, deepening more and more those relationships. Efficacious deployment of resources is perhaps the biggest boon.

      –My business philosophy (as I presented in “Leading Our Customers”): the only long-term sustainable business model is to care about our customers, and follow where that care takes us. Value pricing equips me to do that.
      https://thriveal.com/2013/12/02/leading-our-customers/

      –Another observation, the entrepreneur is the one who creates value from the intangible (ask Disney, Virgin, or Apple). As I heard Dan Sullivan recently say, entrepreneurs ‘make it up, then make it real.’ If we can get our intangibles right, I believe our tangibles will fall into place. It’s why I like to say, “everything comes from nothing”
      https://thriveal.com/2014/01/07/the-power-of-nothing/

      Hope that helps, and rock on my friend! 🙂

      Reply
  • On 12-02-2014 at 12:45 am, Mike Bark said:

    I thought the transition to value pricing (we call it flat fee) was incredibly easy because we were sick of time and billing and clients liked the cost certainty and the fact that they were no longer getting a bill every time they had a question.

    No doubt there were years where we would have made more money on some clients had we stuck with hourly billing, but investing some time into the relationship has also created incredibly loyal clients and advocates of our firm.

    If you’re on the fence about value billing I would suggest just taking the leap.

    Reply
  • On 12-02-2014 at 3:38 am, Adrian G. SImmons said:

    Hi Mike, and thanks for your comment! I’m glad to hear you have taken a leap, and are finding better experience on the other side of it.

    Two small observations I wanted to make: flat fee is a little different than value pricing, though it’s certainly closer on the scale. One of the big characteristics of value pricing is how the price is arrived at — flat fee typically has a greater emphasis of putting a fixed price on a service, while value pricing involves more of exploring value options with a customer. A great graphic the wonderful minds of Jay Shepherd and Michelle Golden put together to help illustrate the various pricing strategies on the spectrum from hourly to value is available here: http://jayshep.com/what-kind-of-price/

    The other is mostly just a word thing: “billing” is done after-the-fact, while “pricing” is done in advance. “Value pricing” is different than “value billing” because of the advance nature of it.

    I know these are not really clear in all the industry writings out there, which makes it harder sometimes for you and me to help it explain it to our peers. 🙁

    Reply
    • On 12-02-2014 at 12:41 pm, Mike Bark said:

      Adrian,

      We made the change back in 2006 after seeing Ron Baker at a seminar in Las Vegas and having read his book. We just found that clients took to the term “flat-fee” more so then “value”.

      The one thing we did note is that clients had zero problem accepting this change. Firms who have decided to keep the hourly model often say it’s because their clients would have a hard time accepting a different model, but we’ve found that clients have overwhelmingly liked this approach to billing.

      Reply
      • Jennifer Blumer

        On 12-02-2014 at 3:50 pm, Jennifer Blumer said:

        That is really interesting. We had mixed reactions at first, but the clients we attract now are totally onboard with it.

        Reply
    • On 12-02-2014 at 3:24 pm, Adrian G. Simmons said:

      Thanks Mike! And I agree: while the term “value pricing” works for industry conversations, using a different term for customer conversations can be helpful. I often explain it to customers by saying: ‘we don’t bill by the hour, we price by the result’, and that helps them connect to the idea better too.

      That’s very encouraging to hear you had zero push-back from all your customers! I definitely think it’s more intuitive to purchase this way. Asking a consumer to make a purchase decision before actually knowing the price doesn’t fly in most other contexts, but somehow we’ve trained much of our industry differently. Our experience is that some customers take to it right away, and others can struggle a little to understand it and need some support to make the change (often those with extensive experience in being billed by the hour).

      I hope your words give encouragement to others too — it can be done! 🙂

      Reply
      • On 12-02-2014 at 7:01 pm, Mike Bark said:

        I think the reason that value pricing was accepted easily was we could look back at the client’s history and see that their billings were pretty consistent. So it was a matter of taking that information and just going by the month.

        The other key is to explain the benefits of not getting a bill every time they send an e-mail or pick up the phone. To our clients, that was a huge selling point.

        Reply
  • On 12-02-2014 at 8:03 pm, Ed Kless said:

    Great piece Adrian. It is often hard to express how life changing and liberating moving to VP and killing timesheets can be. Thanks for your continued contributions to the movement.

    Reply
    • On 12-16-2014 at 5:26 pm, Adrian G. Simmons said:

      Thanks Ed! And btw, used “dialogue” instead of “discussion” as a hat tip. 😉

      Reply
  • On 02-25-2017 at 1:25 am, Dominic Gomes said:

    Hi guys,

    Just had a read through all of this – i like the idea of value pricing as i feel you can still reach the same desired profit margin that you would expect from fixed fees.

    My question though is, what are your thoughts on listing a starting from price on a website, if you plan to use a value pricing approach?

    Is it wise?

    Reply
    • Jason Blumer

      On 02-25-2017 at 11:37 pm, Jason Blumer said:

      Thanks Dominic. Pricing is an experimental process.

      So I would say, YES!, try it and see what happens.

      Including “starting from…” in your pricing on your website shouldn’t prevent you from pricing hiring than the starting from comment.

      Do it and let us know what you find out! Thanks.

      Reply

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