288 How to ACTUALLY Implement Value Pricing in your Firm

Okay, let's say now you want to actually put this value pricing stuff to work. Roll it out in your firm either with yourself, with your team. How do you actually get there? Well, in the books we've been talking about, we've got an eight step roadmap. They've proposed there today. We're going to run through that process how they suggest you would do it. The things that I think today are still practical and still doable and a few things that I think are a bit of a challenge, all coming back to value pricing, fundamentally being about pricing each engagement better so that each engagement has the potential to be more profitable, whether you fully drink that value pricing, Kool Aid or not. There's probably a few things here that you could extract to plug into your sales, your re engagement process. So we'll run through those eight steps today, extract some nuggets, come on in. Plenty of nuggets to go around. Before I forget, I ended up making a, a guide, like a worksheet for what we talked about yesterday. Customer risks and sources of customer price sensitivity. Like things that would cause them to be resistant to your price. We talked through those things, but I got to the end of the episode as I was thinking about it later and I was like, that episode wasn't good enough, honestly. It wasn't like practical, it wasn't actionable enough. So I went back through those things again and, and this is one of the downsides of publishing daily. That episode is in the can. I was going out the door. Nothing I can do about it. But I wanted to go a little deeper on that subject. So I put together a worksheet that was all of those customer risks and all of those sources of price sensitivity. I chucked it all on a spreadsheet and then jotted down a bunch of ideas for how you could overcome those things one by one. And I do think those things, if you're running up against it with a customer where they're like, I'm not gonna pay that price, I actually think that list is pretty representative of all the various different things that cause people to not pay that price and to have a tactical sort of, sort of list of, okay, they're obviously stuck on this. Here's how we overcome it. Can we save this engagement? Did we not do a good enough job building this mitigation strategy into the sales process? Check out that worksheet. I think it's, it's pretty helpful. At the very least, talk it to a member of your team and be like, think about our sales process and how can we integrate these things into it better? I'll put a link to that. It's down in the show notes. Okay. Value pricing, how do you actually do it, man? I think a lot of people can get behind the idea of it all and like, yeah, sure, make more money on every engagement. It's the doing of it that's. That's the hard part. First things first, if you're going to do this with your team and take it seriously, read these books with your team. One of the funnest things I ever did with my team was like, book clubs as a. As a fledgling progressive accountant. And if you're here listening to this, you are, buddy, you are. Take a good look in the mirror. You're ahead of the curve. But when, when you take that stuff back to your team and they don't have any of the context that you do, that is just inevitably a frustrating situation. Right? You're like, why don't you get it? Like, I get it. And I was super hot for a while on the book, the Win Without Pitching Manifesto. Great book. And I explained kind of some of the principles to my team and I was like, ah, whatever. And I was like, you know what, you stinkers? I'm going to round up like four to six to you, four to six of you. I'm going to force you into a meeting every week and give you a signed reading, and then we're going to discuss it and the difference before and after. Like, they came out and it was like they owned it. They got it. And like a fire had been lit inside of those people that was like, oh, man, we could totally do this or that. And it flipped it from their boss telling them to do a thing to them having this thing inside of them now, that was a professional opportunity for them. They were like, man, I totally get this. And now this can actually enable my career if I deploy this. And I'm sitting back going, oh, my gosh, where has this been all of my life? Like, it was genuinely that cool of an experience. And so if you're thinking about something like, like this, that's hard. And I think most people running firms, their biggest blocker for value pricing is. It's hard. It's a skill. You gotta learn a lot. We don't all have a Ron Baker sitting in the back office that understands, like, all sorts of economic frameworks and the history of all these different things that makes it so. He's very good at doing this thing. You're like, bro, if I don't have all that context, like, what is my version of it? And is that worthwhile? If we're trying to get our team to plug into this, do it from the beginning. So go through these books with them. If you go through one book, go through implementing value pricing. It's the most practical one. Time's up. The newer book is pretty good, but a lot of it rehashes the same stuff. And I think the most, the biggest core principles are in implementing value pricing. Totally go through it with your team. Like plan out, like, you know, an eight week arc or something like that, where they've got a knockout, a few chapters each week and then you come together and discuss them. You're gonna be halfway through that book and your team will already be taking the lead on how you can change how you approach this stuff in your firm, which is what you want because you have enough stuff to do. Just listening to this podcast is procrastination. When you woke up in bed this morning, you knew exactly what you needed to do, but it didn't mean you were doing it. Was that too direct and too personal? I've been thinking about this a lot lately. We all know what we need to do. Like, do you really need one more webinar? Do you need one more book, one more podcast, whatever it is, to know what you need to do? You really don't. But I digress. What's cool about getting this book in front of your team is like, it's not just you that knows what needs to happen now. They know what needs to happen, which means it might actually happen. Okay, so four thoughts I jotted down about how to actually do it. Read these books with your team. Build a shared understanding of why you're doing it together. You know just as well as I do, when that value pricing nerd, you know, comes down from the mountaintop with their stone tablets and said, says, look at, look at this thing we've got figured out. It is hard to understand that. So your team's gonna have to go through that process too. Third thought I jotted down here, Ensure that your team has incentive to be excited about this. There's so many initiatives that, that die because your team has no reason to be more productive. We just assume because maybe we're wired this way. I know I was wired this way. I'm just gonna be as productive as I possibly can and do as much work as I can possibly get done and always try to be more efficient and improve and all that. A lot of people are not wired that way. And so if they're not incentivized to do more, then what they're going to optimize for is comfort. What is the most comfortable way I can get through my 40 hours, my 55 hours, whatever it is. But if we can incentivize them so that there's an aspect of like, production pay or something like that, and they see this and they're like, oh, dang, let's see. I mean, it doesn't take long for them to do the math. If they're like, oh, if we could get another 15% on every engagement, that'd be like, that's a. That there's my boat. And now they're excited. Otherwise, for some people, it's just gonna be one more job to do, kind of a chore. And then fourth, find a way to start helping people to build the muscle. How do you practice? How do you get everybody experienced with it? Because you're not gonna be great at this stuff like, from day one. Now refresh your big picture of the goal here in the kind of the premise of value pricing. We need to avoid commoditization of our services. If what you do looks the same as what everybody else does, then you're a price taker. You're not going to be able to set that price. And folks generally aren't going to value what you do. And decommoditizing what you do starts with your belief in it not being commoditized. And sometimes this can feel like, I don't know, being a used car salesman or something like that, you're like, deep down, you're like, it's just bookkeeping. Do we need to make it any fancier than that? And honestly, I fight that too. Like, does it need to be any more involved than that? I would argue in some cases it doesn't. If all I'm doing for somebody is 1099 or something trivial, we don't need to make that any more fancy than it needs to be. I think the bigger problem there is we may not be valuing our time and attention enough to say, if. If I'm going to do anything for you, it has to be in the scope of a bigger thing where I can help your business. The problem is we may have a few of those engagements, but oftentimes we let all these onesie twosies on the list where the client comes in. They're like, I really just need this and that. And there may not be a meaningful way to impact their business just with payroll or just with doing their W2 filings. At the end of the year or something like that. And so we probably just shouldn't be taking those engagements. But if we can truly sell something that is not commoditized, it's gotta start with us believing that we're actually providing more value. And. And ultimately that's how we're gonna make more of every single engagement, how we price them that extra 10%. If we can find a way to squeak that out, that's going straight to the bottom line. So let me read you an example from the book that I really liked about a landscaping company, like Landscaping Providers. Cause I feel like landscaping is a good example of something that is perceived to be commoditized. I come to a landscaper and I'm like, bro, I just gotta get this stuff done. And just with the least amount of effort possible, I just want you to mow the lawn, keep the bushes where the bushes are supposed to be, maybe a bit of weeding, some fertilizing, fix my sprinklers when they break, and sometimes I'll send you a picture of a bush that I like. That is my vision of what landscaping should be. And because I'm an accountant, I wanna get it as cheap as I possibly can. So from time's up, the most recent book story about three different types of landscapers. I think this is actually a great framing of value pricing. Imagine you're in the market for a landscaper. The first arrives and walks around your front and backyard with a clipboard. How big is the lawn? How many trees, bushes? All that. He concludes by telling you he will handle the yard's maintenance for 80 bucks per hour. Of course, that raises more questions than it answers. Well, how long will it take? Will it vary every week? Does it depend on who you have do the work? And so on? His pricing is based on inputs. The second landscaper arrives and performs the same ritual. He informs you that he will do the work for a fixed price of 120 bucks a month. This is better than the first company because it provides certainty in price and doesn't raise any of those useless questions. He is pricing based on outputs a specific scope of work. If something happens outside that scope, a tree dies, a sprinkler head needs replacing, you will likely need to go through a change request and be charged in an additional amount agreed to in advance of the work. Then the third landscaper, he begins by asking you questions. Tell me a little about what you do. I got the impression from our phone conversation that you're not exactly Martha Stewart. Do you Enjoy yard work. Does Martha enjoy yard work? Hot take, but may I ask why you want to terminate your existing landscaper? Have you received notifications from your homeowners association for various violations with respect to landscaping? Do you have plans to sell your house? If yes, what's your timeline? He concludes by offering you three options. The basic maintenance package at 150 bucks per month. The bring your yard up to neighborhood standards package at 225 per month. And the highest level, the best curbside appeal in the neighborhood is 350 per month. Since your timeline to sell the house is two to three years, he will gradually upgrade your landscaping. You always have the flexibility to slide down to a lower priced package. He's pricing based on outcomes. A specific transformation for each of the three packages, which wasn't just the premium one that had a transformation. All three had some form of transformation. Which landscaper communicated a higher value? Which one reframed their value from yard work to a specific return on investment? Which one provided three transformative options at a fixed price with all inclusive packages providing frictionless service? Which one is nearly three times higher than what you're paying now? Which one? As you focus on the transformation rather than the price, the moral of the story was, which one will you be happier with? I'll tell you what a good accountant does. They listen to the third one and they say, that's smart. I'm gonna go back to the second one and see what the price will be for the second one to do what the third one just described to me. Right? Isn't that kind of the obvious answer here? At least for the pessimist accountant inside of me that is slightly a penny pincher, but that's where substitutes come in. Um, maybe the right thing to do there is hire the third person because they are actually thinking bigger picture like that maybe that does lead to a higher level of service. But absent like any other differentiating factors, if I think they're all going to do the same work, maybe I come back and propose that Tier 3 engagement to one of the others expecting to get a cheaper price. But if we're projecting that example onto accounting firms, this is the value of being unique, of being one on one, one of one being for a specific type of person to reduce the number of perceived substitutes for our for our prospect or for our clients. This episode of Sponsor in part by Live Flow. I love spreadsheets. Yes, I do. I love spreadsheets. How about you? But you know what spreadsheets don't do? Integrate with anything like anything, all the other tech that we use, except for DAX software has to integrate stuff like that's just a requirement now for software, but humor. Humhow humhouse spreadsheets have been left off the hook. And so you end up doing this hokey pokey CSV export over here, CSV import over there, big hot copy paste mess. Which isn't good when spreadsheets are a part of recurring workflows like month end closes, stuff like that, where you literally rely on the worksheet to make a work paper every week or every month. And gang, that is where Live Flow becomes the Swiss army knife that gives your spreadsheet Jim Belushi superpowers. It's a plugin for your Excel or your Google Sheets that'll pull any data in from your client's QuickBooks files. Don't even have to go to QuickBooks, just bippity boppity boop. Couple clicks from inside of your spreadsheet and you got Data from that QuickBooks file into the spreadsheet. You can pull it in once, it can pull it on an ongoing basis. You could get hit by a bus tomorrow. And that spreadsheet, it's gonna, it's never gonna stop, it's gonna keep on updating and I don't know, there's just something about that that I guess it becomes a conversation of legacy. What do you want to leave behind? And will your spreadsheets keep updating even after you're gone? Because you know what, with LifeLow they will link in the show notes this episode is sponsored in part by Team up, who helps you find talented people in the Philippines. Common question about hiring offshore people. What do you do about computers and IT other side of the world? How do I get them the goods to do the stuff securely? Basically you got two options. You can let them roll up with a personal computer or you can provide them with a computer. According to Team Ups data, they see roughly a 6040 split with most firms in favor of personal computers. But it's totally up to you. If you want to provide them with a computer, then go out and buy one and you can reimburse them. Or you can actually pull in a local IT vendor. Team up can even connect you with a great one. Plan on around 1000 bucks combined for laptop and monitor and secure your team members computer the exact same way you would if you hired somebody remotely. That's going to work for you across the street. If you have someone that's already managing it for you, they can probably extend that to the folks that you're hiring offshore Practice Protect Team up also calls out as a good option here. We actually did a video on the main channel about Practice Protect. I use that for single sign on in my firm. My folks in the Philippines. Philippines use that as well. And like most things hiring offshore, it ends up looking a lot like hiring onshore right now. Spooky question. People we can get stuck on sometimes. What if the employee does something bad? What if the what if. Ah, what if they make off with the Lucky Charms? We're going to talk about that next week in another Team up ad. How do you manage the risk of a remote employee just being a criminal? We'll cover that next week. Thanks to Team up for sponsoring this episode. Learn more about Team up in a link below. Show Notes okay, let's get down to the recommended path for adopting value pricing. This is from the book Implementing Value Pricing. Again, links to all this stuff down in the show notes. Don't come here for me to read books to you, okay? Read your own books. So let me read some of this book to you. Eight steps from the book Number one, It starts with conversation. This is maybe the, maybe the most annoying one for us when we're like, I don't. We've all been through the sales process where the salesperson just wants to ask you 100 questions and you're like, bro, there's nowhere else in the world that I would. I would rather be rather that nowhere. There's nowhere. This is the least place. You know what I mean? And it can sometimes feel like you're like needling them or needlessly asking them questions. In this section in the book, they run through a whole ton of different example questions. The goal here is to get an understanding of what's going to be valuable to them and what will not be valuable, but to genuinely have a better understanding of how we can support their business. One interesting framing they brought up here that I think is helpful is to say we only undertake engagements where we can both agree that the value we're creating is at least three to ten times the price we're charging. So straight out of the gate we're saying we're only going to do this if we're giving you like multiple like times ROI on what I'm going to charge you to do this work. But of the whole giant list of questions that they've got in the book, I'll call out the eight that I really liked. Five that were tactical. What do you expect from us from coming from having not asked that Question on a number of engagements only to find out six months later we're not doing remotely what they wanted us to do. They came to us asking for accounting and projected onto us what that meant to them and that actually was something completely different than what we thought they needed. Number two, how do you make money? So I want to understand how the client makes money to see if there's any way that I can support them in that. Because if I can frame my fees through the lens of well, you're not going to make more money because of X, Y, Z, that's, that's great. Number three, what is your current bottleneck? To me that is lost, lost revenue potential. Four, why are you changing firms? And five, what's your budget for this type of service? Not that I'm going to stick to it, but I am definitely going to use that as a point of reference because they're coming in oftentimes seeing us as a cost center for their business. It is the cost to get this thing done. But if I can augment that to provide upside potential, then that budget to me just got a whole lot bigger. If we're providing them with surprise, unexpected upside and we know like, it's, it's not uncommon that we can come in and provide some real like legitimate potential upside because we have just more experience with this stuff than they do. Like we get to see in hundreds of different businesses they have their, their one of one experience and so they don't know all the ways that we can help them. And then a few more woo woo questions. What keeps you up at night? What? I love this one. What trade journals do you read? Seminars, trade shows, et cetera. There's probably a more modern version of that. I don't know. Who do you follow on social, what sort of media do you consume? That's a great window into what they're impressed by, what's exciting to them. Actually maybe the most interesting part of Times up the new book was to me how much they went into the value of affiliation. We're actually going to talk about this more tomorrow. The increasing need of people to feel like they belong, like where they're spending their money and they, they, their self concept aligns with where they spend their money. And if this person's into the same stuff that you and your people are, that's, that's awesome. What was it, a week or two? I debated with Gerald and in the end, you know, told him, hey, I got a, I got a guy on my team that I'm going to let Work with you. He's a farmer just like you. That got AI Gerald excited. Like that's what we're looking for is how can we give them that sense of belonging, like they found their place. The accountants who do stuff and have that kind of similar worldview to them. Then last woo question I really liked here. How important is our service to you? Going back to that cost center framing, there are some people who literally just come to you and just want the financial garbage taken out and want to have nothing more to do with you. If you can't break through that, that's going to be a really tough engagement and probably something you want to know up front that may be worth steering clear from. So number one conversation, this just boils down to understanding their needs and hopefully collecting this information in a way that doesn't feel sleazy or sort of overbearing. But these questions, if you've ever, ever come into like a first conversation with a potential client and you're like, oh, what do we talk about? Or it just kind of goes on a random tangent. I think that's probably how most those goes. Those go is they just lead off on whatever direction they go on to. You know, this isn't like a dinner party conversation. Like you want to try to make that conversation as tactical as possible. So these framing questions, even if you got a short list on a post it note or something like that, where you try to remember to get to some version of those questions each time. What we're looking for is opportunities for what we do to provide value to the business itself, not just to solve the accounting problem, not just to solve the tax problem. What are the opportunities that I see, the better I understand their business to unlock something that can make their business more profitable so that we can be along for the ride. Now in this implementation approach, they have this notion of a quote value council, which is a collection of people in your firm that sort of provide wisdom and input on how you price each of these engagements Again. And people seem to talk like flippantly about value pricing and how it's just obvious and you should be be doing it. It's, it is work. And it doesn't mean that every firm is going to have like a dedicated council, but that's literally part of their description for how you implement this stuff. If you run a we baby firm, this could actually be a really interesting thing to do with other firm owners. But let me, let me circle back to that because they say sometimes in this first step when you're having this Conversation. A member of the Value of Value Council ought to be present to be able to listen as well. It's also a great opportunity to use AI meeting recorder, where a member of this council could go back and scrub through that meeting to see if they could extract any tidbits that you may have missed. So step one is asking a bunch of questions, having that conversation. Step two is pricing the customer. So a big tenet of value pricing is pricing the customer, not your services. So in this step, all the info you gathered in step one is presented to the Value Council to price the customer, not the services. And you're going to go through a whole bunch of questions that they laid out in the book here, questions to ask before establishing a price. Some example questions, what is the customer's cost of not solving the problem? So you're answering these questions internally now based on the info you gathered in step one. What's the customer's cost of not solving this problem? What is the economic benefit if they find a solution? How do we help them grow their business to become more profitable? And how do we help make their business more valuable as a whole, like the value of the business as an asset? And then how do we help them achieve their preferred vision for the future? These are all questions you talk through with your value counsel. You can also consider factors of price sensitivity to the customer. So we talked a bit about those yesterday. What information do we have that would lead us to believe they could be particularly sensitive based on any of these different sort of. I think there are nine or something factors we went through. And then we're going to develop three prices. Remember, we're pricing the customer, not the service. This year we're going to develop a reservation price. This is quote normal profit relative to the risk you're taking on. And you will not go below this number. This reservation price is kind of your minimum. Two, you're going to develop your hope for price. This is super normal pricing. And you get this more often than not. And then third, you're going to pick a pump fist. I said pump fist price, not fist pump, pump fist. I didn't write the book. This is a windfall profit and if you never quote them, you will never get them. Ain't that the truth, man? There's so many examples of this where you just put out absolute YOLO fees and they're like, okay. And you're like, did you say okay, you're good. And you just didn't know that universe existed until you stumble into it, man. So many examples of that in my life, even recently, just, we probably need to be pushing that envelope more frequently than we do, but we don't because it's uncomfortable. And then you land a couple of those and you're like, well, this is the normal for me now. How could I ever go back to driving something less than a G wagon? You get that, like, new windfall level client. And now, like, you see you. You learn why they value you, and you start looking for that elsewhere. And it makes it way easier to find the next one. Right. Okay, so step two is pricing the customer with that value Counsel. If you're a solo operator, if you run a really small firm, wouldn't this actually be kind of a cool thing to do with some other firm running friends every time you have to price an engagement? Maybe, let's say I'm going to do this with two other friends that run a firm. I'm going to record my initial sales meetings. I share that recording with my two buddies who also run firms. They watch that before we meet. And then we come together as this sort of value council to talk through this and figure out how to set these prices. I'm going to come in with my own notions of where I am in that moment and how I came away from that conversation. But those other people are going to come in with perspective, Way more perspective than you have, because you're trapped in the group. Think of your firm and what normal is for your firm. But these other people outside your firm, they don't have those same constraints that you do. They're actually maybe a little more like the client, where they're seeing it more holistically without that very specific lens of your firm. And they help you get to these sort of three prices. That'd be kind of cool, right? Actually much better than having to make all that stuff up on your own. This episode is sponsored in part by Ignition. Come, come, come, come, come. Here's the thing. Here's the thing about client billing. You can't bill for the time you spend billing. You can't. You can't. It is pure waste. And we're bad at billing because it's. It's icky. You let things slide. You don't get paid. You waste time. Waste time chasing people for money. That's not what I did. I would just. I didn't want to waste time chasing them and stuff. I would just. I just eat it. Don't do that. This is where Ignition comes in. The leading revenue generation platform for accountants and professional services. When I was running my firm. Ignition wiped out our ar, it's true, and significantly reduced the time spent billing clients, saving our partners over a thousand hours in the first year because they didn't have to build all that stuff manually. Man with Ignition, we want more business with impressive online proposals. No more hustle and hustle and PDFs and Word docs. We automatically pulled payment up front or at the end of a job when it was done. No more dialing for dollars. We transitioned our firm to more recurring revenue and better managed scope creep. No more leaving money on the table. Ignition is making thousands of firms more money and genuinely made us more profitable. Check out why over 7,000 of the smartest businesses run on ignition@ignitionapp.com I'll put a link in the show Notes this episode is sponsored in part by by Client Hub Choosing a practice management system for your firm it is. It is a big decision, arguably the biggest tech decision you make. Here is a way to think about it. Use the four C's. Isn't that a. Isn't that like a diamond thing? Like clarity, cut, carat and crunch? Boy, flashbacks to having to buy a diamond when I proposed to my wife. I think we're moving past that. I think fake diamonds have gotten good enough. Well, I remember one of those C's I totally maxed and just let all the other C's burn because they seemed less important. Where am I right now? We're in a Client Hub ad read. When choosing a PM, think about the 4C's capabilities, client experience, clarity and crunch, and community. Today we're talking capabilities. There are a lot of PM solutions out there that do a whole lot of stuff. Remember that roundup we did of all the different PMs, 14 of them compared hundreds of different features. But Client Hub specifically, it sets itself apart from the others with two sets of capabilities. One, it's built to support your CAS bookkeeping work with QBO and Xero integrations built straight into the PM platform. And two, they're investing in AI that is artificial intelligence. You might have heard of it with magic email replies, magic workflow, magic answers. Starla. Is that her name? What's the wizard lady's name? Sharla? Starlet? Starla Charm Blaster. She's not here right now. It's about picking the right tools for your needs. Now for practice, it's more tax or audit centric. There's probably better options out there than Client Hub. Wow, they just called out who they're not for props, but if your firm is founded on bookkeeping and client Accounting Services. Client Hub is a great platform for you or a small startup that's co founded by a former firm owner. Top 100 pro advisor who knows the challenges for firms like yours. But more about Client Hub, check out the link in the show notes. We've also done some demos of them on my YouTube channel. And thanks to ClientHub for sponsoring this episode. All right, step number three here. Develop your pricing options. So this is how you present your prices, which has a whole different level of psychology and strategy wrapped up in it than just those last few prices that we landed on. I'm going to say this example or tell this story which I didn't realize was in this book. That is just one of my favorite stories ever and I've said it on the podcast before, but I'm going to say it again because I like it that much and we don't like factor this story into how we price our stuff. So it's from the book Predictably Irrational by a Behavioral Economist, Daniel first he presented the following two options. This is related to the Economist magazine's offerings. First he presented the following two options to 100 students and Mitsubishi Sloan School of Business first option economist.com subscription for $59 a one year subscription to economist.com including access to all articles from 19 clear back to 1997. 68 students chose this option Option number two, the print and web subscription for 125 a one year subscription to the print edition of the Economist and online access and all and all that. 32 students chose this. So 32 students chose print and web. That was at 125. 68 students chose just web. That was 59. Now compare those results to the actual ad that the economists offered which contained three options, not two. The first one was the same 59 bucks for online only. The second one was print subscription only for 125. The third one was print and web for 125. Now no students picked the middle one. No one picked print only because it was the same price as print and web. But guess how many students picked print and web? 84 picked the most expensive one, print and web, compared to only 16 choosing the web only option one. So on the first test with only two options that were identical to the two options from the third. In the first step, 68 students picked the cheaper one and 32 picked the expensive one. But simply by adding that middle dummy option that was the print and online for the same price as the premium one. Simply by adding that second option, 84 students went to the most expensive one in this sample set of 100 compared to only 16 to the cheap one. What does this mean? This means if we're offering three options, if we're offering four options, we'll just stick to this example here. You can have a cheap option and an expense expensive option if you just have two. And who knows, clients may land one side or the other there. But by simply injecting an option in the middle there that is very similar to the premium option and priced very similar, it will cause people to look at the premium option and go, well, that's the best value here. That is the best relative value of all of my options. So I'd be dumb not to buy that, right? I'm not a sucker. I'm going to go for that one. I think it genuinely pushes more people to the premium option. And when I was putting proposals in front of clients, most likely it had a decoy price there. There was one option there that I was making align best with the problems. They communicated that there was a very obvious one that I wanted them to pick and I would use a decoy price to make them more likely to pick that one. It really does work. Okay, back on point. We are on step three developing and pricing options. We are, we are leaning into like the mind games that go into what do we actually present in front of them. And, and so if you remember, in the previous step we had the reservation price, the hoped for price and the pump fist price. Well, now we are going to set those prices for our bronze, silver, gold. They don't actually call them bronze, silver, gold in the book they call them green, gold and platinum. Let's just say bronze, silver, gold. For each of those three things you're going to set a reservation, a hope for and a pump fist price. So you now have nine prices. And then you will strategically choose a price for each of those. The bronze, silver and gold that you think will lead to the client basically picking the option that you want them to pick. Now if you think they're gonna be very fee sensitive, maybe on two of those options you're using your reservation price. If you think you've got a leg up here and you have a pretty unique offering for them, maybe one of those options or two of those options are your pump fist price. But that is step three is like the strategy of building out what you present to that client. So much a skill that can be developed. Now step number four is about how we present the option to the customer. Steps five through eight are more about like the life cycle of managing the engagement. We're not really going to get into that. Step four here is how we present the options to the customers. A couple good bits of wisdom from here. When you give them the price, resist the urge to ramble on and on and explain and explain and tell them how you got there. You want to put the price out there and you want to listen. You want to understand their reaction. You don't want to talk straight over a sale that you could have gotten if you just had a better understanding of how that landed with them. Don't reference your quote unquote normal price. You are unnecessarily like anchoring yourself and opening yourself up to negotiation when you bring up other prices. They're living in a reality that is just defined by this engagement and this conversation. None of the other stuff needs to matter. Remember that a rejection of your price may actually be a doubting of the value. So did we do a good enough job explaining what the value of that was to them? This is a reason to, when you have this conversation, start with explaining the value first and then get to the price at the end. This is why if you sit on like sales calls with software companies, this is why they never give you the price until the very end. And it's super irritating. So find a way to do this that is not overly burdensome or irritating, but make sure that you have clearly communicated. You know, if, if we knew what their budget was and we're, we're proposing an offer that is above their budget, we need to make crystal clear. It's because we believe with these changes you now have this upside to, to your business that we are going to enable, but you are still going to see 3-10x the ROI of the fees you're paying us. So, so we got to outline that value before we put the price in front of them and then we want to listen. In this book, they push for always presenting your most premium option first because there's so much comparison involved in this and we're thinking about relative values. It's generally better to start with the expensive option rather than start with a cheap one and then have them anchor based on that cheap one. And there will almost inevitably be an element of negotiation here where business people are just trying to get the best price. And the, I guess the most tactful word to use here is fair. Is this a fair price to you? It's we don't want it to turn into like a war of who can battle out and negotiate it better. We're getting to does this seem fair relative to the value that we both agree that this engagement could provide to you? So that, that fair framing I think, I think is it's helpful to bring it back to what is known like what is known like the value that we expect to deliver here and how we set a fee relative to that. Now, step five is about codifying that into a fixed price agreement. Step six is about the ongoing management of the project. Step seven is about scope creep and change orders. This is maybe one of my biggest hang ups with value pricing is the notion of pricing a relationship and then issuing a change order. Like you can price a relationship, but you still have to define the scope. Seems like you kind of got to pick one or the other there. That's admittedly something that feels kind of imperfect and maybe there's, maybe there's a clear justification for that. But even though we're pricing the relationship like, we still have to set clear boundaries around scope. And then last number eight, pricing after action review, basically circling back and reviewing and saying could we have done that better? Like if we're six months down there or 12 months down the road, did we miss out on any potential value there? Should we have gone with a higher price on this, the specific offering, so that the next time we're doing the same thing, we're making sure we're squeezing everything we can out of that just on that phrasing, squeezing everything we can out of that. That may actually sum up the biggest objection that I think folks have with value pricing. I've been putting out some, some discussion on social media just to kind of gather where's everybody out on this stuff right now and what are the main things they're stuck on? On Friday we're just going to do a big old roundup of maybe the blockers to leaning into a degree of this. And if you got questions and thoughts and blockers along the way, please drop them in the comments and we'll devote Friday to unpacking those things. My opinion, there are completely legitimate blockers to this and I would say even situations where it is not worthwhile and the value here is delineating between when is that the case versus when is it worth the investment? For me, there's also a degree of us getting in our own ways, as with all things. And if that's the case, is it justified, is it not justified? And how much of that is, is a personal decision versus something that we kind of just need to get over. So I'm excited to, to tease some of that stuff out Friday. If you're having some of those struggles, drop a comment below. Like, I don't think there's. I think sometimes people are actually afraid of sharing that sort of thing on social media because they'll get torn to shreds by value pricing. People who are like, no, you, you don't, you don't, you don't get it. When oftentimes actually think you do get it, you just are coming at it from a different place. Drop that stuff in the comments and if anybody does tear you to shreds, I'll just delete it because I have the power to do that here. That's all we got for today. Tomorrow we're digging into basically what the whole new book is about in the place of subscriptions in 2024 and how the world is definitely trending towards subscriptions. But does that actually mean that Professional services needs to do the same? Got some thoughts on that and more on the sort of how to build affinity into your firm and make it feel like a place that people will belong to make those relationships even stickier. I'll see you there. Until then.