General Consultant Discussion

For anyone struggling with fixed pricing in their practice -- here's how I resolved the problem of quoting odds-and-end pricing inquiries from customers. Sure you can sit down and have a value discussion. However that's often not practical. The customer doesn't want you to come on site to discuss a Crystal Report or Visual Integrator job that might be perceived as a simple task. I'm also skeptical about the ""Value Bill"" advice. I think it's opportunistic and unethical in some situations. It's also impossible to streamline in an organization. One person's value is another persons ""two second question"". Probably could debate this all day and not agree. In the interest of being able to adopt fixed pricing - what I found works for me is to have what I've termed a ""pricing menu"". I went through the most typical ""ala carte "" requested services and came up with a ""starts at"" price. For most customers the start at pricing -- is the price. For the other 85% who delight in asking a price -- and then adding ""oh but will it include... "" [insert laundry list here] -- ""start at"" gives me wiggle room. Also I have had problems that many customers want quick verbal quotes. Going to a full out proposal is often not practical no matter what they teach you in class. I believe my practice thrives because I am able to respond quickly to customers. Waiting three or four days to schedule a meeting for a routine request is for me not practical. So here's how I've been doing pricing of routine requests. I created a pricing menu and now if a client (or more often someone on the Internet) requests a quick ""hey what would it cost"" .... I have a standard guideline to review and reply ""in most cases our pricing starts at "" ... [insert price from list] Also my pricing is higher for non-ROR and for people not on my support plan. Sorry if I shared this before but we have some new people who may benefit from this and I just had occasion to use the pricing and thought it worth another mention.

Wayne, who's advocating value billing (other than some of the lunatic attorneys I've seen giving that advice)?

Ed Kless??

Sage is now forcing all of us to sit through three days of that indoctrination in order to get our ration of support cases.

John's getting at the notion that Value Billing vs Value Pricing. Ed advocates Value Pricing, where the price is known up front as opposed to Value Billing, where it may not.

Therese, definitely not Ed. Robert, exactly right.

Thanks for the clarification. Now I can rest easy knowing that John wasn't contradicting Ed... :)

Phil, it will be the best Sage-related conference you've ever been to.

I don't think I've ever heard John contradict Ed. Well, there was the one time. But other than that never.

There was that conversation about the Steelers...

John, I attended the mini version a year or two ago. We played some silly games and then Ed did his spiel about value pricing and the death of the billable hour. At lunch, I asked Ed about how to move existing happy clients from hourly billing to value pricing. He did a five minute song and dance worthy of a presidential candidate debate, and never came near to answering my question. I finished my lunch and left. The concept is wonderful, but the day to day implementation seems to create at least as many problems as it solves, not least of which is spending more time on a proposal than the report or VI job would take to create.

I think that one of the most significant problems with the whole value pricing or billing model is that you have the real potential to end up being looked at as just another vendor and not as a true partner. I sell a relationship that delivers clearly thought-out and effective solutions designed for each specific client that I work with. I do not sell products. Taking the time to help my client to truly understand what he really does need is part of my job. If he did not need that help, then I truly am nothing more than a vendor trying to sell just another product to him to him and my client understands that. The reality is that most customers view fixed-price engagements, solutions, etc... as products. How many times does the ""value shopper's"" analysis of what he really needs turn out to be either entirely wrong or in direct conflict with the needs or requirements of other parts of the business? And how many time will he admit that the money that was wasted was his fault? That is the root of the reason I stay away from fixed price billing in all but the most exceptional cases. I do not like being associated with money-wasting and failed ""solutions"". I cannot quote the cost of a real solution until I have taken the time to understand your business and that is something that I as a consultant charge for. If a company demands ""fixed-price results"", I refer him to a competing firm and just tell him that when things do not work out the way they mught like, I would welcome the opportunity to work with them in a way that I know will work well for everyone involved. I have obtained some of my best clients this exact way. They figured out that what they wanted was a partner and not a vendor.

Phil and Greg, I don't even know where to start. Yes, I do...read Ron Baker's latest book, Implementing Value Pricing. As Ron would say, those comments are nonsense on stilts.

thanks for sharing Wayne - I've been meaning to ask how you've been able to make this transition, as it does seem extremely difficult. While I'm sure there are no quick answers, a simple price list with some commonly requested tasks (server moves, Vi jobs, etc.) ,and a ""Starting Price"" might be a great first step for those of us trying to dip our feet into fixed pricing. Or, in your opinion, does it need to be all or nothing? Did you make a gradual move from T&M to Fixed or was it a more drastic change?

@PhilMcIntosh Here's how it works with current customers: Some make the transition. Others jump ship.

Eric, we made the change (over 4 years ago) by moving 100% to a Firm of The Future model. The lead up to making that change took about 9 months. We talked with our First and Business class customers about the changes we would be making (and more importantly, why we would be making them) and asked for their input. For all of the other customers, we invited them to meetings to talk with them about where we were headed. After listening to the customers and after coming up with our plan, we set the date after which we would no longer offer hourly billing as an option. I don't believe a gradual change is healthy for the firm or for its customers. It creates confusion and frustration for everyone. The biggest first step is for you to define your ""why"". When you can effectively communicate that why to your customers and prospects, you're ready to make the transition.

@John I have owned and operated many businesses for almost 30 years now. Not a single one of them has lost money in even one single month. Not one of them has ever been sued. I have seen many great new theories like value pricing come and go. I am very comfortable with my ""nonsense on stilts."" Business is about relationships, trust and results. Price is not the ultimate decision maker if you are going to be sucessful over the long haul. Another fact. Unless you are in the insurance industry, you probably lack the resources and information and experience to properly price insurance ...and that is exactly what a key part of ""value"" billing is all about from a customer's standpoint. Forget all of the great theory. Value pricing and billing almost always involves quoting a cost before you truly understand exactly what it is that you are expected to do or know how exactly you are going to do it. Unless you are God and know and see and understand everything, you either have to include a very large cushion or risk a very large loss to price this way. For the record, I have never lost a client that I wanted to keep or even lost a deal with a prospect that I wanted to do busines with because I did not offer ""value"" billing to them. When I explain the problems with this theory, they get it and in many cases laugh and say ""well I had to try"" and then often add ""I understand where you are coming from and would not offer value billing myself as it does not make sense to me either"". I am not a vendor and I do not sell insurance. That is what it all comes down to for me.

Greg, I totally agree with paragraph 2 and the last one. The rest, however, couldn't be more wrong. Oh well, what do I care? And I really like the God compliment! HSD!

John, The great thing about this country is that people can disagree and that is O.K.. You do what works best for you. I do not claim to know what works best for everyone. I just know from experience what has and has not worked for me. Take what I have said that you believe is true and use it to your advantage. Feel free to throw the rest out. I definately am not God...far, far from it. One last thing...I always appreciate the opportunity to learn and you have given me an opportunity to do so here. What does HSD stand for?

Greg, that's why Ed Kless further classifies my Libertarian political leaning as a ""Howard Stern Libertarian"". Freedom of speech. An HSD is one of our KPIs (key predictive indicators). It stands for High Satisfaction Day. They are predictive in the sense that the more of them that everyone in our firm has, the greater our chances of future success.

@RobertWood may I ask how many have jumped ship?

@JohnShaver is the better one to ask this question. I'm still a coward. John's the one who's told me the stories.

Thanks for the honesty! @JohnShaver care to share how many have jumped ship?

My experience was about 60% jumped ship. Here's the interesting twist, we became more profitable (and revenues increased but my main focus is on profitability). The customers that stayed gave us more projects than they would have under the old model. And they out right told us that. They're happier and we're happier. Others have had different experiences but that was ours. @WayneSchulz and @PeterWolf may want to chime in on that point. We also (to use the airplane analogy) elected to eliminate the coach and priceline sections of our plane. We only have First and Business class customers. That was a personal decision that was comfortable for us. It might not be the right move for everyone but it works for us. Also, 100% of our customers are on a KTA (Knowledge Transfer Agreement) with us.

Okay, what's a KTA??

Knowledge Transfer Agreement - John's agreement of what he's doing for the clients and what the fees will be. Neogtiated on a per client basis (as opposed to a standard menu of prices model). John can of course provide more specifics.

My model is slightly different. We (I) haven't been brave enough to tell clients to get on board or take a hike. We have a lot of clients that are on our ""On Demand"" plan - which is essentially no plan and they pay per support call. Some clients don't want to be on an unlimited support plan but I don't want to lose their upgrade work, occasional customization work, integrated Sage CRM web portal work, etc. If a client is a turkey, that's another story altogether and I am good with talking to them about how they might find more appropriate service levels at my favorite competitors. Luckily, most of our clients have been great over the last four or so years and that conversation has only been made twice. I still have clients (and partners) that continually ask for quotes that never go anywhere. I still accomodate them because hope springs eternal in my heart. (Less charitable sorts would say it's because I'm a sucker.) Another challenge that my business faces is that 80% (maybe higher) of my business is working with other partners to provide Sage CRM services to their clients. Some partners are more reserved about the relationship and want to keep more control so our unlimited support plans don't work because it requires a direct relationship between the client and Azamba to be most effective. To date, we continue to accomodate these partners and their clients. On a related note though, we find that the partners that want the most control have the least satisfied clients when it comes to our CRM services. I can't speak to their satisfaction on the accounting side as it's outside of my domain. I think this control vs trust correlates with being a firm of the future too. The traditional firm model is all about control from the client relationship down to the employee's time. The firm of the future is more about a trusting partnership where the firm and the clients are in agreement on shared objectives and mutual prosperity. Of course, there are a lot of us that operate somewhere in between those extremes - Azamba is one of them. Just my 2 cents. Sorry if it was a bit rambl-y.

I appreciate all the input. As you know, Peter, I am trying to get away from hourly billing but I keep stumbling. First, I'm getting resistance from my employees who are very comfortable with our current system. In addition, they are concerned about losing clients who are also comfortable with our current system. I assumed we'd have to have support agreements with clients otherwise, how would we handle the day to day calls? We all had different perspectives about how they should work so we decided to start with fixed fee projects. Everyone was gung-ho until someone quoted a project and the client said they could wait; their current procedure ""wasn't that bad."" Now they're leery about quoting projects for fear they'll lose them. Second, as Greg stated above, unless you're God, how do you know what to estimate when you may not know all the parameters? I know, I know, it's all about scope but we aren't used to change orders, etc. I think I'll have to read ""Implementing Value Pricing"" as suggested by John. Maybe I don't have my finger on the ""Why"" part of it yet.....

Therese - you raise some really good points. There are no easy answers except to understand that the firm of the future stuff is 90% philosophy, 9% sweat equity and 1% cursing and swearing. You have to accept that during the transition, you will stumble more than a few times. You pick yourself up, dust yourself off and learn from it going forward. In fact, I've been doing this a while and I still stumble. The absolute best thing about taking the dive into the firm of the future pool (my opinion) is that your organization shifts from same-old, same-old to a dynamic organization prepared for and expecting change. Right now, too many professional firms are living like they were 5, 10, 20, 30 years ago. The world is changing quickly. Adopting a model where it's ok and even expected to deal with failures is essential not just for maximizing profitability but for survival. Firm of the Future = a company built for the Internet Era.

I'm actually getting started on the process myself. I'm facing the same problems you are Therese.

I think we should form a support group - not software-related but Firm of the Future/Value Pricing/whatever it might be called - related. We can all stumber together...

or stumble...

(I think you can edit your comments if you click the little gear that shows up in the upper right if you hover in that area.) Therese - let's discuss this on Monday. I have some suggestions.

@GregTalburt - I have two customer where I just did upgrades from 4.2 to 4.4. They both paid a fixed price. Both were pretty standard GL/AP/AR - 5 User ish The price was not the same (one was $2,000 one was $15,000) Both required the same knowledge Pricing was different because they requested different services. In this case fixed only means that you fix the price ahead of time - not that everyone pays the same. Do not be fooled by my list of fixed prices. I get a ton of requests off the Internet. If I stopped to have 40 minute conversations with every tire kicker I would not have time to work. Similarly customers ask for quick pricing all the time. I find having a price list for MINOR things is essential for me. Larger projects are always priced separately (usually after a paid on-site consultation). The price list is part of how I've grown constantly as I adopt fixed pricing. My upgrade agreement when I started offering fixed price upgrades was about 1/4 page. Now it's 5 or 6 pages detailing exactly who does what. It's just something that I'm continuously working to improve.

I absolutely LOVE Therese's idea. I do not care what you call it, but we all could benefit from taking the time to listen to and learn from others who have found an approach to the market that has worked well from them. I am from the old ""best of"" school of thought. Take the best of a lot of theories and practices and put them all together in a way that makes dense for your business. It is not an either/or situation as fat as I am concerned. Peter, please include me in the group/discussion on how to better and more profitably run a consulting practice. I have a feeling I could learn a lot from it that I could use to make my practice more successful, profitable and more fun. Yes, I want to make sure that I enjoy doing whatever I do; getting paid to do what you enjoy beats the heck out of getting paid to do something you do not enjoy doing.

@ThereseLogeais With respect to defections - I did not have the immediate defections that @JohnShaver did because I phased my use of fixed price support plans in over time. What I find is crucial: a. You must have a plan - and stick to it. b. If you don't have a plan the first time a prospect asks ""so how many hours would that be"" you will fall back to the hourly method of billing which I don't enjoy c. It is ok to say no and for prospects to tell you that they don't want to do business with anyone who does not bill hourly. I just refer them to people I know who bill hourly. Usually the report back from the person who I referred the prospect to is that the prospect only wanted to ask a free quick question. Don't fool yourself on the value in some fo these people. I have copies in Google Docs of: - Support agreement - Upgrade proposal I save these as templates (huge time savers). This means for every request I can turn around and send out the info immediately. One of the biggest stumbling blocks to fixed billing is that it requires more time up front to analyze the problem and develop proposed solutions.

@GregTalburt I REGULARLY told both Ed and John that they were crazy. That their ideas would not work. Were stupid. That my method was better. And probably a few other topics that I'm forgetting. When we discussed this between ourselves in this group we also came up with a lot of ""well our business is different"" reasons why their ideas were sill and why we could never implement fixed price billing. This is definitely a journey and not something you will turn and implement immediately. However if I can do it ...

I couldn't agree more @WayneSchulz about the time it takes up front. That was the complaint from the person who lost the project, ""I spent all that time putting this together!"" How did you phase it in? I suggested we talk to a few of our A clients to get their feedback but everyone thought we should have a plan in place first otherwise we might look stupid. I did ask one of my favorite clients what he thought and he said he'd have to see the value in it. ""You mean you don't see the value in the ability of your employees to call us when they have questions instead of waiting until they have 5 questions or until they try and figure it out themselves causing more work? Or the value in KNOWING what the project is going to cost instead of gasping when you get the bill?

Wayne, You and I are on the same page. I will quote fixed price IF the client pays me for all of the time that it will take to really nail down the exact details related to scope, mutually-agreed to and accepted expectations and limitations and who is responsible for what and put all of it into writing in a way that covers both of our backsides from a legal perspective. What I have found is that most of my clients just do not want that fixed price option enough to pay for the cost to get it. I get 90% to 95% of my business by rererral and always have. Maybe that is why I do not have the demand for fixed-fee pricing as others seem to have. I do give give a client an estimate of costs when they ask, but it is exactly that--an estimate. The smaller the project, the greater the odds that the estimate will be equal to or over the actual costs. The larger the project, the higher the odds that the estimate will need revising once everyone involved in the project knows everything required to complete the project. My clients also get the fact that it is more unusual than not that new opportunities to do things better often present themselves only ""when you have the patient opened up"" and that is why everyone should build in some extra monies to a project. And it seems to work best when the money is spent on doing things rather than buying insurance. I am not an insurance agent or an attorney and my clients get that. I am a management consultant that works with accounting software among other things. They ask only that I do my best and have confidence and trust that I will. Again, it all comes back to that confidence and trust thing for me. I will get off my soap box now.

1. You have to give the customer options. 2. One of the options is not ""stay as is"" I admit that phasing this into EXISTING customer is tough. You can however start with new customers as quickly as you can rip my logo off this and throw yours on: http://goo.gl/W9J0K PS - I'm not saying my pricing is right for you -- use your own rates or what you're comfortable with. Until I figured out that ""stay the same"" was not an option - customers walked all over me. I was like Barney Fife stuttering and stammering until I'd agree to bill the customer the old way in 2 minute increments - quick calls free.... Don't do that anymore. If customer calls and threatens to leave because they cannot afford us (happens 1 to 2 times per year) then they are telling me that (drum roll) they can't afford me... Note: They usually cannot afford anyone else or they just want to pay by the minute but only if the call is not deemed quick or easy.... Teach them how to do business with you -- you dont' go into a store and tell the owner how you are going to pay for their merchandise - do you?

It was after seeing Peter, John and the others at Ed's Killing the Timesheet session at Summit that I thought the same as Wayne suggests - ""If they can do it, why can't I?"" No offense guys, but I don't think you're THAT much smarter or better than me, just smart enough to know that change CAN be good.

I think Therese just hit it on the head. Change CAN be good. From my perspective it all comes down to how you perceive what it is that you are selling. Are you selling a product or a process? They appropriately would be billed for differently. It is also important that there are certain legal requirements related to record-keeping and time sheets if you are billing by the hour and not by the project. If you do away with time sheets, you might also do away with hourly-based billing to be in compliance with specific federal and state laws. I am not sure if Ed touched on this or not.

I agree - it's not brains that make it successful. The good news is that I think most of the folks who run their own practice have the essential quality to make this shift: courage. More food for thought: like Wayne, I didn't pull the bandaid off quickly. We didn't lose a single customer. The problem is that I still have customers who are dysfunctional and refuse to talk about the scope before projects start. But... one of these is my largest customer and I couldn't give up the revenue. So we have a mixed model where we do fixed price projects with options where we can and we do T&M on miscellaneous work. The ironic thing is that on the fixed price projects, they always choose option 3 - the lowest priced option with least value but with T&M they always pay a premium because we jump in heads first on most projects and they keep shifting.

We are all selling results Greg.

Regarding scoping the work and being afraid to ""lose out"" on the time spent if the client walks... If a project is small and can be scoped with a few calls, less than an hour or two, we do it as part of a sales process. The value pricing is making sure that we are compensated fairly - much better than a $135 * 3 hours model of billing. If the project is too large, we take a WAG (wild ass guess - technical term) and say ""we need to better understand the scope and nature of what you want. We can't do it in just a few calls so we're going to put together a proposal to properly scope the work."" From there, the client says ""no way"" - problem solved or ""ok sounds good"" - problem solved. Then we scope the work and come up with a more detailed proposal with options based on value triggers that we heard during the scoping project. It's a win-win because now we all know exactly what is expected on all sides. Contrast this with slapping a workplan together with hour ranges and tasks. The focus is on how long things will take versus the end results and the value of the results. Furthermore, if you are a seasoned pro and it takes you 5 hours to do someting a junior takes 10 hours - what do you charge? Is it fair to charge 5? 10?

Peter, I do not disagree with your statement. What I am asking is is the ""result"" always something that can be defined and known up front or is it sometimes something that can only be fully defined and known after a process has been completed? Everyone in this group delivers something of real value to their clients or they would not have been in business for long as pretty much everyone in this group has. I am just trying to make the point that the idea of ""one size fits all"" rarely works--even in the case of value billing.

I just posted something right before your post Greg discussing how I scope.

And... ""one size fits all"" rarely works - PERFECT! That's what value pricing is all about. An upgrade for customer A might be worth $5,000. The same upgrade for customer B might be worth $10,000. It depends on their needs, the options provided, the bells and whistles included, etc.

Peter, I assume you charge the prospect/client for ALL of the time that you spend on the scope document. Otherwise you are asking the clients who do engage you to pay for the time that you have spent messing with the ones who did not or you are just adding that to your marketing and selling expense overhead accounts.

That was a long sentence... I'll answer the best I can with a few questions. Do you charge clients who engage you for the time spent on prospects that did not engage you? If not, what happens to that time? I don't penalize customers for my sales time. Here's one last question for you: if your standard install (GLAPAR) workplan calls for a range between 40 and 60 hours but it used to take you 80 to 100 hours, who do you charge for the time lost because you have more expertise these days? Because if I look at them side by side, it looks like you are getting screwed over for being better at your job. I don't think that's the way it should work.

All, it's really awesome to see all of the great thoughts and comments about this! As you can probably tell, it is something I'm very passionate about. We are already in the process of setting up a group just as several folks have described. It will probably be on Yammer since it has some advantages over Socialcast. I'd like to open the group to a broader audience than just Sage partners since I think we gain knowledge from other professionals (CPAs, attorneys and consultants). Ideally, it would be set up under VeraSage (www.verasage.com) umbrella so we could include folks from that group (Ron Baker is the founder, Ed & I are fellows). I'll let everyone know when it is ready to go. Back to the conversation between Greg and Wayne...it's actually not our customers asking for it. To date, I've only had that happen once. Making the change was a decision that we made. I do believe that changes in business models are pushed by the seller and not pulled by the buyer. We've all (and I'm including myself) done such a great job of convincing customers that there is no other way that they would never think to ask. And I should add that not only do we not bill by the hour, we don't have any mechanisms in place to track time. We do, however, use project management tools such as the Issues List to make sure we are hitting our project milestones. Peter, to expand your comment that we are selling results...I don't even consider us to be a seller of software anymore. Instead, we sell knowledge. That knowledge is used to accomplish the results.

Peter, I was discussing fixed=fee billing, not ""value"" billing. Now that you have brought up the ""value"" billing concept, let's discuss it. Let's try put the value pricing concept on say something like cars...how would you feel about paying $10,000 more than your neighbor did for the same car as your neighbor bought and being told that it was ""fair"" because you got more ""value"" out of it. Yes, what is fair matters and every one of your clients will tell you that. Like it or not, accounting software and even the services that we all provide are to a certain extent comodities. Proof of that is just how easy it has been for Sage to relpace a lot of the support services that reseller's have historically provided with Sage support plans. Our clients can choose who they purchase them from. If a client can get the same thing for a lot less elsewhere, they eventually will... so unless all of your competitors adopt ""value"" billing, your services may be devalued and replaced. That is just market reality. That is one of my biggest problems with ""value"" pricing which is a completely different thing than fixed-fee billing is. Do not confuse the two. 'Sorry for the bluntness, but as much as I question the wisdom of implementing fixed-fee billing, I can see where it can be legitimately employed in certain situations. I have a much more serious problem implementing ""value"" billing as it just strikes me as something that might come back to haunt me from a reputation standpoint.

John, please include me in that group. I do not get it yet, but maybe I will be able to figure out just what I am missing.

Greg - let's use the term value pricing - not value billing. We are pricing based on perceived value to the client and not billing based on perceived value. Value pricing is done up-front and is agreed upon before work begins. People pay different amounts for the same car all the time so that's a good example. Houses too. It's based on what the customer is willing to pay based on the value that they have ascribed to that thing. Regarding the commoditization of accounting software and services, well... I think you need to re-read John's last post or you are right - there's going to be trouble. We are selling the educated professional services to deliver results with little to no stress on the client's part. How much is that worth? It depends. On a whole bunch of things but most revolve around the specific customer's belief and value system. I don't do fixed fee billing. I offer different options based on different value packages. The options will be fixed in price - just like that car or that house - but it's not a menu-based, one price fits all. I'm not sure where I gave the impression that we were discussing fixed-fee. I would suggest you re-read my posts as fixed, value priced options.

Peter, As my expertise has gone up, so has my billing rate. And yes, I do have different billing rates for different things as I know more about some things than I do others. I also obvoiusly do not bill my existing clients for my sales time. I do track that time separately and even have a separate line item on my P&L statement just for that time so that I know what the value of the time I am giving away is and I present it to a prospect and to a client for exactly what it is-sales time that I spend on my dime to try and sell them something. If I am creatiing a specification document or project plan or anything else like it, I bill 100% of the time that I spend to create it to the client. That is consulting time and not sales time and if he wants to take that document to a competitor he is free to do so as he did pay for it. I think only 2 over the past 25 years have actually done that. My bottom line is simple. All the documentation that fixed-fee billing requires takes time and costs money. Someone has to pay for it either through inflated prices or reduced margins. Unless you would get a lot more business by doing it than you would get if you did not do it, why on earth would you do it? My experience has been that I just have not seen the advantage of going to fixed-fee billing in my practice. Call me old fashioned, but what professionals have been doing for hundreds of years still works well for me-bill by the hour at a rate that reflects your personal level of knowledge and bill for all of the time that you actually spend on a project. Most clients can understand and respect that billing method when you are in fact selling a process and not a product.

I think we can agree that we are all passionate about this. It is just such a difficult concept to wrap our brains around, as you can see from this very long but very worthwhile thread. Even if you do grasp it, the reality is, it is difficult to figure out HOW to execute it. My suggestion for the support group was so that we could continue this dialogue over time with questions like, ""We're thinking of.... Has anyone tried that approach?

Greg, what would you do if a client requested a Crystal report that you have already written for another client? Would you bill them just the amount of time it takes you to copy it onto their system and add it to the menu? Isn't it worth more than that? I""m not saying you bill what it originally took you to create but it HAS to have more value than the 15 minutes you might bill. We had this exact scenario happen a while back. One of our clients was being audited and called one of our employees frantic about needing certain informaion. He connected to her desktop, transferred the report and showed her how to run it. Took him 15 minutes, which is what he billed her. When I suggested it was worth more, he said, ""But she knows it only took me 15 minutes.

@Wayne - thanks for the full disclosure -""Probably could debate this all day and not agree

Great example Therese. Greg - instead of arguing why T&M pricing is best and value pricing doesn't make sense, I challenge you to make a choice. Either stay on T&M and continue to be prosperous as you currently are or decide to shift to firm of the future. Either way - I'm sure you will be successful. If you go the second route, we can stop arguing about why T&M is better and instead talk about how to make firm of the future work for you. To me, arguing about why T&M is better has zero upside. I'm perfectly ok with the fact that for some folks do it, are happy with it and will continue to do it so this is not a condescension. Just choose what you think is going to work and then move forward along that path.

Oh and by the way... for thousands of years folks thought the sun revolved around the earth. It didn't mean it was correct - even though they had invented all sorts of measurements and schemes that showed it was ""correct"".

Peter, we see the world differently. I do not care what you call it; value pricing or value billing. I would not purchase a car from a dealer if I know the same car or one very similar (same make and model, but in a different color for example) to it were available for $10,000 less just a few miles away. Maybe others would. I also have also never bought a house without first considering what similar homes like it were actually selling it for. How I feel about a house or a car has never been as much an issue for me as how good of a ""deal"" it really represented was. Most sucessful businesses operate in a similar manner. Regarding accounting software and related consulting services becoming more of a commodity, that is just a fact. Ignore it at your own risk. That is a whole other conversation, but I believe my statement to be true. How many firms are authorized to support MAS? How many of those firms are really hungry for business? How many of their employees and owners are just as smart as you and I and offering basically the same services. And oh yes, Sage is offering the same services (and remember that they OWN the software) as well. That is a lot of choice. That is my point. Your client and mine purchase EVERYTHING they do with and eye towards getting value. And they define value as getting as much as they can for each and every dollar that they spend. We are not exactly in the midst of a great economy. They do look at what you and I am selling and compare our prices to our competitors and evaluate what they really do get from each relative to what they are paying for it. They can also do math so no matter how it is packaged, cost is compared to benefit and benefit means results. How is it of ""value"" to pay $20,000 for services from one vendor when substantially the same result can very likely be acquired for $10,000 from another vendor who charges by the hour rather than the job? What one is selling that the other is not is insurance and fancy packaging. Some people will buy the insurance and fancy packaging, others will not. If you can buy a new Toyota Camry in red from one dealer or get a blue one from another for $10,000 less (even if you like the color red more than you do the color blue) which one are you going to buy? How you price things does not matter near as much to a sophisticated purchaser near as much as what the price is relative to what it is available for elsewhere in the marketplace. Yes, there will be a subset of the market that is attracted to value pricing. There will also be a lot larger segment who will not be however once they figure out what it really is. Car companies tried to implement fixed pricing a while back. What happened? Value pricing that involves substantially higher pricing than other pricing methods will only work in near monopoly situations over time. Time will prove me out on that one.

Therese, The Crystal Report question is a very good one. I do not charge the next client what I did my first client. The second sale it really becomes a product which costs me less to sell the second time than it did the first time. The second guy is always happier to be paying less than the first guy did. I have also been known to refund the original client some of the money he originally paid if I end up reselling what I created for him to others. You talk about suprising the first client and building goodwill, when you send that first client a check as a result of reselling what you originally created for him, you end up with a cery happy client. This scenario is exactly why I make the mental distinction between whether I am selling a process or whether I am selling a product.

I hope I can start getting checks from Lynyrd Skynyrd. I bought their best of MP3 album last night. I'm guessing some others did too.

I like some of LS's stuff. I'm really looking forward to the Pink Floyd immersion sets coming out later this year.

Peter, You are of course right when you suggest that we just agree to disagree. For the record, I am not saying that T&M is always right. No one way is ever always right when it comes to how a business bills. 'Sorry if I insulted you or offended you. You are a very tallented guy and I do have a great deal of respect for you.

@JohnShaver - I didn't realize that was her last name? Floyd?

Wayne, I know my refund checks to the original customer are unusual and not likely to be adopted by many others, but they were also very effective marketing dollars. My clients told their friends about this quite unusual business practice. Guess what? Many of the people they told about the check actually gave me a call just to find out what kind of wierdo would actually do such a crazy thing. A few of those became clients themselves. For anyone who wants a really effective way to spend marketing dollars, this way sure has worked for me and built a lot of client goodwill as well.

Pertinent: http://cheezburger.com/CheekyBrassMonkey/lolz/View/4985274624

that's just sacrilege right there - any comparison or relation of Pink to Pink Floyd. @Greg - I love the refund check!