General Consultant Discussion

I know there have been some conversations about the definitions of pricing terms. Michelle Golden and Jay Shepherd came up with a cool flow chart that explains the differences very clearly.

My favorite is ""billable hours in drag""!

I'd love to be a fly on the wall to the conversation where the customer say's ""this is worth $ xx,xxx to us"".

My experience has been that most of the time the customer will at least lead us toward what they think the value is to them. From that point, it's our job to push further down that path.

It's definitely more of an art than a science getting them there.

Although Jay does add a little science to it...for the tactical consultants in the group: http://www.clientrevolution.com/2009/08/how-do-you-set-your-prices.html

I like Jay's explanation. I think he breaks it down to about the way that I do it -- though in all honestly when I have to wing it I figure a minimum that I'd charge for my time and about how long it would take - then I adjust up or down. Heck - you need a place to start. I have a customer who asked about an export of some data from MAS. I know that these things are NEVER as simple as they seem (it's a rookie mistake to think so - especially when the export is being integrated to a 3rd party system and someone is going to accept that data file on their behalf). Hourly at ""what it seems like it should take"" - I bet this is a $1,500 job. At fixed price I gave $5,000. And I'm willing to walk away at less because I know the issues that almost always arise with these. For $5,000 I'm willing to guarantee it -- the import either works or they can pay me nothing. For routine things like ""hey Wayne we need a Crystal Report"" -- I haven't found that creating an extensive analysis is a great way to satisfy what is often just a curiosity. So I use a menu -- our pricing for Crystal Reports START AT (key) $ xxx. Always using the ""starts at"" to guard against the Steve Jobs ""oh and one more thing"" ..... if you give a firm price to an UN-FIRM specification you are often left holding the bag.... until the scope is known it's ""starts at"" ....

When the customer UNDER-values the work - it's also important to walk away... Over the summer (last year actually) I lost a big customer because I knew (correctly) that the services they wanted for guiding an integration project were more complex than described and therefore were being valued by them for way less than what they should have been. They wanted to work the quote 15 different ways to Sunday -- all of which eventually worked down to "" we want to pay you on a ""not to exceed"" .... Not to exceed is about the worst billing arrangement I can think of... I told them $2,500 per month (and I think that was probably a little low). Their value was about $2,500 total (after 18 months their project still wasn't finished - just like I told them it wouldn't be). It didn't help that their 3rd CFO in 3 years tried to crush my hand during the first meeting.... They found another partner to bill them hourly. My guess is that partner isn't making any money on them. In many situations (but certainly not all) I find that if I have an opportunity to talk to the partner who the customer chose to continue working with that the new partner does not have a different story to tell.

When I first saw the chart, I printed it out and then Jay Shepherd's post. Why? Because I'm about to put together a quote for a long-time customer for an upgrade and I wanted to use them as guides. This customer's last upgrade was a nightmare (4.05 to 4.3 with about 100 Crystal reports) and while I gave them a quote, it was based on ""estimated hours."" It went WAAAY over and I had to write off a good chunk of it. So I started in the upper left-hand corner of the chart: Yes, I will be giving them a price beforehand (going good so far!); Uh-oh, will I be basing it on the last upgrade?? I have to say yes, to a degree. (So now I'm billable hours in drag... Darn, this is tough!). If I had said No, is the price the same for every upgrade? Absolutely not! Okay, on to Are bills adjusted based on effort? Hmm, the whole change order thing, something we will definitely have to perfect, along with the scope document. No wonder people bill by the hour, it is so much easier! ;) We just met with them a couple of weeks ago to discuss the upgrade - process, changes, requirements, etc. - and of course, the president asked, ""What do you think your time will be on this?"" I told him we are changing our billing practices and that I would give him a quote for the project, most likely broken out into different parts(they have CRM, EDI, KnowledgeSync, and even MORE Crystal reports!). I have already done a value-based project with them (KnowledgeSync, Phase I) which worked out for both of us - they got their first set of scheduled reports and I didn't have to track my time! I hope I can do this upgrade just as well. I'll keep you posted...

I may do that @JohnShaver - thanks!

@ThereseLogeais Let me know if you want to brainstorm about it.

If you guys do any type of Google Hangout or group conference I'd be up for participating - I'm always looking to improve my skills here. The way I've been doing this - sort of our of necessity since I get asked for UG quotes quote a bit. I ripped this off from both @JohnShaver and @MikeFitzgerald --- the concept of menu pricing (Mike calls this small/medium/large). I have a table that I refer to just so I can get a start with quoting a minimum fee. For customers who I don't know well (such as from the web) I do not want to spend time validating another quote that they have. So my table might be: Upgrade From 3.71 -- $ 7,500 Upgrade From 4.00 -- $ 6,000 Upgrade from 4.05 -- $ 5,000 Upgrade from 4.10 -- $ 4,000 Upgrade from 4.20 -- $ 3,000 Upgrade from 4.30 -- $ 2,000 Upgrade from 4.40 -- $ 1,500 Add $ 500 for each user over the first 5 Add $ 1,000 (ea) for: - FRX - F9 - Knowledgesync - Business Alerts Custom additional quote for: - Extended Solutions - Scripting - Customizations - Extensive Custom Office - Custom Crystal Reports Basically I want to be able to consistently quote a ""starts at"" price because many times customers ask then disappear for 6 to 8 months. Then they resurface and ask again. I wanted to have some consistence in what I told them their starts at price would be. .02

Interesting @WayneSchulz. According to your table, this customer would be $11,500 based on version, users and KnowledgeSync plus $XXXX for the Crystal reports and customizations. Are you saying you would quote ""Starts with $11,500...""? I don't know what Google Hangout is but @JohnShaver would you like to take a stab at this?

I just made those $ up / that's not my real pricing. I can give you a link to what I use.

Best method is tlogeais@technology-integrators.com. Thanks, @WayneSchulz!

I'll be poring over this tomorrow.

@ThereseLogeais Are you signed up for Google+? You'll need it for the Hangout.

plus.google.com

Yes, I am.

I defer to @JohnShaver on value pricing and would like his opinion on good resources for it. Personally I struggle to read Ron Baker's books. They are just too in-depth or something. Makes my head hurt. One that I found that fit my style better was Tim Williams Positioning for Professionals. You all should go out and get this asap. My recommendation is to get the real book not the Kindle version. I have it on Kindle and it's so annoying to flip back to sections that I want to refer to - and there is a lot to refer to. http://www.amazon.com/Positioning-Professionals-Professional-Knowledge-Differentiate/dp/0470587156/ref=sr_1_1?s=books&ie=UTF8&qid=1333642779&sr=1-1

I have Positioning for Professionals, haven't read it yet though....

BTW - I'm with @WayneSchulz - I can never seem to get the client to lay out ""hey this is worth $xxx to me."" But Tim's book describes how to have the ""scope of value"" discussion before the ""scope of work"" and that helps you frame the importance. It doesn't seem to fit in to the ticky-tacky small projects that I seem to get invovled with a lot but you adapt his principles and do the best you can.

Stop doing whatever else you are doing and read it right now. Seriously. No need to thank me when you are done.

It's at home - I'm at the office... :) I'll rush right home after work and crack it open!

Let's pick a time some weeknight - maybe around 8 ET

Not on Survivor or Amazing Race night...

I wouldn't mind sitting in on this if it's ok with you all. Like Wayne, I'm always trying to improve with different approaches. Never seem to have it perfect ...

The more the merrier! Especially those who are currently espousing this model.

@PeterWolf I thought you were too cheap to buy a Baker book? Talk yourself into reading 87 pages of Baker's Implementing Value Pricing (http://www.amazon.com/Implementing-Value-Pricing-Business-Professional/dp/0470584610/ref=sr_1_3?ie=UTF8&qid=1333648299&sr=8-3). Chapters 27 - 35 lay out Ron's 8 value pricing steps. Once you make it through that part of the book and start implementing Ron's ideas then go back and read the rest of the book in which Ron talks about the economic theory behind the business model.

@JohnShaver - I will take a look at the book you mention. Part of my ""cheapness"" to buy the book is that Ron's style is so in-depth that I feel like I'm slogging through it. Kind of like reading Faulkner or Hemmingway. Both are brilliant writers but I prefer the comic-book version - lots of pictures and easy to follow words. :)

If that's your reading style @PeterWolf I assume I'll zip through Tim Williams' book?? :)

Yes, I think you will. I read it over five days and went back to it again and again for the next few months to get the hang of some things. And don't get me wrong - lots of people love Faulkner and Hemmingway and Ron Baker is the Godfather of Value Pricing / Firm of the Future so people should give his stuff a shot. Just because I have the attention span of a gnat doesn't mean others should not pick up his books. I have read two of them - very good stuff.

With Baker books I make the mistake of starting at the beginning and doze off reading the theory and walk away from them.

Well now we all know to skip to chapter 27 in his Implementing Value Pricing book instead of starting from the beginning....

Yup!

@JohnShaver @WayneSchulz @PeterWolf and anyone else still interested. I now have two quotes to ponder. Are we still on? (I haven't looked at the TV schedule Wayne, but could we possibly do this during the day?) Let me know!

I'm around today - 4/12. End of day is probably better (4pm ET)

That works for me. @JohnShaver and @PeterWolf?

I can't make it today. Don't let that stop the train from leaving the station though.

What did you guys decide?

Friday morning would work for me. Or sometime on Saturday. I'm out working on some damn good hush puppies this afternoon.

How about Friday morning then?

I'll be in the office by 9am Eastern.

Would 10 CT work?

What are we doing? A new episode of the Fabulous John Shaver Show?

John has offered to ""brainstorm"" with me regarding an upgrade quote for a client. Wayne and Peter said they'd like to sit in as well. Value pricing and all.

Gotcha! Brain not functioning up to 60% today.

11 Eastern works for me. Are we doing this on Skype?

Or Google Hangout?

Did @JohnShaver figure out how to Hangout?

11 am Friday Google Hangout works

https://plus.google.com/109408520520143490220/posts/8mghDaVw6y8

Shared circle of people who were on this message

According to Amy, I know how to hang out.

I am interested in joining your session Fri @ 11 am ET. I do think I have some experience to help Therese with. And I'd like to hear the other ideas that come up. If not, I'm ok, too.

Here's where we can all start from. I think that I have everyone on this message in the Google+ circle. If you click this link and CANNOT see the message after logging into G+ leave me your Google Profile address or just leave a message here and I'll find and add you. https://plus.google.com/109408520520143490220/posts/X12FC7qTUMK

Does anyone mind if we open this top Sage Academy Alumni - or prefer it to be just us?

Also - you'll need to have a Google + account to participate -- http://www.plus.google.com

@JohnShaver I'm not touching that one.

Sadly, Amy did................. And to think @JohnShaver thought my post was bizarre.........

Please! I'm having breakfast.

What do you mean, sadly, Jeff? The one time I touched it we got Caroline :-)

Hmmmm, another 15 or so posts before Wayne can post up on Linkedin on another INTERESTING thread the group is having. This will REALLY be a good promotional ""piece"".

The key to Google Plus is if you want to get someone's attention via notification you stick their ID in their +wayne schulz And sadly I have two accounts - use the one with the same profile icon as here.

@AmyShaver well, then he does pretty good work then.

If you can, record it and post it back here for those of us that can't make it.

@WayneSchulz - I say invite the Sage Academy people but defer to Therese. This originally started as an exercise for her to run a few quotes by John / you to figure out how to optimize pricing (I think that's how it started ...).

Good point - lets keep it in the family

I appreciate everyone's willingness to participate in this! I have a couple of objectives - one, to learn how to get the customer's true value of the project, not mine; two, how to define the scope and assumptions; and three, how to provide options in the quote i.e. Option 1 includes this, this, and this; Option 2 includes everything in Option 1 plus this and this; and Option 3 includes everything in Option 2 plus this. And whatever else John and others suggest!! Perhaps we can do something similar for a broader base in the future?

Sounds like a good plan to me.

Hang out time -- https://plus.google.com/u/0/109408520520143490220/posts/MFPJuCebeHj

I can also add you by phone - leave your phone #

Hangout!

Thanks everyone!! This was very helpful. Now on to my proposal creation......

What ever happened to what goes on in the hang out, STAYS in the hang out??????

Just be glad it's not video. I think at one point these are going to automatically go to YouTube

Too funny - as soon as I exited the hangout I received an incoming inquiry from an existing user wanting to ""try me out with a project"" and ""what are your rates"". I will never hear back from them. Here's what I sent: Hi John, Thanks for speaking with me today The following link provides more information about our support services for Sage ERP MAS 90 and 200. http://goo.gl/W9J0K Prior to undertaking any projects we require a systems review. This allows for us to document system setup, issues, future needs, missing features, etc. I can provide pricing on that once we've met to discuss your requirements - the review typically starts at $1,500. Our pricing is all fixed and guaranteed - I'd be happy to schedule a time to speak further once you've had a chance to review. Thanks,

I am sure I could get much fancier and more elaborate with the reply. My experience with raw web leads (not a referral or subscriber to newsletter) is they're generally not worth the extra effort.

Like ""Pricing on Purpose"" we should always be ""Marketing/Responding on Purpose."" Answering these questions: ""What do I want them to do after receiving it?"" and ""What will they probably do?"" I think your response is perfect in that sense.

I received an RFP yesterday that weighed solution pricing as 30% of the eval criteria. In the pricing section was what is your hourly rate and what rate can you commit to for the next 36 months? I got so confused by those questions that I accidentally deleted the RFP.

Anything asking for hours and rates I don't bother with. They are almost always from either an IT person or ""consultant helping a customer