A fair price for a fair job!
I was personally reminded today of the perils of time-costing so beloved of solicitors, accountants and many consultants. I received an unfathomably large bill from a lawyer who did some property work about 3 months ago. I was aghast, but immediately grasped the problem.
He had billed me for what the job was worth to him – the supplier, not what it was worth to me – the customer!
I have approached his firm with a proposal to help him move from hourly billing to value pricing. The proposition that “time is money” is over 250 years old, and attributed to Benjamin Franklin. However, clocks don’t write cheques, and you don’t attract and retain clients by selling hours.
You sell solutions, service and value.
For the benefit of anyone currently charging clients by the hour, here’s why switching to value pricing could transform your business:
1: Pricing a job at outset gets any objections from clients on the table before you start; far better than arguing over the bill at the end!
2: Clients feel special, as you are calculating a bespoke value for their work. Hourly rates, by contrast, are applied at the same level for everyone, irrespective of the value you are adding to their business.
3: Sharing risk by quoting fixed prices projects experience and confidence in your delivery and performance. Clients will feel that you must know you can do the job, otherwise you wouldn’t have committed to it.
4: Clients will appreciate that you are not about to rip them off. Can you imagine how you would feel if an airline charged by the mile for your ticket? Maybe the pilot would deliberately take the long route to rack up the costs!
5: Value pricing forces internal efficiency. Fixing revenue ensures you will delegate and review work flows so you can offer service whilst ensuring you meet your own profitability aspirations.
6: Annual price increases are easier to factor in, as each job is costed individually. No firm likes sending out notices of hourly rate hikes, and no client likes receiving them.
In summary: value pricing encourages trust and nurtures long-term relationships with satisfied clients, leading to mutual profitability and success.
It’s time to ditch the clock and focus on value!
Jon Cooper is the founder of Jupiter Dawn Consulting. Add any comments or questions to this column online, or by e-mail to jon@jupiterdawn.com
Showing posts with label profit. Show all posts
Showing posts with label profit. Show all posts
Monday, 21 September 2009
Thursday, 19 March 2009
Don't waste this crisis!
Positive thoughts and actions pay off in tough times.
One of my clients asked me today how it is that I’m always “up” and positive about things when so many businesses seem to be running out of steam, laying people off and reporting more pain yet to come.
I replied that there are some unique opportunities in amongst all the chaos. I am too busy working to identify them and using them to improve my life and the lives of others to ever feel down!
I could see he was unconvinced, and he challenged me to come up with 10 reasons why the crunch/recession/downturn isn’t all bad…
1: In a slowdown, it’s easier to see which of your goods and services are relatively unprofitable, and to focus on your core strengths or in developing your next core strength.
2: Many companies have reduced customer service and support staff. If you’re a competitor of theirs, they’ve made it relatively easier for you to impress in your own marketplace.
3: Advertising is cheaper and more accessible. I heard of a radio station offering 5 times the airtime per pound than 12 months ago, and some local free newspapers are desperate for your business at any price!
4: PR exposure is easier to achieve. Most of the media are eager to promote good news about the economy. Make a big noise if you’ve won a new order, opened a new site or similar.
5: Business supplies are really cheap. Now’s the time to replace the photocopier, stock up on stationery or give the office a makeover.
6: Vehicle leasing and purchase deals are incredibly sharp. That new van or company car has never made more sense.
7: Commercial property values are on the floor. Grab a bargain by purchasing or renting smart new premises you couldn’t have afforded a year ago.
8: It’s a great time to learn how to cut costs intelligently. When the economy upturns, you’ll be more profitable than before.
9: Government assistance is genuinely more available than ever. Check out the Solutions for Business portfolio via Business Link.
10: Recruitment is an employer’s market. Why not strengthen your sales or marketing departments, from a wide choice of potential staff at relatively low cost?
Have a question you'd like Jon, founder of JupiterDawn Consulting, to address? You can submit it by either adding a comment to this post online or by e-mailing it to jon@jupiterdawn.com
One of my clients asked me today how it is that I’m always “up” and positive about things when so many businesses seem to be running out of steam, laying people off and reporting more pain yet to come.
I replied that there are some unique opportunities in amongst all the chaos. I am too busy working to identify them and using them to improve my life and the lives of others to ever feel down!
I could see he was unconvinced, and he challenged me to come up with 10 reasons why the crunch/recession/downturn isn’t all bad…
1: In a slowdown, it’s easier to see which of your goods and services are relatively unprofitable, and to focus on your core strengths or in developing your next core strength.
2: Many companies have reduced customer service and support staff. If you’re a competitor of theirs, they’ve made it relatively easier for you to impress in your own marketplace.
3: Advertising is cheaper and more accessible. I heard of a radio station offering 5 times the airtime per pound than 12 months ago, and some local free newspapers are desperate for your business at any price!
4: PR exposure is easier to achieve. Most of the media are eager to promote good news about the economy. Make a big noise if you’ve won a new order, opened a new site or similar.
5: Business supplies are really cheap. Now’s the time to replace the photocopier, stock up on stationery or give the office a makeover.
6: Vehicle leasing and purchase deals are incredibly sharp. That new van or company car has never made more sense.
7: Commercial property values are on the floor. Grab a bargain by purchasing or renting smart new premises you couldn’t have afforded a year ago.
8: It’s a great time to learn how to cut costs intelligently. When the economy upturns, you’ll be more profitable than before.
9: Government assistance is genuinely more available than ever. Check out the Solutions for Business portfolio via Business Link.
10: Recruitment is an employer’s market. Why not strengthen your sales or marketing departments, from a wide choice of potential staff at relatively low cost?
Have a question you'd like Jon, founder of JupiterDawn Consulting, to address? You can submit it by either adding a comment to this post online or by e-mailing it to jon@jupiterdawn.com
Wednesday, 4 March 2009
Sharp lessons from a wily creature
Are you a hedgehog or a fox? And which provides a better model for leadership and success?
According to business guru Jim Collins, and contrary to what you might imagine, it’s the prickly one we should be emulating!
The reason is all about focus; developing a single idea and doing it superbly well, rather than creating endless new strategies, divisions and projects in an attempt to stay ahead of the competition.
Embedding the “Hedgehog Concept” into your enterprise requires you to understand your answers to the following three fundamental questions -
1: What can you truly be the best in the world at? This won’t necessarily point you to your current endeavours, qualifications or experience. In fact, if you’re engaged in something which you’re not particularly good at, you need to look further to discover your true calling. Do you go to work feeling that you were born to do this, and that you have found your niche? If not, why not?
2: What drives your financial success? All the great achievers and organisations understand where their cashflow and profit comes from. Both are essential to business survival, so you shouldn’t waste time on anything which rewards you with only one or neither. Furthermore, eliminating those parts of your activity which are holding you back financially gives you more time to concentrate on the worthwhile stuff.
3: What are you passionate about? Here’s a test. Today, you win the lottery. Do you enjoy your work so much that you would carry on doing it tomorrow? If you would, you’ve already found your true calling. Furthermore, in your business, is there a universal culture where everyone feels motivated, excited and valued in everything they do?
“Hedgehog” thinking operates in the space where the answers to all three of those questions overlap.
In case you’re wondering about the analogy with forest wildlife, remember that whether the fox creeps towards him slowly, lunges at him from behind a log, or leaps from the bow of a tree in an attempt to surprise him, Spiny Norman only ever has to execute his one single, perfect move.
He curls into a ball and leaves his “cunning” attacker reeling in defeat, usually with a bloody nose!
Jon Cooper is the founder of JupiterDawn.com business consulting.
Email jon@jupiterdawn.com with feedback and business strategy queries.
According to business guru Jim Collins, and contrary to what you might imagine, it’s the prickly one we should be emulating!
The reason is all about focus; developing a single idea and doing it superbly well, rather than creating endless new strategies, divisions and projects in an attempt to stay ahead of the competition.
Embedding the “Hedgehog Concept” into your enterprise requires you to understand your answers to the following three fundamental questions -
1: What can you truly be the best in the world at? This won’t necessarily point you to your current endeavours, qualifications or experience. In fact, if you’re engaged in something which you’re not particularly good at, you need to look further to discover your true calling. Do you go to work feeling that you were born to do this, and that you have found your niche? If not, why not?
2: What drives your financial success? All the great achievers and organisations understand where their cashflow and profit comes from. Both are essential to business survival, so you shouldn’t waste time on anything which rewards you with only one or neither. Furthermore, eliminating those parts of your activity which are holding you back financially gives you more time to concentrate on the worthwhile stuff.
3: What are you passionate about? Here’s a test. Today, you win the lottery. Do you enjoy your work so much that you would carry on doing it tomorrow? If you would, you’ve already found your true calling. Furthermore, in your business, is there a universal culture where everyone feels motivated, excited and valued in everything they do?
“Hedgehog” thinking operates in the space where the answers to all three of those questions overlap.
In case you’re wondering about the analogy with forest wildlife, remember that whether the fox creeps towards him slowly, lunges at him from behind a log, or leaps from the bow of a tree in an attempt to surprise him, Spiny Norman only ever has to execute his one single, perfect move.
He curls into a ball and leaves his “cunning” attacker reeling in defeat, usually with a bloody nose!
Jon Cooper is the founder of JupiterDawn.com business consulting.
Email jon@jupiterdawn.com with feedback and business strategy queries.
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