10 concepts for better pricing

To get the year off to a good start here are 10 concepts for better pricing to improve fees.


1.There is more to pricing than just the price

Don’t forget that pricing does not just involve pricing. The way you position and market yourself will impact on what you can charge. Apply the golden triangle (find, get, set, keep) to apply the dynamics of a fee’s life cycle.

2.Turnover vs profit

Remember the old saying: “Turnover is vanity, profit is sanity and cash flow is reality”. What matters more is not the headline rate to be agreed but the effective rate that can be invoiced after all write downs and write-offs. A lower rate accompanied with lower write-offs can be more profitable than a high rate with lots of discounts. Profits matter more because ultimately it is the distributable profits that determine take home compensations

3.Price vs scope

Talking price without talking scope is meaningless. Sometimes more time and effort should be spent defining or negotiating the scope of work rather than the headline fee rate. If a scope is not defined clearly, clients will always be able to claim that the original quote included the extra work. Why allow for this ambiguity? Scope creep is a great opportunity to renegotiate a higher fee as negotiation leverage is much better for the service provider. Don’t give up on this opportunity needlessly.

4.You are worth more than you think

Most professionals underestimate the value added they bring to their client. This is why they underprice. Clients come to professionals because they need them. Only when a client truly has the option between several equally good providers, who deliver exactly the same work to the same specifications will price be the sole determinant. As soon as you can differentiate on quality or scope you can differentiate on price.

5.Different clients value different things

Most professionals think it is all about the technical issues of their profession. Most clients can’t evaluate the quality of the technical work – all they can evaluate is the quality of service. Different clients will value different aspects  of this service – find out what they value and price accordingly.

6.Prices are sticky – Beware the impact of discounting

Professionals often forget that once a discount has been granted, clients will expect to receive this discount going forward. Discounting also undermines the standing or credibility of a professional or the original fee quote. The message that easy discounting sends is “we did not mean our first fee quote” or worse still ” we don’t believe in the value we represent”. If discounts have to be given they should be given slowly and in parts and always in exchange for a counterconcession.

7.Saying “No” is hard to do

Professionals want nothing more than to be busy doing good work. Many clients know this and take full advantage of this desire. Be clear why you take on a new piece of work. What will this add to your practice. If clients don’t want to pay your rates than there had better be several other, good reasons, ie contributions to the growth of your practice before you should take on the work. If there aren’t any you are likely to be better off saying no and looking for clients that value what you do.

8.Input vs output

Hourly rate based pricing is an example of input based pricing. This may be OK when clients always pay what you charge but clients have become more demanding and sophisticated. Consider pricing in line with the value of what you deliver for a client. This may either be the value of the work or the value of meeting a tight deadline. Although value based pricing is PSF nirvana is it tough to do and requires good discussions and explorations with clients.

9.Quantum vs structure

Applying a mixture of fee structures within an assignment may yield a better all-in fee than a conventional one-size-fits-all approach. Most assignments have a number of phases in which the interests or risk appetite of either side may vary. Take a step back and review an assignment for modules or phases and look for opportunities to price each differently.

10.Price at start vs price at end

The fee that is quoted at the start of an assignment is rarely the fee that is invoiced at the end. Lots of reasons can influence this and clients know this. Smart professionals understand this and will sit down with clients in advance to ensure that such changes are managed well from both sides’ perspective. When this is done well relationships are strengthened and profitability is protected.

For further details take a look at High Impact Fee Negotiation and Management for Professionals, 2nd Edition


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