Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen My Amazon Authors' page Twitter:@ jacolineloewen Linkedin: Jacoline Loewen Profile

April 11, 2011

6 Tips for value pricing

Why is the concept of value pricing seen to be radical? It makes a great deal of sense and I appreciated the LinkedIn discussion and thought I would share some of the highlights. Here is one of the posts.
After mentioning I had taken 14 pages of notes on Baker's book on Value Pricing, above, Jacoline Loewen suggested I share a few Aha's from these notes. Here they are: Baker presents the idea that professional advisers should keep in mind that we are (or should be) giving our clients (which he calls customers) a crowbar with which to open a treasure chest. If so, ten times the price would still be a bargain for our crowbar. We should not provide a cheaper price merely because, for example, we may have lower fixed overhead. Value drives price, not cost. If we have significant intellectual capital (as defined by Baker), offering it at a lower price devalues it and sacrifices a significant amount of profit.
 We should focus on the totality of our services our firm provides the customer or client and consider bundling them together into a fixed price agreement, not an hourly rate agreement. The billable hour becomes the floor, not the ceiling.
 Baker outlines methods of qualifying the right customers/clients, the sins of hourly billing and ways to eliminate them, how to understand the value we offer that customers seek, key predictive indicators for knowledge workers, and eight steps to implementing value pricing.
In his section on developing and pricing offerings, the author identifies several elements, any or all of which a firm’s Value Council (explained in the text) may want to make part of a fixed price agreement, over and above the hourly rate, which is never mentioned:

  1. Fixed Price. (A guarantee that the customer/client will not be surprised by an invoice; that all work will be authorized in advance, so that the client will be able to budget his or her professional spend with certainty.)
  2. Change Orders. (This ensures customers that work will never be done without their authorization on price, terms and scope, giving them a choice on how to proceed.)
  3. Service Guarantee. (An overt statement that your project will create value three to ten times greater than the cost or the customer doesn’t pay.)
  4. Price Guarantee. (The customer may ignore any invoice they receive for which they did not authorize price, payment terms and scope. The customer will never be surprised by an invoice because all work is priced in advance.)
  5. Unlimited Access. (The customer is granted unlimited phone calls and meetings to discuss whatever the customer wants.)
  6. Payment Terms. (Financing plans.)
 The subtitle of Baker’s book indicates the concept of value pricing is radical. It may be radical, but after carefully studying his book, it makes a lot of sense to me.
Posted by Robert R Dunford
Robert R. Dunford, Principal
http://www.GCIResearch.com
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Are my hourly rates too high or too low?

Business owners are enjoying their position of power as capital floods Canada and one of the big issues is how the fees charged by professionals are being squeezed. A post by Robert Dunford about how to charge for his finance services unleashed a torrent of responses.
I particularly liked the advice from Michael McGrady:
I personally believe that it’s imperative to lead the preliminary discussion as a marketing professional and leave the tactical/technical for later. You provide knowledge, perspective, assurance and informed caution – your work helps to set strategic direction, inspires the development of deal structure, helps to craft strategies regarding earn-outs, reps & warranties, etc. and in some cases help prevent bad deals from happening. We have all been involved in or know of deals that went south solely because of poorly executed research and due diligence – the financial consequences of these bad transactions always eclipse the minor onetime expense your contribution would have provided. They clearly like your work; remind them, talked about the multifaceted value you provide and the consequences of a poor execution. And don’t lower your price; if you don’t value your time who will? 
The second thing to possibly consider is working on retainer or a combination of retainer and an hourly rate for overflow. There is more work involved on the front end to ensure you and the client understand the scope. I like retainers because I don’t have to manage a time sheet and if I am more efficient in some aspect of my work I don’t penalize myself with fewer billable hours. The client likes it because they don’t feel they are being nickel and dimed and it gives them a delineated line item for the budget. As I said it’s more work on the front end but so far I haven’t broken my pencil and I make more money than I would have by billing hourly (knock on wood).
There was recommended reading from Isabella Brusatti and the book inspired this quote - Baker's book qualifies as a "good book," as defined by Thoreau: 
"Books, not which afford us a cowering enjoyment, but in which each thought is of unusual daring; such as an idle man cannot read, and a timid one would not be entertained by, which even make us dangerous to existing institutions––such call I good books." 
—Henry David Thoreau: A Week on the Concord and Merrimack Rivers, 1849
Jacoline Loewen, Money Magnet author, Mergers and Acquistions expert.

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April 9, 2011

Aussie dollar boosted by its own 'gold standard'

The Chinese are told by their government to own gold bars and now India is picking up that investment philosophy. Dollars are no longer seen to be reliable - unless you are talking Canadian dollars or Australian. European money continues to flood the Canadian Hedge funds as Canada seen to be a haven of stability for the next 20 years.
The Australian dollar is one of the strongest currencies in the world because it is a commodity-backed currency. That’s why it hit a 29-year high against the US dollar today – and it’s all related to the gold price

BMW breaks car sales record

Guess the boys are back in town - driving their BMWs. When I saw this heading, I figured the sales would be from Asian growth and that seems to be the case.

Consumer confidence may be fragile in Europe amid spending cuts and sovereign debt concerns, but sales of premium Western cars are soaring in emerging markets as the middle classes grow. BMW said sales in Europe rose 8pc to 93,540 and sales in America gained 19pc. However, Asia surged by 52pc

BMW breaks car sales record - Telegraph