By Martin Bissett – Accountancy Marketing blog
The war on timesheet versus value pricing has been going on for a long time now without any sign of resolution in the near future. Pricing, again, is a huge topic and a science in itself, and so within the confines of this article I’m going to give you just two major rules for pricing in presenting a proposal to a prospective client.
The first one is to know your ‘walk away price,’ in other words if you have the proposal set at £12,000 for instance and you end up getting into a negotiation session, know that you’re prepared to take that work on for anything down to, say. £9,000, but below £9,000 you don’t really want to do it because it’s just not worth it.
Having that walk away price means that you maintain your credibility – that they can’t all of a sudden half the price means that you maintain your credibility – that they can’t all of a sudden halve the price that you’ve quoted and it makes it look like you just invented the number off the top of your head to begin with – and it makes sure that you’re not winning low profitability work. So the walk away price is critical to have before you in the meeting.
The second thing I see happening in a lot of professional service firms is where a proposal is prepared for a partner, whether it be for a new client or an existing client, and they look at the price and say, “They’ll never pay that. Drop it by a thousand,” and we immediately discount before we’ve ever got to the meeting, to the prospect and all I’m going to say about that is £1,000 dropped 100 times a year over ten years means that there’s £1,000,000 that will never be in your bank account as a result of that action.
So we must be careful not to discount unnecessarily and this is closely related to the section we did on under-charging, but in pricing we must make sure that the price is what we want for the work, but also something that we can justify to the potential client, that isn’t outrageous when compared to what they’re receiving and paying at this moment in time. Pricing is a huge issue, but those two things underpin all of it.
To Your Continued Success
Founder of the Upward Spiral Partnershi