One of the arrows in your pricing quiver is the TIP clause (sometimes referred to as a Retrospective Price or Success Price).
We’re always asked if customers actually pay these? Yes, they do, and we have many stories to prove it. Our Senior Fellow Peter Byers in New Zealand has received nearly $1 million dollars in TIPs since I met him back in 2000.
The largest TIP we are aware of was to Gus Stearns, a CPA in Dallas, Texas who received a $950,000 TIP from a customer.
I got the attached letter from a client and wanted to share it with someone who understood its significance. The background to this is that I had a fixed pricing agreement that was well “value” priced but did not include a TIP clause (an oversight I regretted as project progressed!).
So not only was I well paid but I got an unsolicited “tip” of £30,000. Doing the right work for the right clients!
The great part of this story is this was an “unsolicited” TIP—that is, it wasn’t agreed to up-front as part of the price.
Who can argue now that sometimes firms leave an enormous amount of money on the table by pricing by the hour?
Let’s not forget that the billable hour is a theory. It may be widespread, well understood, and accepted, but that doesn’t mean it’s optimal.
Especially when you are doing something that resides at the top of the Value Curve.
Congratulations Paul. Your HSD is ours too.