And meanwhile, on the Beeb…

Gucci HandbagLying in bed last night having a listen to the World Service on the BBC (as you do when you’re an exciting accountant), I happened across a very interesting program on pricing.

Being a rampant technophobe, after about 5 minutes, a link to the broadcast was sourced and it is available here.

I recommend you have a listen to it as there are some worthwhile observations through the broadcast – particularly when it comes to Gucci pricing their new handbag. It may surprise some readers to find out that the cost of manufacture had little (nothing) to do with eventual sales price which was set by the customers! The reporter on the job seems to take some umbrage at this, however the earnest Gucci rep explains it quite simply.

Really, It Is That Simple

Yesterday, Kai Kasad from Moores in Victoria, Australia posted this on a VeraSage internal page. We thought it was too good not to share to a larger audience. He writes:

Earlier this week, I was at a pricing workshop hosted by a biglaw firm.

At one stage attendees were asked how the pricing function worked at their firms. I informed the audience that with Moores Agreed Pricing or MAP, we agree the price before we start work for a customer.

I was asked by the host, director of pricing of the big law firm, what we do if the “client does not come to the table with respect to scope.”

My answer: “We simply don’t start work until we’ve scoped and agreed the price in conjunction with the customer.”

After a pause he said: “Well, that’s very disciplined of you.”

I think I got his attention given he suggested he wanted to chat with me in detail about how MAP works!

It is amazing how the answer is so simple, yet so beyond the comprehension of otherwise very smart people.

On Conscious Capitalism and Pricing

Originally, I intended to just write up a quick post on a book I am rereading, Conscious Capitalism by Whole Foods CEO John Mackey, but then I was presented with an interesting pricing case study.

First off, read Conscious Capitalism. It is absolutely fantastic and definitely in the top three books that I read from 2013.

Now the pricing case study.

When search for the link to Conscious Capitalism, I notice that there are two Kindle prices on Amazon.com one for the “hardcover” edition and one for the “softcover” edition.

Banners_and_Alerts_and_Amazon_com__conscious_capitalism-9

 

Any thoughts as to why this might be?

BTW – The link above is for the cheaper version.

 

Comment to Alex Koltin in CPA Trendlines

In post published yesterday in CPA Trendlines Alex Koltin argues that “I think the value billing phenomenon (throw out your timesheets and just bill for value!) will lose some of its steam. I sense some of the firms that have executed the strategy are having some challenges when they are trying to measure associate and partner performance…”

Here is my comment:

Hi Alex, I appreciate you perspective. I think you have analyzed some of the challenges quite well.

However, one quibble is your use of the term “value billing.” True advocates never use this term. To us (yes, I am one of them) “value billing” is akin to saying “soak the rich” when referring to tax increases. It is derogatory. We use the term value-led pricing or value pricing when referring to the process. With a customer, it is always a fixed price.

Now as to your issue with timesheets and their use “to measure associate and partner performance,” I must ask a few questions:

1. Are all hours billed “good” hours?
2. Are all customers (I know clients) “good” customers?
3. Are all timesheets accurately completed?

If you answer “no” to any of the three, then you must admit that timesheets are hopelessly flawed as a tool for measuring performance. While they may be precise (1756.2 hours billed this year), they are precisely wrong.

Podcast: Touring IVP – Chapter 2 Part 3 – Where do profits come from?

Ron Baker and Ed Kless continue their tour through Ron Baker’s book Implementing Value Pricing: A Radical Business Model for Professional Firms. This a part three of three on Chapter 2 – The Firm of the Future. The topic is where do profits come from.

Podcast – Touring IVP – Chapter 1 – The Firm of the Past

In this podcast we explore the equation for the firm of the past.

In addition, we have a dialogue about the definition of a business model which curiously has changed since the writing of the book.

New VeraSage Podcast: A Tour Through Implementing Value Pricing

This VeraSage podcast is the first in a series which will tour Ron Baker’s book Implementing Value Pricing: A Radical Business Model for Professional Firms.

In this first episode, we look at the Preface and have conversations about the three major themes of the book and about the words that are used in the book and why Ron believes they are important.

Please feel free to comment below with your thoughts.

The Empty Hourglass Program

I’ve been exchanging emails with Eliot M. Wagonheim, of Wagonheim Law in Hunt Valley, MD.

In one email he mentioned his “Empty Hourglass Program,” and I was intrigued, and had to ask him what it was all about.

He replied with the following story, which he has graciously allowed me to share with you:

I conceived of our Empty Hourglass Program (“EHP” for short) in 2010 after a disturbing phone call from a client. I remember where I was – on the deck of a Ft. Lauderdale hotel where I was attending a CLE program. My client called and we opened the conversation by spending a few minutes talking about something – the weather, the Ravens, the NCAA basketball tournament…whatever. Then he gave an awkward chuckle (you know the one) and said “listen, we better get down to business. I know you’re on the clock.”

Now, he knew I would never have billed him for small talk. At least I hoped he knew. But the point is that under our billing arrangement, I could have. We both knew that.

At the end of our discussion, he said something akin to “I’m sorry about that crack about billing. I know that’s just the way things are and there’s nothing you can do about it, but it still bugs me.” So there it was: a client I liked and respected. A client with whom I had a relationship I valued and wanted to expand, hated the way I did business. I remember thinking “why am I fighting against my own business model in order to avoid frustrating clients I like?  I own a law firm. Why can’t I do something about it?”

I mapped out what became EHP that night in my hotel room. When I came back, I called my client and we sat down to lunch to kick it around. He helped me finalize the program that is now approaching its third anniversary. We have a short video of client testimonials about the program on our website, if you’re interested. At the time I formed EHP, I had never heard of Ron Baker or VeraSage.

In fact, the reason I read your book is because I met someone at a business function who had heard of EHP and thought that I was on your track – even if I didn’t know it yet. We had just met when he told me that he was ordering me a book from Amazon and that I should expect it in a few days. Although it is not unusual for people to send me books, and I now prefer iBooks and Kindle, yours was the first such book I can remember reading cover-to-cover upon receipt. For me, the day I received your book was an HSD.

This story resonated with me because it parallels closely why I began to offer fixed prices back in the early 1990s. My customers had repeatedly told me they didn’t like being billed by the hour and the uncertainty in price that came with it. There had to be a better way.

Thanks, Eliot, for providing yet another HSD.

 

 

Hourly Billing vs. Value Pricing Interview

It was fun to do The Money For Lunch show with Bert Martinez on July 3rd.

We discussed the advantages of Value Pricing over hourly billing for professionals, the perverse incentives built into hourly billing, and why the business model of “We sell time” is more and more becoming obsolete.

My segment is from 1:56 (but skip the bio reading, to 3:40) to 15:33, with one commercial in the middle.

Transitioning to Value Pricing

A few months back Tim Williams, VeraSage Fellow and Founder of The Ignition Group, sent me a set of survey questions he uses when talking to an advertising agency about potentially transitioning to becoming a firm of the future.

With his permission, I have modified his questions to be applicable for just about any professional organization. Feel free to share this link.