VeraSage Senior Fellow Peter Byers has one of the most innovative sole proprietorships in the world, bar none. I had the great good fortune of meeting Peter in Auckland, New Zealand in the year 2000; ever since I’ve watched—like a bystander—his progress with amazement. You can read more about Peter at the VeraSage Web site in New Zealand.
Not only did he adopt Fixed Price Agreements with alacrity immediately (before we even met), but he’s also received nearly $1 million (NZ) in TIPs. Peter’s firm is located in Northern New Zealand, in a town with a population of roughly 5,000. The majority of his customers are farmers.
On March 21, 2007, I received this E-mail from Peter explaining the progress he has made utilizing Fixed Price Agreements:
I’m having a bit of a golden run with my roll over [FPAs] for the next financial year. In every case so far we’re up between 15%-20% on last year’s price—often the client opens the subject and we review the year that was, what’s around the corner, next year and work to done and by what time line, agree the price and get on with business.
It is a wonderful way to conduct business and as the clients have absolutely accepted the “no surprises” and all the other matters contained within Value Pricing and Total Quality Service we’ll top $2 million this year but the real juice is that all of us are enjoying the work and the depth of the relationship that VP brings. Karen especially, as she can produce the monthly accounts in about 15 minutes—” Fee as agreed”—that’s it.
Couple of matters—some accountants and lawyers are using the words “Service Agreement” where clients do not like the word “Fixed” in the FPA—probably because they have not explained the Change Order properly—but the test is that it is working. As for COs, I’m seldom using them now—what clients prefer is to rewrite the agreement or if that doesn’t occur then we run two prices—one for the initial FPA and then a separate agreement for the “new work”; so we can have two concurrent payments, one for the 12 month agreement and one for the 2/3 month special work—just a variation of a theme but it does avoid the word “change” in CO.
I think you are a genius.
As you can see, Peter is constantly experimenting with the presentation of FPAs and Change Orders, figuring out better ways to communicate value to the customer.
The real genius here is Peter. I’m just a lazy theorist, while Peter has actually implemented these ideas, not to mention improved upon them. He is one of the most sought after mentors to professional knowledge firms in New Zealand and Australia, and he’s not cheap. Now you know why.
The Kiwis are some of the most impressive and progressive firms in the world. We often have asked ourselves why this is? Anyone have any thoughts?