Value Pricing Formula

After fifteen years of extensive research, VeraSage has determined firms should use the following formula to derive a Value Price.

Start with: Estimated Hours x Hourly Rate (this will establish a cost accounting minimum floor beneath your pricing).

Add the following premiums if you are offering them to your customer:

  • A fixed price: add 12.613% (this is similar to the premium charged for a fixed rate mortgage versus a variable rate mortgage).
  • If you utilize change orders, add 3.14% (again, because you are offering fixed prices for all scope creep).
  • If you offer a service guarantee, add 22.245% (a service that is guaranteed is worth more than a service that isn’t).
  • If you offer a price guarantee, add 16.301% (this insures the customer they don’t have to pay for work they didn’t authorize).
  • If you offer payment terms structured around the customer’s cyclical cash flow, add 14.729% (customers have budgets, they will value this highly).
  • Since all value is subjective, add a “black box” component of 25.298% to reflect this fact.

If you follow the above the formula, you will accurately Value Price all of your work, and invert the now artificial ceiling of hourly billing to a floor.


  1. Ron,
    I love it. šŸ™‚
    The problem being, some will take you seriously; more the pity.
    Look forward to catching up with you soon.

  2. Interesting, is there any more detail on how these percentages were derived?

  3. You know what?

    I think this is remarkably accurate.

    Originally, I set the price of my standard consulting job purely by sticking a finger in the air, and seeing which way the wind was blowing (or to put it more crassly: I pulled it out of my backside).

    I just did the exercise – purely for a laugh – basing it on how long my consulting work took me to complete, and a desired charge rate.

    My final figure – based on the calculations – was $220 higher than what I am actually charging.

    Would this mean that I am still undercharging? (that’s a bit of light humour by the way)

    All jokes aside, it’s an interesting exercise for someone who still insists on some formulaic method to get to a figure. The question still remains: have you got the backbone to actually put it on paper and put it under the nose of a client?

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