Breakout Session – Making Value Pricing Work for You

Dec 31

This is the fourth in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance's Fall Collaborative (<-I love that word) held in Palm Springs.

This was a panel session, hosted by Lisa Kianoff of L. Kianoff and Associates. Three partners (all Sage) participated. More significantly, I was not a participant (except as an attendee). This is a huge victory for the pricing with purpose movement.

Here is what each one had to offer.

Annette Balgord of Balgord Software Solutions

To develop her price she does begin with rate times hours, but then factors in likability of the customer and their people, the complexity of the work to be done, the potential risk to her firm in doing the work, whether or not the customer has an internal IT department or uses an outside contractor. Before setting price, she believes you must have a thorough understanding of what the customer needs.
"Even if you do rate time hours and you do not understand the needs, you are still guessing at price, aren't you?"
For the most part, she believes RFPs are poorly written and inconsistent and refuses to get involved with prospects who will not let her bypass them.
"When a customer asks, 'How long did this take?' We say, 'We don't know, we do not keep track.'"
Annette kept timesheets for a year, only to realize she never looked at them and it caused ill will with her team. To manage projects she is using duration (due date) completion percentage rather than effort estimating.
"I don't know if I make money on a project, but I do not care. I know I make more money overall. Oh, and by the way, I have no collection issues and no bad debt."

Mike Taylor of L. Kianoff and Associates

Started fixed pricing on upgrade projects and found that customers love fixed fee engagements. They are paying a premium and they love it because they are only down three or four hours, rather than the one day or two days when they billed them by the hour.
Developing scope is always an issue, but it is much easier when they do paid Feasibility Evaluation engagements. Pre-sale of software engagement. They found that if they can prove that they have a viable solution, even the customer's budget number is irrelevant!

William Vespe of BCS/Prosoft

They offer a 100 percent money back guarantee with 100 percent payment upfront and have never had a customer as for their money back. They have however, insisted on giving a customer's money back and not continuing to work with them. They also include a 15 percent premium on fixed fee engagements.
The reason they move to a fixed price is that they found they were only collecting the forecast hours anyway, so why not get the benefit if they were able to do the project more quickly.
Scope, scope, scope. Change order, change order, change order.
They still do some work on a time and materials basis but 70 percent is fixed fee.