VeraSage

Trailblazer: Kim Foard, CPA & Company

On January 9, 2010, I received an email from Kim Foard, CPA from Billings, Montana that created an HSD for me—High Satisfaction Day—as we like to say here at VeraSage:

Your book, Professional’s Guide to Value Pricing, improved my client’s happiness and my success. While the financial rewards have been fun, the improved relationships are priceless!

Pricing on Purpose is next.

Kim Foard

Kim was kind enough to provide us with a case study for our Trailblazers section, reprinted below.

January 16, 2010

What We Want

As a door-to-door Cutco© knife salesman in my freshman year of college, I learned that people buy what they want; not what they need.

When asked for several knives to sharpen, one couple would present broken blades so dull soft butter was a challenge. While giving me hearty nods of approval that they were in need of knives and enjoying the presentation of tricks performed with the sharp knives from my sales kit, they would politely say, “No. No, thanks; we don’t want what you’re selling.”

The couple in the next house would struggle to find any dull knives in the sets of fine cutlery displayed in their kitchen. As they apologized for not being able to play along, I would make a little conversation, reluctantly begin the show, and then quickly navigate my way through the script.  Without even asking for the order, my focus was on an exit strategy. They would reach over, touch my arm and exclaim, “Yes! We want to buy the biggest set!”

Only years later, when studying one of the greatest salesmen, Zig Ziglar, did I learn, “You can get everything you want in life, if you will just help enough other people get what they want.”

This is my story.

The days of my childhood were spent horseback in a sea of cowhides with a Dad who knew the way to confidence was by doing what others said was impossible. The evenings were spent in epic tales of adventure with a Mom who knew the portal to opportunity was by learning from the stories of others.

After high school, I turned down scholarships to pursue my dream of being a cowboy. Fifteen months later, I knew I didn’t have the same love of horses and cows as my dad! Yet, all of those years living the notion, “Where there’s a will, there’s a way” came in handy for a poor kid with a “new dream” of going to college. In the course of managing my fledgling business as a twenty-something entrepreneur, the counsel of an older client friend cut short my whining as he said, “Kim, your problem is not that you were born poor. Your problem is that you were born with ambition. Many are born poor and stay that way. You want something else.”

The “something else” was finally discovered twenty years later in a book written by Ronald J. Baker, Professional’s Guide to Value Pricing (with CD), Edition 3, published by Aspen Law & Business, 2001 [now out of print].

By starting with one client in a little Montana town of 2,500 population, appropriately named Roundup, the cowboy in me was enjoying the gathering of a small herd of loyal clients. They understood from the very beginning: I was in the business of selling dollars. I didn’t understand Value Pricing; I did understand the importance of finding 5 to 10 times my fee in benefit for them. In the early years, there was an Exit Conference with every single client to explain what had been done. That made quite an impression and they would say, “No one has ever cared enough to spend time with me, like this!” Spend time?  Heck, no! I was investing time with them; I wanted a long-term relationship!

Then, one day, time had taken its toll on a ranch family and they were in the process of transitioning the next generation into the accounting function. I remember the excitement of working with the new twenty-something CFO, as we set up QuickBooks© and enjoyed a day’s worth of coaching and visiting.

In the course of adding families, processes, and infrastructure to the ranch operation, right in the middle of a seven year drought, there was a Net Operating Loss to be carried-back: Many thousands of dollars of benefit for a thousand dollar fee. To my surprise, I received a call from the new CFO, who had questions about the bill.

Remember, this was before Value Pricing, Fixed Price Agreements, Retainers and crystal clear Communication at the beginning of every project.

Sure enough, he was right.  There was a line on his bill, and every other client’s bill, that read: Photocopies and Assembly—$75.00.

Made perfect sense to a bean-counter; we have overhead. After a few years in business, we have a history of expense; we can project that cost into the next year and we can reasonably estimate number of clients and projects for a given year. So, we do the math. $75.00 was a good number, all clients paid the same on any project and it, definitely, was a Fixed Cost to me. Not to the client. He wanted to negotiate that amount, downward.

In fact, he had counted the number of pages, and fasteners, applied the going Office Supply Store rate for those commodities and arrived at his number of $7.50. In his mind, he had been overcharged by a factor of 10. Ah, that “Perfect 10”; yet, this time it was viewed as being in my favor, not the client’s, and it was causing harm to our relationship!

He thought I was cheating him; I thought he was behaving stupidly. We were, both, on to “something”!

The value provided to the family for the last twenty years didn’t matter at that moment. In essence, he was a “new client” and deserved my respect. So, we began at the beginning.

Having read enough of Professionals Guide to Value Pricing to think differently and having found the CD in the back of the book with templates, I approached this “new beginning” with fervor. I had nothing to lose and everything to gain; a relationship hung in the balance!

There must be a better way to build relationships than: work hard; send bill. For twenty years, I had done what I had been trained to do by my accounting mentors. It worked, most of the time: 95% of the clients understood the value and were willing to be surprised by the bill. For a competitive perfectionist, that other 5% was the challenge, and at that moment I had one very irate customer on my hands, and my mind!

Change nothing; Nothing changes.
Insanity is doing the same thing over and over, expecting a different result.
Easy is hard; Hard is easy.
We get what we allow.

It was time for a change.
The insanity was tiring.
A new path was needed.
I had created this mess.

A single line on a bill was the proverbial straw that broke the camel’s back.

One more witticism became the mantra of the day, “Fake it until you make it!” At the time, all I had was a page of script titled, “Questions You Should Ask The Customer During The Fixed Price Agreement Meeting” and a burning desire to find a better way.

Today, those questions have been customized and internalized until they are at the center of every new beginning, and potential client relationship.

They look like this:

• What do you expect from me?
• What are your biggest worries?
• How do you see me helping with these challenges?
• What growth plans do you have?
• What role do you want your CPA to play in your business?
• How would you define quality service?
• Is a 100% Money Back Service Guarantee important to you?
• What would you consider as timely response to your accounting and tax questions?
• Why are you changing professionals?
• Are you concerned about any, one, issue that I should give special attention?
• Were you referred to me by someone?
• Are you Able To Pay for guaranteed exceptional value?
• Are you Willing To Pay a retainer in advance and the balance upon completion of services?
  

Forget about Perfect 10s; these are the Lucky 13!

As accountants, we will eventually need, and want, to answer this question:

• Are we Relationship Builders, or Paper Shufflers?
  

Paper, as a commodity, is cheaper by the case.

Relationships are priceless.

For those who want to debate whether the glass is half-full, or half-empty, handling commodities might be an excellent career choice. For those of us who wonder why so much attention is given to “half” of anything, “Creating and Capturing Value” is quite a noble profession!

Wholeness comes from tapping into the Universal Principle of abundance; our real potential is unlimited. Yet, this isn’t about us.

Communication is what the listener does. Are we listening to our clients? Do we really hear, and understand, what our customers want?

Oh, sure, they will grudgingly accept bills for the compliance work they “need” to have done. When they understand how much we care about them, demonstrated by how we actively listen to their dreams, they are open to new ideas. As they consider all of the many menu choices available to them, with a clear pricing structure designed to express the value of each one, and ultimately commit to partnering with us, the “want” is palpable!

Yes, that new CFO in charge of the family ranching heritage understood the Value in the Price (when I covered up the detail of the bill) and wanted me to understand that he wanted more of that simplicity. Why did it take me so long to get the horse in front of the carriage? Answer: Good judgment comes from experience; Experience comes from bad judgment!

Disciples of Value Pricing never hear “The check’s in the mail.” In fact, because “the checks are in the drawer”, we manage risk, schedule our days, attract quality clients, stumble into opportunities, enjoy open communication, reap financial rewards, and tie “Ribbons and Bows” around each and every project on our way to building relationships.

I have learned a deep respect for one of Goethe’s couplets:

Whatever you can do, or dream you can, begin it.
Boldness has genius, power, and magic in it.

In our world of technological advances, “www” has become the gateway to infinite possibilities. If we will decide “What We Want” and, then, offer that with passion to others, the result is guaranteed to be a “Win Win Win”: for Customers; for Us; and, for the Whole Wide World!

Best regards,

Mr. Kim Foard, CPA

It’s rare to get cowboy poetry from a CPA, so thanks again Kim for making our day.

More importantly, congratulations to you for having an open mind, looking for a better way, and contributing to the dignity of our profession by doing the right thing for your customers.

Reading Kim’s story was another HSD!

Pricing PR by the outcome, not the hour

Dan Morris received many nice emails from people who saw him quoted in the Wall Street Journal article. One was from Kirsten Mortensen, who wrote the following:

Hi, Dan,

Came across your name in yesterday’s Wall Street Journal article. Congratulations on that!

I have also just joined your institute.

My firm, Creative Communications Services, has offered project-priced PR services to our clients for over 30 years.

I can’t tell you how many times, in that time, we’ve watched with astonishment as corporations have thrown big bucks at PR programs that are all puff and no results.

Please let me know if there is anything we can do to contribute to your site.

Regards,

Kirsten

I immediately wrote to Kirsten and asked if she’d contribute a case study for our Trailblazers section, which she generously did. It’s just excellent, and speaks for itself on the sanity of basing your prices on results, not hours:

It’s All in the Package:
Pricing PR by the outcome, not the hour

Kirsten Mortensen, CCS/PR

Other public relations agencies have probably viewed us, over the years, as naïve.

We’ve never cared. We’ve just smiled and gone about our business—because, in the 35 years that CCS/PR has been serving our Fortune 500 clients, we’ve proven our value many times over, earning our clients’ loyalty and repeat business, as well as a steady stream of word-of-mouth referrals.

Our secret is what we called “package pricing.”

We didn’t design this model to anticipate the Big New Thing in services pricing—nor to respond to clients’ budget concerns. It was by accident, really. Our firm was founded by Bob Fisher, a young newspaper reporter who transitioned to writing “success stories"—
case histories—for Eastman Kodak Company and other high-tech corporations. It was a modest little freelance business in the beginning, but notice the model: Bob brought a journalist’s aesthetic and principals to public relations, and he was paid when he produced something tangible—high-quality articles profiling how customers benefited from using his clients’ products.

It wasn’t the way traditional PR firms operated, but it worked for Bob—and it engendered a feeling of mutual trust with his clients.

As Bob’s workload grew, CCS transitioned into an employee-owned company staffed by journalists and media relations professionals who secured placements for our case studies. The portfolio grew; today we offer everything from news release development and distribution, marketing, PR consulting, to customer reference management, video production, and, more recently, website content development.

But even as we expanded, CCS continued to offer package pricing under the original model. For example, we arranged for the placement of articles before we started writing them, so clients only paid for print-publication pieces that actually reached their intended audience

Yes, this model means we assume some risk. We essentially work on spec. But because we assume the risk, we work smart, and there’s a built-in integrity to our services delivery.

We focus our efforts on results—because we’re paid for results, not for “effort.”

We find ways to work efficiently—because when we work efficiently, the operational savings go straight to our bottom line, allowing us to bid more competitively for work while still remaining profitable.

We are inherently comfortable with metrics. It’s easy for us to document the results of our services on our clients’ behalf, because our work is focused on achieving results.

And we don’t overpromise to our clients or overhype what they can accomplish—because we know we won’t get paid for promises we can’t keep.

Not every client we’ve worked for has wanted our pricing structured in this way. We’re sometimes asked to bid on contracts based on a per-hour bodies-for-hire model. And when this happens, we accommodate those requests.

But no matter what, we continue to offer our package pricing option to both new and existing clients. It remains a fundamental aspect of our firm’s corporate identity. And it feeds our corporate culture of integrity, high-quality work, and a strong emphasis on results.

Thanks, Bob!

Thanks so much Kirsten for sharing your story with our community.

Trailblazer:  Integrity Wealth Pty Ltd

I had a great conversation this week with Michael Stewart of Integrity Wealth Pty Ltd, outside of Brisbane, Australia. 

I’ve known Michael since his days with Results Accountants’ System under Paul Dunn and Ric Payne.  Then he was with Principa, and now is with Integrity as General Manager.

As of October 1, 2007, the firm eliminated timesheets.  More empirical evidence that this is the wave of the future if firms are serious about operating effectively in an intellectual capital economy.

During our conversation, I asked Michael to provide me with a case study on his firm’s transition to becoming a Firm of the Future. 

Here is his first installment, as he wants to add to the story in the future to inspire others:

Hello Ron.

Thank you again for speaking with me during the week. As is always the case when interacting with you, or your material, I left feeling further inspired; and also somewhat humbled—there is still much for us to learn and implement as students of pricing and value.

As agreed I’m sending this email now and if there is sufficient interest from the VeraSage community I’ll follow up with a more detailed case study. While getting rid of timesheets was just one step in an overall strategy to change our firm, it has proven to be a critical one. Not being an accountant myself I’ve never had to record my life in 6 or 10 minute units (and if I had I probably wouldn’t have lasted very long). So in some respects I don’t think I can really convey some of the differences it’s made to individuals within the firm. But I do know what it’s done for our mindset, how we promote the firm, and how both clients and team members react to a no timesheet model—and it’s all positive. Perhaps in a future email I’ll get one of the team to write their thoughts. As an example, Denise Gibbons (Partner) said to me recently “I used to make myself sick preparing bills for clients”. We don’t have to worry about that anymore, which in itself has to be a major win.

As a summary:

Practice Profile:

• 2 partners + 11.5 FTE (includes our financial planning division)
• 2006 revenue $645,000
• 2007 revenue $735,000
• 2008 revenue $1,180,000 (growth approx 50/50 acquisition/natural growth)
• Approx 400 clients in Accounting division
  

We are located in Clayfield, Brisbane, QLD, about 10 minutes from the heart of the city. Over the past 18 months we have been working to redesign the business on many levels in order to create a place that will attract team members. The partners, Denise & Mark, were very keen to implement many things but like most firms were struggling to balance client work with internal goals. I joined full time in October 2006 with my focus being on establishing the strategy and infrastructure that would attract team members and allow us to grow. For a firm of this size to hire someone who does little or no client work was a significant decision, both financially and in terms of mindset—the partners were agreeing to hand over the day to day running of the overall business so they could focus on client work and development of the team.

We made the decision to abolish timesheets as of 1 October 2007. We had been talking about it for at least 9 months prior to that and had committed in writing to the team we would do it. There were many discussions on whether we should keep timesheets at the same time to make sure, well, to make sure the sky didn’t fall in I guess; or whether we should still record total time on the job to identify scope creep. Finally common sense prevailed, we chose to back ourselves, we took the leap, and haven’t looked back.

How it works:

• All clients now receive an engagement letter with a fixed fee and a date for when their work will be completed. Typically the fee is based on last year + 10%. We review each job and the scope of the work before determining the price. Mark, the partner of the accounting division does the initial review. We then sit together and as Chief Value Office I challenge anything that has not seen a minimum 10% increase. (This is in addition to a 10% increase last year for most clients). Mark is right on the page with value pricing so he identifies any special work or areas in which we could add significant value. Though for most work it’s very similar year in year out.

• We must receive the signed letter back from the client before work begins. Naturally there are some long-standing clients where we respect the relationship and we haven’t bothered trying to force an agreement upon them. So long as they agree to the price we’re happy.

• We now ask for payment of invoice immediately upon completion of work, instead of 14 day payment terms. New clients often have to pay $1,000 upfront for us to review their work, then we quote on the scope and price of the work that needs to be completed. Again, the client must agree to all terms in writing before the work begins. We haven’t worried about moving to bill existing clients upfront. Instead we have focused on workflow—if we can get the job out the door quickly then we can invoice sooner. Then of course you need a system to chase debtors (receivables for our international colleagues).

• We initially set a minimum fee of $1,000 for new clients. We have since moved that to $2,000 and will soon be increasing to $3,000.

• We currently have just one KPI that has replaced timesheets—a monthly invoicing target. The entire accounting team are responsible for ensuring we make this target. I have set the budgets for the firm, Mark then looks at all upcoming work and selects the jobs to be completed each month. Then we just get on with it. If we make target, we know those jobs have been completed. Nice and simple.

• Monthly targets are based on a combination of what we have invoiced for the same period in previous years; what the firm would have achieved on a hours x rate x productivity model; plus any price increases, allowances for special work or value priced engagements etc. In a firm of our size it’s pretty obvious if people are working hard or not. If productivity or workflow is lower than we believe it should be, it’s usually more to do with planning, getting the right people doing the right work, and resourcing, than it is a lack of effort by the team. In other words we believe people come to work with the intention of working hard; we just needed to get the planning and infrastructure correct so their efforts turned into outputs.

  To ensure I was happy with the monthly targets I conducted a financial analysis using Principa’s FirmPlan—I think it’s the best tool I’ve come across in relation to looking at the financial performance of a firms that record time. Within it I compared our numbers to some benchmarks, ran some what if analysis on impact of price increases etc. From there we picked an annual revenue figure, divided it by 12, made some adjustments to each month based on seasonal fluctuations, and targets were set. We have 15 years of history on what price our clients will pay for most of our work and how much work we can do in a given period—so even if that is based on a timesheet model it is a well established precedent and provides an easy starting point for getting rid of timesheets and quoting a fixed price before the work begins.

• It’s important I point out how helpful our team, in particular our admin team, have been in adopting this change. For the professionals it has made life easier. Though for Barbara (admin, reception) it has created work. Who gets engagement letters; who doesn’t; changes to the system every other week as we learn new things; extra work in preparing engagement letters; updating the workflow system etc. We continually communicate why we are doing these things and we are very grateful that all of this has been handled with a minimum of fuss and we are a better firm as a result.
  

Ron, there will be many other things to discuss and share: strategy, vision, client selection, pricing, marketing, recruitment, post job reviews, successes, failures, things we have no idea how to approach, examples of value pricing successes, and comments about “accounting utopia” (more on that story in another email). This email is to get the process started. On behalf of Integrity I’d like to say a massive thank you to everyone who has shared their ideas with us and myself over the years. We hope our contribution is helpful to others who are heading down this path.

Ron, please feel free to publish my contact details in case anyone would like to contact me.

Michael

Michael Stewart
General Manager
Integrity Wealth Pty Ltd

Integrity Chartered Accountants & Business Advisors
http://www.integrityaccountants.com.au
http://www.integrityfp.com.au
Tel: +61 (7) 3262-3533

Thank you, Michael, and we look forward to more details on your firm’s transition.

Congratulations to the entire team at Integrity for blazing the trail for your colleagues—and all of those reluctant consultants—to follow. 

This is truly Firm of the Future 2.0.

Trailblazer Fred McBreen of Base52 Ltd

Congratulations to our newest Trailblazer firm, Base52 Ltd in Hertfordshire, outside of London (the same city as O’Byrne & Kennedy).

Fred McBeen is the Director and Practice Manager of Base52.  I was privileged to meet him at a talk I gave for CIMA last June outside of London.

Here is Fred’s email reporting on his firm’s progress since our meeting:

Dear Ron,

I hope that you are well.

You may recall we met at a UK conference a year or so ago and exchanged e-mails after this.

I was enthused by your presentation and by your book, The Firm of the Future and implemented some changes to our practice after reading this.  You asked if I could send you an update after 6 months or so and let you know how things are going, so here goes:

Broadly, things have gone quite well.  We are a relatively small practice having only started a few years ago.  In the last financial year we grew revenues and profits by about 35% and a good proportion of this growth was due to “Value Pricing” measures we implemented.

We scrapped timesheets about 6 months ago now and I don’t think we have missed them.  We set work completion targets every month and track these every week so as practice manager I have a good feel for how work is progressing.  Being less hung up about hours has meant that we focus on quality even more and ensuring that we do a first rate job.

I mentioned in my previous e-mail that we had secured a contract with one customer and I had followed value pricing principles and priced this 2 or 3 times higher than if I had used my normal “hourly rate” method.  I am so pleased that we did this as the work has been problematic.  Nevertheless we have made a good profit on the contract and have done what we said we would do.  On our old pricing methodology it would have been very hard slog for very little (if any) return which would have been demoralising for the whole team.

My conversion rate for signing up new customers has dropped from around 70% to nearer 25%.  The prospective customers we have not signed up have not been prepared to pay the higher prices I have quoted.  By and large I am satisfied that they would not have been the right customers for us.  In a tough market, we are finding it more difficult to pick up new customers but for now I am holding my nerve and looking to compete on value and not price.

I have been a bit less tolerant with customers who do not fit our ideal profile.  Again it is a tough call but I expect to give notice to a couple of customers shortly who have repeatedly ignored our advice and do not seem to appreciate the work we do for them.  This will mean a short term hit on revenues but will hopefully will be for the longer term good

I have taken on board the views in your book about building capacity before taking on new business.  We have invested in training, systems and a bit more space so feel ready to expand with the right customers.  We are only a small team and I am hoping that I can retain my key team members for the immediate future.  If I can do this, I think the prospects for growth are very good.

One of the biggest changes in my own attitude has been self belief and confidence that what we offer is good value and we don’t need to be apologetic about this.

So to summarise the progress report.  It’s so far, so good.  Our target is to grow profits by another 30% or so this year.  I will let you know how it goes..

Thank you again for your advice and support.

Best regards,

Fred McBreen
Director
Base52 Ltd

Fred makes many excellent points here, probably the most important being that you’ll never be paid more than you think you’re worth. 

Also, it’s nearly impossible to implement Value Pricing with the wrong customers.  I’m a bit concerned, Fred, about your acquisition rate dropping from 70% to 25%.  This may be just a temporary drop given your new pricing strategy. 

If it persists, however, it may be a indicator that you are not effectively communicating value to prospective customers, since customers aren’t as price sensitive as they are value conscious.  If this continues, you may want to develop a “stripped down” version of your services at a competitive price (pricers call this a “flanking product"), which will allow you to acquire some of these customers and then as time goes on they will purchase more from your firm.

But I don’t want to take away from your incredible accomplishments in the past ten months. 

Congratulations again, and please keep us posted on your progress.

New Technology Trailblazer - Forepoint LLC

VeraSage is pleased to announce a new Trailblazer in the technology industry — Forepoint LLC.

Based in the northwestern United States, Forepoint has undergone what President Kevin Cumley describes as a magical transformation. “This business is fun again after some years of difficulty. Our customers are happier and more profitable than ever and it is due to the move we have made to what we call value selling and value pricing.”

Not that it was easy. It was actually quite hard. “The hardest part was convincing ourselves. We had some struggles just getting buy-in from our people.” Take Sonia Gray, vice president and partner in the firm. At first, she resisted thinking that customers would not understand and believe that value pricing was akin to price gouging. “I was not convinced, but I agreed to at least try it,” she begins. “Then something happened that dramatically changed my thinking.

“I was talking to a prospect and told him that we wanted to fix price his engagement rather than bill him by the hour. He looked at me, dumbstruck and said, ‘I don’t know why everyone isn’t doing this. I’ve always thought that billing by the hour was just a license to steal!’ From that point on, I was convinced that this was the best thing for both our company and our customers.”

“Getting Sonia over the hump was the catalyst that really got things started,” says Cumley, “Not that it still didn’t require convincing others.” A recent example illustrates this challenge.

Forepoint was engaged by a customer to perform a simple (from their standpoint), but high-risk movement of data for a customer. Cumley set the fixed price based on the relative value to the client and risk to his firm (based on time it came out to a little over 4 times their standard hourly rate). Once the Forepoint staff was informed of the price quote, one of the consultants on the project even emailed Kevin to express his concern, “I know that our services have a lot of value, but I think that this data move has been grossly over-priced, and could be a problem.” Cumley held his ground. “The answer is simple - this is not about time, but value. My question to you is this - given the very high risk for a project of this nature to both our firm and the client, what is the value to the customer,” he responded. After some additional email exchange, the consultant reluctantly capitulated, “OK - I give.”

Kevin even admitted that he expected some price resistance from the customer. The result, the customer not only signed off on the proposal without any resistance, but also was thrilled with the results. “Probably left money on the table,” laughed Kevin. “It ain’t always easy, but it sure is fun!”

Trailblazer:  Mark Chinn, Chinn and Associates, PLLC

A few years ago I received a telephone call from a guy who wanted to talk to me about my book. 

I remember the call well, as I was sitting in a New York hotel when we finally connected.  He began by telling me how much he enjoyed my book, Professional’s Guide to Value Pricing, along with a lot of flattery I’m too embarrassed to repeat. 

He also told me about a pricing success story he had had, which obviously convinced him to become a Value Pricing convert.  Since then, we’ve exchanged occasional emails, he has written a fantastic book, How to Build and Manage a Family Law Practice, and a White Paper, “Dumping the Billable Hour:  One Lawyer’s Experience.” He’s also written other recognized books.

Well, I finally got to meet Mark Chinn at the Atticus Value Pricing Workshop in Orlando, Florida.  He told the entire group that he’s made over $500,000 more utilizing Value Pricing than he would have made billing by the hour, in the last couple of years.  He knows this because he still maintains timesheets.

I said it was time to take the training wheels off, as Mark’s firm, Chinn and Associates, PLLC, has obviously made pricing a core competency, along with the practice of family law.

He said he was going to go back and trash timesheets.

Mark is an incredibly nice man, and I’m honored to have had the chance to meet him.  Though I’m sure I’d never want him in the courtroom against me, he is a true gentleman.  Poke around his Web site and you can see for yourself his accomplishments, philosophy and purpose.  He even has a description of Value Pricing.  All very impressive.

Family lawyers are litigators.  And to all those attorneys out there who think litigators can’t offer fixed prices, Mark is empirical evidence they can.  There are now other family law practices out there doing the same thing.  So much for “it can’t be done.” Usually, people who say that are being bypassed by people who are doing it.

I’ve always had tremendous respect for attorneys.  I do believe it’s a noble profession.  The lawyers I’ve had the privilege of working with are smart, well-read, excellent debaters, have respect for abstract ideas, and cogent thinkers.  I always learn much more from them than I impart to them.

Congratulations, Mark!  Your Team’s progress has been amazing this past couple of years.  I am honored and humbled to have played a role, no matter how small. 

Who knows, after a while living without timesheets, we may see your picture on the Fellow page of this Web site.

I hope so.

Trailblazer:  Kreykes Consulting, Inc.

One of our favorite Key Predictive Indicators at VeraSage is the HSD—High Satisfaction Day.

Nothing gives us more HSDs than receiving an email like the one I did yesterday.  Even though my computer’s hard drive crashed in the morning, which is a lousy way to start the day, getting this email from Brett Kreykes makes it all worthwhile.

Ron,

Keep up the great work at VeraSage!  You have been inspirational to me and my small I.T. Consulting company!  Indulge me, if you will, in my “story.”

Five years ago I journeyed out on my own as an independent I.T. consultant.  I was billing by the hour and things were going pretty well for me.  After 2 years I was very busy with small to medium sized companies and residential work.  I soon discovered that I was unable to grow my income due to the limited number of hours in a week.  How terribly depressing!  I wondered for days if I was going to be ‘stuck’ at a fixed income.  I didn’t know how to address outside of raising my rates, but I didn’t think my customers would put up with that for long.

After seeking out advice from those wiser than myself, a friend of mine introduced me to VeraSage and I dove head first into the 3 ACCA Booklets available on your website.  I immediately knew FPAs were the solution.  I continually had situations in my work that bothered me.  When one customer had a new problem, it might take me 3 hours to fix it.  A second customer then had the exact same problem, which I could solve in 10 minutes.  This was really unfair to the first customer and to me!  Now, realizing that selling knowledge/skills (and not time) would remedy situations such as this!

I introduced my first FPA to one of my larger customers, which they warmly received.  My fees increased 50% without having to do any more work!  As my hourly based contracts expired, I introduced FPAs to my remaining customers.  I occasionally received some resistance, but nothing unbearable.  Once my customers understood how an FPA would benefit them, they soon saw the value of a FPA.

Now, the beautiful part of it.  I’ve been firing customers, specifically all of my residential customers and business customers who were not good customers.  I now have more free time, less stress, and I can better take care of my FPA customers and provide a higher level of customer service.  Now, if any business wants to ‘hire’ me, I sit down with them and determine their needs.  If the engagement is not worth at least $10,000 a year, I pass.  This way I ensure of having customers who are as committed to me as I am to them.

I have never enjoyed work so much as I do now.  I earn a fantastic wage and I don’t have to work myself silly.  I even get paid sick days, holidays, and vacations now!  (try that with hourly billing) My family life has even improved as I now have more time for my wife and children.

Ron, you and VeraSage have made a huge difference in my life, and I want to say “Thank you!” As comical as it is, my friend who first introduced me to VeraSage has yet to get his CPA firm utilizing FPAs.  I brag about my success to him all the time and continually remind him of all the money he’s leaving on the table.  It drives him nuts.

Best wishes for the future!

Brett Kreykes
Kreykes Consulting, Inc.

Thanks Brett.  Nothing is more humbling, nor more inspiring than hearing stories such as yours.

Value Pricing works, and to all those cynics who say it can’t just read all of our Trailblazer stories.  This is empirical evidence from the real world.

It also illustrates that Value Pricing is not just about pricing.  It’s a business model.  It changes everything about a firm, from shifting your thinking that you sell time to thinking you sell intellectual capital.  It impacts how you treat customers, how you select them, communicate with them, and more.

When we say “all this we do only for the price of seeing you, our colleagues, succeed,” we truly mean it.  This type of confirmation of our work is priceless because it furthers the posterity of the professions.

Congratulations Brett, and continued success in the future!

As a follow-up, I asked Brett if he trashed his timesheets.  Here’s his response:

Ron,

I did in fact dump my “timesheets”...what a sheer joy that was in and of itself.  I didn’t have sophisticated software, I tracked my time using Microsoft Outlook’s calendar.  At the end of every month I would then manually transfer it into QuickBooks so I could do my billing.  It was an awful process that was tedious and prone to human errors.  I’m glad that ‘chapter’ is done!

Thanks again!

That’s worth another HSD!

Case Study from Aries Technology Group

Aries Technology Group sent in this case study on Pricing with Purpose. It is published for those of you who are always saying “Ok, I like the idea, but how do you do it in the real world.”

One of our long standing customers was leaving us. Purchased by a competitor, their ERP system we had supported for years was being retired and the current solution of the purchasing company was being implemented. We had a great relationship and told them, out of courtesy more than anything else, if we could be of any assistance to call us.

And in fact, they did, much to our surprise.

They wanted to convert current and historical data from the retiring solution to the new solution. They had struggled to find and extract the data in a format that could be imported into the current system. They asked to utilize our knowledge and expertise to create six files in a format that could be imported into their current system.

We had never had a customer ask us for help in this manner before. How to price this project: the creation of six reports out of the retiring ERP solution? Especially if the customer would cease to be a customer once the project is completed. Plus, we had other projects in the works with customers that we hoped to maintain building successful relationships.

We talked it over inside our office. We needed to make sure that if we took our attention away from on-going customers and focused it on a customer who was leaving that we were compensated properly. We offered the price of $32,000 to create the reports, to begin the project in 10 business days and to complete the project in less than one week. This value, we explained to our customer, reflected our understanding of not only their value but to ourselves as well. It had to be worth our while to put existing projects on hold to accomplish the project for an exiting customer.

Their response was very enlightening: “How much to schedule it sooner?”

Clearly the customer completely understood the value in the proposal. We offered a new price, $64,000, to begin the project in three business days and complete the project in less than one week. The customer now had three choices: no engagement, a middle price and longer start time or a higher price and shorter start time. They told us to expect a response the next day. 

Their decision criteria were balancing the money with the scheduled completion time. They chose our first proposal (the middle option for those keeping score), and we completed the project to their complete satisfaction.

Another Trailbalzer:  Shepherd Law Group

Congratulations to Jay Shepherd of the Shepherd Law Group for not only making the decision to transition to up-front pricing, but also for today’s front-page article in the Boston Globe:  “Beat the Clock:  A Boston law firm says no to billing by the hour, and its clients say they are pleased.”

Jay maintains a great blog, Gruntled Employees, and he has written quite a bit about the perils of the billable hour.

What I love about Jay’s approach, as the article makes clear, is his firm’s “refusing to take clients who insist on paying on an hourly basis.” Other insightful comments include:

Shepherd said the new system is also a moneymaker for his firm, which has revenue of less than $5 million a year, because it is attracting new and larger clients who have defected from firms that charge by the hour. He concedes the flat-fee model will be more difficult for larger firms to adopt since they base their annual budgets on the estimated number of hours their lawyers are expected to bill each year.

[Robert E.] Hirshon, the former ABA president, also acknowledges that the current system is entrenched in law firm culture. Many lawyers benefit handsomely from hourly billing, he noted, especially senior partners whose paychecks are fattened by hours logged by young associates. And some clients are wary of trying a new system, despite being dissatisfied with the existing one.

When asked if change across the profession is possible, Shepherd replied:  “Can it be done?” “Yes,” Shepherd said.  “Will it be done?  I think other firms will be dragged along kicking and screaming.”

How true.  But they will be dragged not by customers, but by other law firms who have adopted this more enlightened model and continue to attract customers and talent from the firms unwilling to face the realities of a knowledge economy.

I can’t say this enough:  pricing changes come from SELLERS, not BUYERS.  It’s up to law firms, not their customers, to make this change.  It simply won’t happen any other way.

Congratulations to the Shepherd Law Group for blazing the trail the rest of the law firms will inevitably follow.

Another Trailblazer:  Aries Technology Group LLC

In May of 2006, I was privileged to conduct a Value Pricing Boot Camp with Ed Kless and Rob Johnson of Sage, at its annual Insights conference in Nashville, TN.

One never knows the impact you have on any participant, unless they go back to their firms and change their behavior.  All we can do in a seminar is work on changing attitudes and theories, but the real test is will that lead to changing behavior.

This makes the following email Ed, Rob and I received from John Shaver today even more sweet.  Another HSD—High Satisfaction Day—for VeraSage and Sage.

Ed,

I would say that you, Ron and Rob have made a definitive difference in our business.  We reached the point in doing business by the traditional means (discounting, billing time, etc.) that we were really looking for a fresh and rewarding approach.  The value pricing boot camp at the Nashville Insights was instrumental in opening our eyes to a very new way of doing business (I know Ron says these ideas are not new in reference to Peter Drucker but new to us!).

You guys provided us with the tools to inject new life into the business.  Even a burned out old veteran like myself is now excited again about moving our business forward.

What’s most exciting to see is the way all of our team members have totally embraced the value pricing approach and how much they love not keeping up with timesheets.  When we first brought them on board they told us we were crazy for not sticking with the traditional rules of consulting.  Now they can’t imagine working any other way!

Thanks!

John F Shaver

Aries Technology Group LLC

phone:  (865) 342-4300 x23 or (800) 990-6646

e-mail: 

web:  http://www.ariestech.com

Congratulations to John and the entire Team at Aries Technology Group for being one of the early adapters in their profession, inevitably blazing the trail for the rest to follow.