VeraSage

Paul O'Byrne

Oh there’s more on http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=179422&d=1032&h=1022&f=1026

Frustratingly small reply limits on accountingweb.co.uk - don’t know how Ron copes!  Here’s the fuller reply I prepared before having to pare it down.  (Why wasn’t I told the deal up front? What a paradigm!)

It’s great to see the debate, and I am happy to join in more. In our Hertfordshire firm we have been value pricing since we saw Ron Baker in 2000 and read his Value Pricing book, and even though he is American, and talks and writes provocatively, he actually make a lot of good points, which he is carefully backs up.

May I contribute first by pointing out some of the addressing some assertions made by Rob Lewis that I consider to be plain wrong.

For the past 6 years I have been one of those speakers on Value Pricing in Australia, Canada, New Zealand and the USA, to lawyers and accountants, and have found that it is not unique to Brits, nor accountants, to be shy about discussing money. 

We DO discuss money when first meeting in a client, we have to and we do, but in a round about, avoid the issue, obfuscate-like-hell kind of way. “Well, it depends...”

What do we buy without knowing the price up front? Yet professionals have got away with ducking the issue for decades. If we don’t bring it up the client / prospect will, and that’s not a good dynamic for the start of your professional relationship.

Yes, pricing is tricky, but it’s a fundamental part of running a business.  If accountants can’t do it, what right do they have advising clients?  Market researchers inevitably aggregate and average. We deal with individual clients creating value for them uniquely to their - and our - circumstances.  You think a market researcher or a benchmark study can tell you what a price SHOULD be?  This must be easier for a small practice - they really know their clients and can price everything individually without worrying about firm-wide policies.

There’s no contradiction or paradox if you truly look at the value you create and using price to capture a fair share of that.  The point here is that we need to look at the whole client relationship not any individual assignment.  If the client is happy to pay £1500 what process are we to go through to “value price” it at £1200.  A fundamental concept of Value Pricing (as is said, pricing is done up front, not billing, in arrears) is that the client is the ultimate arbiter of value, it’s what the client is happy to pay, not some arbitrary figure thrown out by some made-up hourly rate multiplied by some (made-up?) hours. If they say for that work we are happy to pay £1500 and you would have been happy with £1200, I suggest you go with £1500. 

If the client says about the same piece of work, “I think it’s worth £600”, wouldn’t you rather know that before you do the work?  That’s when you need to ask, for this client at this time: “they think it’s worth £600. Can I do it for that? How? where do their expectations come from?  Have I explained what’s involved (but not in hours). Who has got the sense of value wrong here?  Do I want to do this for that price?  Should I be outsourcing or just declining that piece of work?  Is this an example of clients turning against the swings and roundabouts approach (They know they overpay us for some work, but get bargains at other times)?”

All good questions for a professional - meriting that epithet - to ask.

Markets don’t make decisions.  It’s just individual customers and suppliers.

Thanks you for suggesting we are market leaders or one of an elite few.  We think of ourselves as value-obsessed.  But I deny the implication that each and every accounting firm cannot do this.  We have unique relationships with our clients, they value us more than they say; that’s fine it’s not their job to talk up our prices.  Why don’t they chop and change accountants each year?  Each assignment? Switching costs, you say?  Well yes, but don’t say it cynically; they value the depth of the relationship, the history and all that’s unsaid because of longevity, they may like our people, our offices, our responsiveness.  They MAY like our prices because they feel they’re getting a bargain.  We KNOW our clients like our prices, because they agree the quantum and payment terms ahead of us doing the work.  We’re happy too, but always wonder if we are leaving too much value on the table.  You never know, it’s more an art than a science - maybe why accountants avoid it?

The above answers somewhat the issue of charging clients different amounts for the same work.  The same work?  It never is!  You say that the “same work” comes out on the time sheets the same? Differing standards of records, completeness, timescales, different people doing it at different charge rates and effectiveness, other costs to serve.  It’s never the same. But mostly the client’s perception is never the same. Not even the same client at different times.  Value is in the eye of the beholder.

I won’t even start on time sheets, save to say that we got rid of them in 2002 and have never looked back.  We’ve got real, real-time management information now.

Accountants don’t think value, no wonder we don’t get Value Pricing.

Oh, and Adam Smith was a Scot.

Paul O’Byrne

Partner, O’Byrne and Kennedy LLP, Chartered Accountants
Senior Fellow, VeraSage Institute