VeraSage

Value Pricing Formula

Ron Baker - 03/31/2009

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.