Value pricing: a debate without end. By Rob Lewis

This is a well-balanced, reasonable and logical article.

I still have issues I'd like to clarify, but given the word restriction on this Web site, I have done so on our Blog. Feel free to post any thoughts, comments, at:

http://www.verasage.com/index.php/community/comments/rob_lewis_returns/

Yes, Value Pricing is difficult. It requires creativity, innovation, creating more value for your customers, thinking, experimentation, and hard work.

This is probably why most firms can't do it, or don't want to do it. Much easier to bill in arrears by the hour.

But the economic reality doesn't change based on how many firms do, or don't do, Value Pricing. The fact is, the rest of the business world is moving towards it, the practice is ubiquitous. It's not a religion--it's economic reality.

All we at VeraSage are saying is the Professional Knowledge Firm sector should catch up with the rest of the business community.

Ron Baker, Founder
VeraSage Institute

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 all DO discuss money when first meeting in a client, we have to and we do, but in a roundabout, avoid the issue, obfuscate-like-hell kind of way. "Well, it depends..."
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? 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.

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. A fundamental concept of Value Pricing 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.

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

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. You never know, it's more an art than a science - maybe why accountants avoid it?

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? 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

built up over several years is that increasingly timesheets are an irrelevant ritual with mythical status, largely redundant in either management or pricing. That firms still keep these dinosaurs is mainly because they are unable to make difficult decisions.

Lots of practices are seeing their prices driven by market forces rather than time costs - they just don't realise it. Sift through the any questions on this site and you will see many comments about what price local markets will take. But "value pricing" is difficult. A client may value an audit at £10K per annum, but if he can buy it for £5K why would be pay £10K?

Timesheets as a management tool is the most fanciful myth of all. You might be interested to know about chargeable time statistics, but in any practice that uses timesheets their completion is almost always a political game - and statistics based on them are meaningless.