Value Pricing in Action

Source: VeraSage Institute Blog

The following includes excerpts, reproduced with permission, from a blog entry by Ron Baker. Baker answers questions about value pricing from a CPA firm partner and value-pricing champion.

Are other CPA firms using value pricing successfully? Literally thousands of firms have successfully implemented value pricing (VP). A top 100 accounting firm has appointed a pricing panel and a chief value officer (CVO), and about one-third of its revenue comes from VP (though it hasn't gotten rid of timesheets — yet). There are also law firms, advertising agencies, IT firms, and consulting firms using VP.

Do you run a simultaneous time system to track profitability for the naysayers? A simultaneous time system is almost inevitable; very few firms trash timesheets before, or at the same time as, implementing VP.

But between you and me, I believe trashing timesheets is the only thing that will make a firm better at pricing. As long as timesheets exist, we look back to time to measure price — precisely what we are trying to get away from.

Will it work as well for audit departments as for tax departments? VP will work in any department. In fact, it's not department-dependent; it is customer-dependent. I don't think a firm should allow different pricing based on departments, especially if the customer experiences more than one service. Imagine being billed by the hour for one thing and given a fixed price for another.

We are doing VP for the benefit of the customers (to give them certainty, a “no surprises” rule), and thus that experience is created one customer at a time, not one department at a time.

Baker also outlines implementation steps for firms that are serious about VP but not ready for a value council or a CVO to do all of their pricing.

To read the complete blog post, click here.

From VeraSage Institute, http://www.verasage.com/index.php/community, “Ask VeraSage: Advice to a Value Pricing Champion,” June 24, 2010.