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The State of Value Pricing (Down Under) with Steve Major

The State of Value Pricing (Down Under) with Steve Major – 036

March 10, 2015 by Kirk Bowman Leave a Comment

Steve Major is a pricing and business consultant from Australia. He started out as a charted accountant (CPA) and then founded a consultancy for accountants called Pricing Power. He grew up on a sheep station (70,000 acres) in Texas, Queensland. He is the host of the Pricing Power podcast and enjoys landscape photography.

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Switching to Value Pricing

  • What is the most important thing you can share about pricing?
    • Pricing is the most important lever in your business.
    • It has more impact on your profit than anything else.
    • Pricing can change your life as well as your firm.
  • What was your first exposure to value pricing?
    • Twelve years ago, Steve built his home with a fixed-price contractor.
    • It made Steve wonder if he could price accounting services the same way.
  • Did you bill by the hour before you switched to value pricing?
    • Yes, in essence, but without accurate time sheets.
    • They used a rough guesstimate for time sheets.
    • Billing was done at the end of the job, not upfront.
  • What were some of the challenges when switching to value pricing?
    • Steve thought the challenge would be with his customers.
    • The biggest challenge was his own confidence.
    • He had to be certain in his own value.

The State of Value Pricing

  • What is the state of value pricing in Australia in 2015?
    • Australia is getting close to a tipping point in the accounting and legal professions.
    • It is widely believed that the billable hour is dead, but people are unsure what to do.
    • Some have moved from the billable hour to menu pricing.
    • In law, value pricing is starting to make headway.
    • The billable hour is still being used in consulting, IT and web development.
    • Starting to see firms in other industries adopt value pricing.
  • Why is a fixed price not the same as a value-based price?
    • A fixed price is a step on the way to a value price.
    • A value price is based on the customer's perception of the value of the engagement.
    • Fixed prices are not automatically connected to value.
  • Why has value pricing been more adopted in the accounting and legal fields?
    • It is reflective of the consultants to the industries.
    • The accounting environment has changed due to compliance work.
    • Accountants are working differently with customers due to technology.
    • The customer perspective of the value of accountants has changed.
    • There was a shortage of good talent in the both industries.
    • The speed of technology is turning some accounting work into a commodity.
  • Has value pricing made deeper penetration in Australia than in the US?
    • Yes, but only slightly.
    • Australia is closer to the tipping point than the US.
    • Particularly in accounting, several pricing consultants have great influence in Australia.
    • The economic imperative to change has not come to many industries yet.

Learning to Value Price

  • How can someone start learning to have a value conversation?
    • Start asking the questions to get to an understanding of what is happening in the customer's business.
    • Realize that you are not just selling a solution, but providing a significant change in the customer's business.
  • What are some of your favorite value questions to ask the customer?
    • What are the problems the customer has in the business?
    • What are the opportunities the customer would like leverage?
    • What are the strengths the customer should be embracing?
  • What should you do if you the customer is reluctant to answer value questions?
    • If a person is not willing to talk about the topics, then you cannot deliver value.
    • State that the purpose of the question is ensure that the solution is valuable to them.
    • If they still will not open up, it is red flag.
    • The core of value pricing is that you cannot be all things to all people.
    • Be willing to walk away.
  • What are some of your favorite ways to offer options to a customer?
    • Options are powerful.
    • Value pricing can change your business; value pricing plus options can change your life.
    • Payment terms is one of the most neglected options.
    • How you interact with the customer can be good option (technology, in-person, etc.)
    • Take the premium solution and then strip away elements create lesser other packages.
  • What is one of your best stories about creating value for a customer?
    • In his accounting firm, a manufacturing customer was struggling.
      • He discovered the key issue quickly and let the customer determine the price.
      • People's lives were hanging in the balance because the business was declining fast.
      • Three months later, the business was profitable and the customer wrote a check for $150K.
      • The customer said it had saved his life.
    • He helped an accountant with pricing. Her husband called later to say thank you for helping her.

About Steve Major

  • Pricing and business consultant in Australia
  • Former chartered accountant (CPA)
  • Host of Pricing Power podcast
  • Writing: Pricing Power blog
  • Twitter: @steve_major

Filed Under: Accounting, Episodes Tagged With: Accounting, Value conversation, VeraSage

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