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The External Perspective of Value Pricing with Kirk Bowman

The External Perspective of Value Pricing with Kirk Bowman – 017

November 20, 2014 by Kirk Bowman Leave a Comment

In this episode, Wes McClure interviews Kirk on his path to value pricing, the challenges with hourly billing, and the process he uses now with his customers.

http://traffic.libsyn.com/artofvalue/017-The-External-Perspective-of-Value-Pricing.mp3

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What was your path to value pricing?

  • Life-long entrepreneur.
  • Custom software developer “by the hour” for the 15 years.
  • Switched to value pricing for 5 years ago.
  • Kirk shares his “conversion” story.
  • Getting to the point you are willing to say no if you can't help the customer becomes an integrity issue.
  • Billing by the hour ends up being an estimate due to how time sheets are filled out.
  • Hourly billing is a misalignment between the customer and the provider.
  • It's easier to succeed with smaller phases than one big one.
  • With hourly billing, on-boarding a customer was trying to dazzle him with technical expertise.
  • Now there is a formal process that takes 2-3 weeks.
  • Good software bakes in the oven for a while, so speed is not usually the priority.
  • The higher the value, the more patient a person is going to be to get there.
  • Discovery is a paid engagement.
  • The biggest value that the customer gets out of discovery is that they will know the value.
  • The second benefit to discovery is education, better understanding of what they really need.

How did you switch existing customers to value pricing?

  • Start with new customers.
  • Then start with smaller projects where the investment isn't that big.
  • Lastly, deal with the existing customer-base.
    • Give them a heads up.
    • Customers will either embrace, try it and not like it, or will not try it.
    • You have to be ready to clean house.
    • When you start to charge for value, the customers might still want that value for free.
    • Say no by offering a choice.
  • Whatever discovery can be completed in a day is about as much as can be tackled in a project.
  • 2-3 phone calls happen before a discovery project is suggested.
  • After discovery, we offer 3 options in a development proposal.
  • If there is a substantial change in scope, we present a Change Request.
  • Be reasonable with your value conversation and look at the bigger picture.
  • How to handle ongoing support:
    • By individual request
    • With change bucket
  • How to handle emergency situations:
    • Preventive approach to avoid emergencies
    • Provide premium price to solve the problem and do it immediately
    • Don't keep customers who won't follow best practices

How has boldly discussing value helped?

  • All profit comes from taking on risk.
  • By being bold, there are bigger opportunities to create bigger value.
  • By being bold, the customers who really aren't a good fit will screen themselves out sooner.
  • To a customer, bringing in an outside consultant is taking a risk.

Thanks to Wes McClure for conducting this interview, wesmcclure.com.

Filed Under: Episodes, Software, VeraSage Tagged With: Project management, Software development, Value conversation

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