Sunday
Nov052006
Books, value, fees, and major changes in perspective
Sunday, November 5, 2006 at 9:22PM
As part of my jump into personal productivity consulting (which is really picking up speed lately) I've read many non-fiction books on various topics, including time management, establishing rapport, culture (esp. stress and overload), consulting, personal development/growth, and networking [1]. The hope is that mixing everything into one brain is going to produce something wonderful. Or at least useful [2].
Along the way I've discovered a few books that really changed my perspective on the world, and I wanted to share one of those with you: Value-Based Fees: How to Charge - and Get - What You're Worth by Alan Weiss.
This book is a mind-blower. It turns the idea of setting fees around from from a more traditional commodity approach (there's a great summary of ideas at Establishing a Fair Consulting Rate) to a value-based one. There's a good bit to it, but the main idea is that value is always defined from the client's perspective. If she sees the work as very valuable, she'll be more than likely to a) find the money, and b) spend it on you.
Consider this: Have you every thought something was expensive, but bought it (or signed up for it) anyway, only to find that later you realized it's quite worth it, and have no trouble at all justifying the cost? The idea of the book is to present the value of your work to a prospective client well before talking about the cost. If she sees the personal value to her, and it's big (like stress-free productivity), the rest flows naturally.
Sounds basic - big deal, right? However, now that I've read it, I can't go back - I look at every interaction differently, and not just for consulting. For example, I was talking about this with an artist friend, and I told her the idea of not comparing yourself (or your fees) to the competition. She didn't like it, with one argument being: "If artist X is charging $10,000 per painting of size A, then I can't charge much higher." I've also heard this about myself: If David Allen is charging $6,000 for an eight hour workshop, you have to charge less. Oh really - Why? In my friend's case I asked if anyone else could paint her paintings. "No." So in other words, if someone wanted to buy a work, and they really loved it, they can't get it anywhere else. Hmmm...
One more story: I've been discussing the book with a client/friend/business owner, who claims the ideas that came up talking with me have already doubled her income, even before reading the book herself. (And that's on top of the claimed doubling that happened after my personal productivity coaching.) Neat!
I won't go on [3], but Weiss does offer many great ideas. My current favorite:
I'll finish up by returning to the impact of books that change your perspective. I think that ultimately the value is in providing us a framework that structures how we think about some important aspect of the world. In the case of GTD, it's how I look at managing myself in work and life. In the case of VBF, it's how I look at all the ways my work contributes value. And so on.
A few final thoughts:
From The world is flat: A brief history of the twenty-first century by Thomas Friedman:
I'd love to hear from you - What books have changed your perspective of the world?
(Confession: I suspect The 80/20 Principle: The Secret to Success by Achieving More with Less - sent to me by a kind reader - is one of those, but I've not read it yet!)
References
Along the way I've discovered a few books that really changed my perspective on the world, and I wanted to share one of those with you: Value-Based Fees: How to Charge - and Get - What You're Worth by Alan Weiss.
This book is a mind-blower. It turns the idea of setting fees around from from a more traditional commodity approach (there's a great summary of ideas at Establishing a Fair Consulting Rate) to a value-based one. There's a good bit to it, but the main idea is that value is always defined from the client's perspective. If she sees the work as very valuable, she'll be more than likely to a) find the money, and b) spend it on you.
Consider this: Have you every thought something was expensive, but bought it (or signed up for it) anyway, only to find that later you realized it's quite worth it, and have no trouble at all justifying the cost? The idea of the book is to present the value of your work to a prospective client well before talking about the cost. If she sees the personal value to her, and it's big (like stress-free productivity), the rest flows naturally.
Sounds basic - big deal, right? However, now that I've read it, I can't go back - I look at every interaction differently, and not just for consulting. For example, I was talking about this with an artist friend, and I told her the idea of not comparing yourself (or your fees) to the competition. She didn't like it, with one argument being: "If artist X is charging $10,000 per painting of size A, then I can't charge much higher." I've also heard this about myself: If David Allen is charging $6,000 for an eight hour workshop, you have to charge less. Oh really - Why? In my friend's case I asked if anyone else could paint her paintings. "No." So in other words, if someone wanted to buy a work, and they really loved it, they can't get it anywhere else. Hmmm...
One more story: I've been discussing the book with a client/friend/business owner, who claims the ideas that came up talking with me have already doubled her income, even before reading the book herself. (And that's on top of the claimed doubling that happened after my personal productivity coaching.) Neat!
I won't go on [3], but Weiss does offer many great ideas. My current favorite:
Always ask yourself, "Why me, why now, why in this manner?"You might start with his free article Forty Methods to Increase and/or Protect Fees.
I'll finish up by returning to the impact of books that change your perspective. I think that ultimately the value is in providing us a framework that structures how we think about some important aspect of the world. In the case of GTD, it's how I look at managing myself in work and life. In the case of VBF, it's how I look at all the ways my work contributes value. And so on.
A few final thoughts:
From The world is flat: A brief history of the twenty-first century by Thomas Friedman:
When you start to think of the world as flat, a lot of things make sense in ways they did not before.From Ready for Anything: 52 Productivity Principles for Work and Life by David Allen:
Perspective is the most valuable commodity on the planet.Finally, this quote - attributed Marcel Proust:
The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.
I'd love to hear from you - What books have changed your perspective of the world?
(Confession: I suspect The 80/20 Principle: The Secret to Success by Achieving More with Less - sent to me by a kind reader - is one of those, but I've not read it yet!)
References
- [1] See How to read a lot of books in a short time and Double your income in a year ... by reading!?.
- [2] See "Interesting, but not useful," or Does it pass the scribble test?
- [3] And yes, I realize there's a danger here - see Getting Things Done stages - Saints, Prophets, and Evangelists?
Reader Comments (8)
Pricing is the most effective lever to increase profitability, and the hardest one to talk ourselves into using.
I've come across a couple of interesting suggestions about pricing which I have yet to try, but thought I would pass along.
The first, from David Maister, who is the first person to listen to if you are doing professional services, is to charge what you belive to be an uncomfortably high fixed price, then give the client the opportunity to pay what they think the value is, up to that price. He's always surprised how few people offer him less than the original price. I've thought about trying this, but we don't do much fixed price work these days. I'd definately do it if I was doing onsite training.
The second, is from Dr. Lisa of viable-vision.com. She makes a complicated, sliding scale pricing offer at [ Mafia Offer | http://www.scienceofbusiness.com/Default.aspx?tabid=127 ]. The trade off is between a fixed price and a capped payment based on ongoing revenue. That one I also have not tried. And that's because I don't know what the correct measure would be for what we do.
Good luck, there's lots of room for creativity in crafting prices.
A biography of Steve Jobs I read as a teen, provided me with the perspective that being an employee is just one way to earn money. One can build a business as well.
Hi efm, thanks very much for the suggestions. Weiss does talk about approaches like the Maister one, but is generally against them. I admit I've been tempted to try a sliding some kind of sliding scale or "pay what you think it's worth," but I realized I wanted to use them because I didn't have the self-esteem/confidence to charge what I think the work is worth. So fixed price (but based on value, not deliverable or commodity).
Thanks for reading!
Hi Christopher, the book sounds interesting. I did find these two, which I think are more recent: [ iCon Steve Jobs: The Greatest Second Act in the History of Business | http://www.amazon.com/iCon-Steve-Jobs-Greatest-Business/dp/0471720836 ] and [ The Second Coming of Steve Jobs | http://www.amazon.com/Second-Coming-Steve-Jobs/dp/076790432X ]. Any tips you want to share would be welcome.
Matt,
my random thoughts on pricing--
Pricing can be very interesting. Value lies in the eye of the beholder.
I once worked as an estimator for a a small company selling products and technical services to mid to large size manufacturing companies, pricing was my job for 4 years.
Engineer types would always try to base the value of services on a dollar per hour or dollar per widget basis.
Financial people were interested in the reporting capabilities of the systems. They like to generate reports that show how much money they are saving the company so they they can demonstrate how smart they are to their bosses / shareholders.
Everybody has an itch that needs to be scratched to generate interest. And that person has to be the decision maker or directly influence the decision maker or there is no sale. Find some key metric for each client that you can help improve.
Set clear limits on your services. do not get stuck in a "do until happy" loop.
Repeat and referral business is huge. Pricing is always less of an issue with repeat customers.
I would suggest having a printed price list available to show to clients, and make the hourly price plenty high. People respect printed materials for some reason.
Remember the story about carpenter that knew just where to place the nail to stop the squeaky stairs.
A friend of mine used to work selling huge enterprise systems to huge retailers-- guess how they priced these systems? I am not kidding- Their strategy was to find out how much money the client had and price the system accordingly. beautiful! Charge what the market will bear.
keep up the great blog.
Tom
Tom, thanks a ton for the great comment.
Everybody has an itch that needs to be scratched to generate interest. - Well put. I try to spend most of my time listening to the person, and asking good questions.
And that person has to be the decision maker or directly influence the decision maker or there is no sale. - Yes! Weiss calls them the "economic buyers" - I'm still confused about how to a) ask if my contact is one, and, if not, b) ask to contact her.
Find some key metric for each client that you can help improve. - Another excellent point, and one that Weiss also talks about. In my business, I'm having trouble coming up with one that I can control. I can't say "You'll be more productive (i.e., email inbox down to zero daily)" because I don't control that - it's up to the client to take what I teach and run with it (or not). What I *can* say is I'll give them the possibility of a bunch of improvements...
Set clear limits on your services. do not get stuck in a "do until happy" loop. - Another great point - thank you. I definitely want my clients to be happy, but I see your point.
Repeat and referral business is huge. Pricing is always less of an issue with repeat customers. - My current thought is to a) do great work, and b) *ask* for the referral. Any suggestions?
I would suggest having a printed price list available to show to clients, and make the hourly price plenty high. People respect printed materials for some reason. - I appreciate the suggestion, though it's not in line with Weiss's work.
Remember the story about carpenter that knew just where to place the nail to stop the squeaky stairs. - Exactly. Which is why a fixed price doesn't work for me. It might be the squeak (filing) or something else, all good, all different.
Their strategy was to find out how much money the client had and price the system accordingly. beautiful! Charge what the market will bear. - I can appreciate this, but a part of me things "ohh - so greedy." But if I think if it differently, it makes sense. For example, if I work two days getting the director of a research center with a $40M budget up-to-speed, isn't that worth a lot more than the gal next door, even if the work looks very similar?
keep up the great blog. - Thanks, Tom - much appreciated.
Good one Matt.
In a world where everyone is a click away, value differentiation is the most critical thing you can do to succeed professionally. Weiss' books are excellent reading for non-consultants too.
Thanks a bunch, Bob.