Micro-Agency Launchpad

How to implement value pricing in your business

Alright, so you understand the basics behind value pricing.

In short, instead of charging based on the time it takes you to execute the project, you are charging based on the value you can create for the client.

But as you might have guessed, in practical application, this might be trickier than it seems.

And you’re right… it is.

Value pricing is not for the faint of heart. It takes confidence and it takes craft. But if you can pull it off even 30% of the time, it will have game-changing ramifications in your business.

So with that said, I’m going to give you a few tips on how to grease the wheels and make this a more palatable proposition to your clients.

1) You cannot be a commodity.

First I want to say that value pricing will not work if you do not have something unique to offer. Otherwise there’s no incentive for the client to take the risk associated with value pricing. They’ll just move along to the next guy who’s willing to do it for a fixed, low price.

So if you want to value price, you need to to de-commoditize your service.

We have an entire lesson dedicated to this in the Micro-Agency Launchpad course, but this means you need to figure out how to distinguish yourself from your competition.

  • Maybe that’s through a unique reputation
  • A unique work style / process
  • Because you come highly recommended
  • Because you’ve built a brand people are compelled to

Whether you’re value pricing or not, if you cannot do this, you’re going to have a tough time as a service business.

2) Tell them that you’re the most expensive option

Convincing the client to get on board with value pricing really comes down to how smooth your are in the sales process.

One little trick I like to do is to try and convince the client to not hire me.

Weird? Yes, but let me explain.

At the end of the day, value pricing is going to be more expensive for the client. So you have to acknowledge and embrace that, not hide from it.

“So, I’m likely going to be the most expensive option, have you thought about XYZ alternatives?”

The reason this works is because you’re:

a) Owning your fee

b) Priming them for a high price point

c) Getting them to explain why all other options wont work

Have you thought about:

  • Going overseas?
  • Doing it in-house?
  • What about previous agencies?

3) Get them to sell you on you…

At this point, after they’ve explained why these other options won’t work, that’s when I like to follow up with this question:

“Okay, well what makes you think we’re going to be any better?”

Again, to pull this off, you’ve got to be confident. You’ve got to KNOW that you are the best option for them. But if you can do this correctly, you are essentially getting them to sell themselves on you.

4) Make the pitch

When it comes time to make the pitch, here’s what to do:

“Okay, so based on what you’re telling me, we can reasonably expect to generate an additional $100k over the course of the next 6 months, right?

Assuming all goes well and we perform even half as good as we know we can.”

“Okay great, so then would you agree that it’s fair for us to take 10% of that as our fee?”

5) Handle objections

At this point, there’s one glaring objection that you might get…

“But how can you promise me that you’ll get the results you are estimating…”

And here’s the answer:

“I can’t. If I could, I would be charging you 60%, 70% or hell, even 100%. Our fee is discounted to account for that risk.”

Pre-Requisites for Value Pricing

Now, value pricing won’t work for everyone. For example:

  1. You can’t be thirsty for work: The reality is, value pricing doesn’t work every time. It’s hard to have the confidence to value price if you’re trying to put food on the table. It removes negotiation power. So if you’re going to value price, you need to have a decent pipeline before you try something like this.
  2. You can’t be solving low value problems: If you’re only taking 10%, then the value you generate for the client needs to be multiple six figures. If you run the math and you’re only saving the client 50k in a year, you might be better off with standard project pricing. Look for big, painful, heavy problems if you want to value price.
  3. You have to have access to the business owner: It really doesn’t work unless you’re talking to the business owner (or a decision maker). A middle manager was probably just given X budget to complete the project and doesn’t have much power to change that. Look for entrepreneurial-minded people with power.

Alright guys, that’s it.

With all that said, if you can figure out how to make value pricing work in your business even 30% of the time, your business will change.

Personally, my strategy is to start off with value pricing. If I can’t make it work then I default back to other pricing methods that the client might feel more comfortable with.

Remember, when you’re value pricing, you simply won’t need to win many projects to crush it.

Good luck and let me know if you have any questions!

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