A client hired me to help improve her firm’s cash flow and profitability. A key point in our coaching revolved around how to price their services and our ensuing conversation had her settle on higher rates that put her old price list to shame. Here’s how we got there…
I started by asking how she came to her current prices, whereupon she referenced various cost inputs, like salaries and other typical business overheads. We talked through the billable hours and the rates for each service, break-even points and other good ol’ accounting principles. It was easily apparent why she wasn’t making much profit. (Hence investing in the coaching!)
Having modelled the operations and financials, we played a game of “What if?” We experimented with operational factors, like billable hours, staff unavailability, and the price points of each input. This pseudo sensitivity analysis was eye-opening: the business was – by her own metaphor – skirting the precipice leaning over the abyss of business failure.
We’d already explored that there was very little wriggle room to cut costs – they’d already done a great job with that. (Why would anyone hire a coach to help do the easy stuff, eh?)
So we took a new approach: instead of what-iffing marginal increases to the rates card, we explored a single fee to cover all services. (A related discussion later helped us streamline services to reduce the menu of choices. This not only eliminated the infrequent services, reducing the internal complexity and skills needed to fulfil the remaining services, but the reduced palette also reinforced the new brand as a specialist service for just her target client.)
Back to raising her fees, her first suggestion still looked like a marginal increase from the current rates. When I probed into the reasoning for this marginally better price point, her feeling was that, putting herself in her customers’ shoes, it felt reasonable, safe, and unlikely to frighten away her client base.
That’s when the coach stepped in to challenge “safe” and “reasonable”. (Because you don’t get coaching to be even more comfortable in your comfort zone, right?)
I suggested she double the rate.
She took several seconds to process that.
Then we doubled the rate again.
Now we were well out of her comfort zone. What was initially scary turned to a near-catatonic mood of OMG-I’ll-lose-all-my-clients.
While we worked through the mini trauma, the principle for everyone wanting to raise prices is that the benefits to her clients could still be argued, rationalised and bought into by her clients.
Specifically, we explored the value to her clients in terms of their gain. As a corporate attorney crafting commercial agreements, negotiating and giving strategic advice on big deals for her clients, what she’d be charging would usually be less than 1% of the reward her clients would enjoy from those deals. She needed to sell the business case – the return on investment ratio of benefits over costs.
Also, she had decades of specialist expertise and a track record that put her streaks ahead of her competitors. Her sales slant had to focus on her years of know-how and not a consulting rate per hour.
With all of this, her paradigm mutated from one of, “How can I charge so much?” to be replaced with, “How can my clients afford to not hire our service?”
So that’s what she did.
In a follow-up conversation months later, my client confirmed that by positioning their services using a business case approach, she eliminated many of their high-maintenance clients and replaced them with far more valuable clients.
But the real gem from their new sales approach was this: not only were her clients valuable to her business, but her services were also valued and appreciated by her clients even more than the old ones.