These are the slide I used during my three-city, four-event tour with the Sage South Africa Accounting team.

1. Introduction to Value-led Pricing
Ed Kless
@edkless

2. What is a Business Model?
How your firm creates
value for and captures
value from customers.
@edkless

3. “Disruptive threats
come inherently
not from new
technology but
from new business
models.”
- Andy Grove, Founder, Intel

4. A Tale of Two Theories (Business Models)
Revenue = People capacity + Efficiency + Cost-plus pricing
Current Model: Professional Service Firm
New Model: Professional Knowledge Firm
Profit = Intellectual capital + Effectiveness + Value-led pricing
↑ ↑ ↑ ↑
@edkless

5. Four Assertions
1) Growth without profit is perilous
2) Nonrival assets have more leverage than rival assets
3) Effectiveness is always and everywhere more important than
efficiency
4) Value-led pricing is superior to cost-plus pricing for capturing value
created by PKFs
@edkless

6. Rival Asset
Non-Rival Asset
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7. From Revenue
to Profit
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8. @edkless

9. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value
@edkless

11. From Capacity
to Capital
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12. Four Forms of Capital
• Financial
• Intellectual
• Structural
• Social
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14. From Efficiency
to Effectiveness
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15. The Antithesis of Efficiency
• This session
• All continuing education
• Knowledge management
• Total quality service
• Mentoring and coaching
• Networking
• Business development
• Social media
• Innovation
• Pricing on purpose
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16. From Cost-plus to
Value-led pricing
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17. @edkless

18. Two Basic Pricing Methods
Cost-led pricing
Product  Cost  Price  Value  Customer
Value-led pricing
Customer  Value  Price  Cost  Product
@edkless

19. Unlearn
• What you do (or have to offer) has intrinsic value
• Business exchanges are like for like
• Price is primarily a function of cost
Remember
• Intent counts more than technique
• NO GUESSING! (Move off the solution)
• Slow down for yellow lights
Three things to unlearn & Three things to remember
@edkless

20. 1. Listen
2. Assuage
3. Move
4. Close
The four steps to move off the solution
@edkless

21. I need to replace QuickBooks for my
growing firm in need of a more flexible
accounting solution. Is that something
you guys can do?
We can. Companies that out have
outgrown QuickBooks are right in our
sweet spot. Would it be OK if I asked
you about what a more flexible
accounting solution means in your
specific context?
Clarify – Example 1
@edkless

22. Clarify – Example 2
I’d be glad to offer my thoughts. Help
me out. When you say you want to
improve your financial reports internally
and externally, can I ask what that
means?
We want to implement a more effective
accounting system to improve our
financial reports internally and externally
with customers. Can you give me a
demo of Sage Pastel?
@edkless

23. Clarify – Example 3
The first thing that I’ll say about my
experience is that everyone who asks
for integrations with Sage Live has
something slightly different in mind.
Would it be okay if we talked a little
about why you want to integrate so I can
make my comments more relevant?
I’m looking to purchase a new finance
system that includes purchase order
requisition and a personnel system that
will integrate with our clocking-in
system, and allows for the digital import
of invoices with OCR. What options are
available to connect to our systems to
Sage Live?
@edkless

24. Presumptive Clarify – Example 1
I’ll be happy to give you price once I
understand exactly what you want to
accomplish and at this point it would be
presumptive of me to guess. Would you
mind giving me some details about what
you are hoping a new Sage Intacct-
based system would do for you?
I am looking for information about Sage
Pastel, but I’ll be honest our main
concern is price. Please tell me how
much you would charge.
@edkless

25. Presumptive Clarify – Example 2
Fair enough, Cloud is a hot topic right
now. However, it would be presumptive
of me at this point to offer my opinion
since Cloud environments have different
definitions. Could you give me yours?
Our new IT director feels there are
advantages to moving to a Cloud-based
environment. I would like your opinion.
@edkless

26. Bonus Content: Marston’s Circle of Scope
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27. Yellow Light – Example 1
I have a concern. If we have no
evidence or sense of impact of the
problem, is it possible that somebody,
somewhere is going to seriously
question the validity of this project?
The customer is pushing to move ahead
with developing a solution to solve the
problem without identifying the evidence
of its existence and impact on the
organization.
@edkless

28. Yellow Light – Example 2
I have a concern. It seems the cost of a
solution may be larger than the problem
itself and it makes little sense to
continue moving ahead. Am I missing
something?
You believe the cost of the solution your
customer is asking for is larger than the
cost of the problem it is intended to
solve.
@edkless

29. Yellow Light – Example 3
I have a concern. I don’t know if your
CFO is like our CFO. However, at our
company, even if everyone thinks there
is a problem, there needs to be a
business case backing up the request
before he will allocate money. Could
that be a possibility here?
Your customer does not want to take the
time to develop a business case for the
solution because, “everyone knows it is
a problem.”
@edkless

30. The Five Golden Questions – Getting to Value
Recognize a “measurable” word
• Revenue
• Cost
• Customer satisfaction
• Quality
• Performance
• Productivity
• Et al.
Ask Mahan Khalsa’s Five “Golden
Questions”
• How do you measure it?
• What is it now?
• What do you want it to be?
• What is the value of the difference?
• Over time (usually one year)?
@edkless

31. A 1% Improvement in:
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
- Fixed Costs + Revenue - Variable costs + Price
2.7%
3.7%
7.3%
11.0%
1.5%
2.5%
4.6%
7.1%
McKinsey AT Kearny
@edkless

32. “The single most important
decision in evaluating a
business is pricing power. If
you’ve got the power to raise
prices without losing
business to a competitor,
you’ve got a very good
business. And if you have to
have a prayer session before
raising the price by 10
percent, then you’ve got a
terrible business.”
-Warren Buffet
@edkless

33. @edkless

34. Presuppositions
• Defined value
• Completed a scope or at least an agreed upon set of
objectives:
• Deploy…
• Educate…
• Provide…
• Convert…
• Develop…
• Integrate…
@edkless

35. Van Westendorp’s Model
• At what price would this customer
think this is too expensive and not
buy it?
• At what price would this customer
think this is expensive, but most
likely buy it?
• At what price would this customer
think this is cheap, but still likely to
buy it?
• At what price would this customer
think this is too cheap and not buy
it?
@edkless

36. Dan Ariely – The Economist sets price
@edkless

37. The Numbers
Two options Three options
Selected Price Revenue Selected Price Revenue
One year, web only 68 59 4,012 16 59 944
One year, print only - - - - 125 -
One year, print and web 32 125 4,000 84 125 10,500
Total Revenue 8,012 11,444 43%
Production costs 32 30 960 84 30 2,520
Profit 7,052 8,924 27%
@edkless

38. @edkless

39. Seven Ts to Offering Choices
1) Terms
2) Timing
3) Technology
4) Talent
5) Tailoring
6) Transference
7) Travel
@edkless

40. Create choices
C
•B+
•Convert…
•Integrate…
B
•A+
•Provide…
•Develop…
A •Deploy…
•Educate…
@edkless

41. The Baron Joseph von Neinbach Model
WA HF PF
C
B
A
@edkless

42. Questions to ask before setting price
• What does the customer think the value of our solution is?
• Have we done a complete scope document/project plan?
• With whom on organization chart am I dealing?
• Who referred this customer to us? Why were we referred in the first place?
• Do they have any time sensitive deadlines for the completion of this project? Why do they need to do it now and not in six
months?
• Who’s paying for this? Are they spending other people’s money?
• Do we have any competitors? If so, who? What price information do we have about these competitors? What is the price of
the next best alternative offering?
• How profitable is customer’s company? How long have they been in business?
• How busy are your resources?
• Have they engaged with someone else prior to us to do similar work? Who was prior firm and why are they changing?
• How sophisticated is the customer?
• Does customer add to firm’s skills or markets?
• Do we like this customer? What is the state of their restroom?
• How do we help reduce the customer’s risk?
@edkless

43. The Proposal
Item $
V
•G+
•Convert…
•Integrate…
G
•T+
•Provide…
•Develop…
T •Deploy…
•Educate…
@edkless

44. http://thesoulofenterprise.com

45. Thank you!