Thriving in the New Norm: Strategies for Post-Recession Success (Part 2 of 2) - BQE Software
Power Pricing and the Business of the New World
Power Pricing and the Business of the New World - BQE Software
We live in a world where there is a lot of technology that lets us automate many business processes.
This is why now, more than ever, there is a push for value pricing, or, for that matter, flat rate pricing for service-based businesses. In the beginning of the video, I give you a demonstration of why this is. The short answer is that as we learn to use technology to automate and speed up processes, it’s taking less time to get the work done. At the same time, the output is exactly the same. To go one step further, you are getting the same output (value), and delivering it in a more timely manner. By this logic, you’re delivering more value, because you’re getting the same output and getting it done faster.
When you charge by the hour you lose money in the above scenario, because you’re getting paid based on how long it took, and it’s taking less time.
In this video I am going to show you the proof, using a bookkeeping engagement as an example, how you can take what used to be 5 hours of work and get it down to 1 hour.
In this scenario, data is entered only once, and then everything else is automated from there. Time and expenses are entered into BillQuick Online. Once reviewed, and approved (which requires no data entry) the information flows from BillQuick Online to QuickBooks Online. Then from QuickBooks Online, to Bill.com. Once it’s in bill.com a click, or tap on a mobile device schedules the payment. Everything syncs back to QuickBooks Online.
In the above example, there is limited human interaction, which means minimal chance of error.
When you take the time, to learn about these apps, and then learn how to use them, who should benefit? You, or the client? When you get better at your job, who gets the raise? You, right?
Then we get into the part where my philosophy departs from “Value Pricing” in principle. To price based on the “value” to the client is too subjective, in my opinion. Ask three prospects what it’s worth to them, and you get three different answers.
Here’s a reality check. No matter how progressive you try to be in terms of your pricing strategy, there is one basic law of economics at play here. This, and this alone, is what drives the price of anything.
Before I went to flat rate pricing, I was able to raise my hourly rate from where I started at $25/hour, all the way up to $250/hour. In short, when I was busier than I wanted to be, the next new client that came in my door was charged a higher rate. Over time old clients at lower rates phased out and new ones came in at higher rates.
What I am describing here is basic supply and demand. That’s what drives the price. I offer the same thing that many others do, at the core, but I can charge more than twice as much for one simple reason.
I’ve created a lot of demand in the marketplace for what I offer by producing a lot of YouTube videos. People call me up, expecting me to be more expensive, and in many cases I am still charging less that what they expect.
Nowadays I charge what gets me excited to do the work. The “Power” is in MY hands, not the clients, to decide how much money will motivate me to want to do the job. If I’m not motivated, and even excited to do the work, I’ll pass.
That’s supply and demand pricing, and this is how it works in this new world. I’ve spent hours learning about tons of new technology so that I can get the job done more efficiently. You better believe that I am going to reap the rewards of that. So should you!