cost based pricing vs value based pricing

I think the $99 tier was instrumental to our success because it helped us get out and talking to lots of different customers and potential customers. We chose $99 as the minimum price to mirror WPCurve, which largely inspired us to start BeanNinjas. The initial pricing tiers were $99, $189, and $374. So, they’re getting pretty good at it! You may charge more with value-based pricing, but is it the best option to grow your business? Click To Tweet Our Journey with Fixed-Fee Pricing Side Project They have delivered the same bookkeeping solutions to a similar set of customers over and over. Yes!! And now that you have performed those actions, thousands and thousands of times – are you better at them, have you found a way to do things more efficiently? Yes!! Think of the first time you ever got behind the wheel or a car? Were you nervous? Did you go through the checklist of things to check before you turned the key? Did your heart flutter at busy intersections, or 3 point turns? The great thing about when you do something over and over is that – you get better at it! It also created an opportunity for our team to focus on improving the way we deliver the standard solution. This reduced the time spent on sales and left us with more time for improving our systems and building a team.

We implemented fixed-fee pricing from the very beginning. Eliminating the hand-crafting and delivering a defined solution to a specific market. Bean Ninjas was our way of building something scalable – taking customers who had similar needs and creating a standard solution to a defined set of problems. If you know our story, you know I originally founded Bean Ninjas with my business partner Ben. I was providing each and every client with a bespoke solution! We needed to find a niche and focus on solving problems for that market, rather than trying to solve problems for such a broad range of clients. I realised that I wasn’t capitalising on the repetitive processes involved in creating client solutions. I was working harder than I was as an employee, I’d taken on more risk and for little tangible benefit. I found that whilst I was winning value-based transactions, it was difficult to delegate the custom project work to my team, so my time commitment was significant. But it also illustrates the challenges of creating value-based pricing where the business truly wins. This is a good example of a successful value-based priced transaction – with a win for both the client and the bookkeeper. To perform the work, it was necessary to have a deep understanding of the businesses operations. My profit on this contract was attractive and well above many of my other clients, but this came at a cost… the file required a significant amount of my time to understand the client’s business and their accounting practices and systems. The client agreed as the price was more than fair due to the cost-saving to him. I quoted $35k per year to complete the work. My own experience with Value-Based PricingĪn example of Value-Based Pricing from my consulting days: I worked with a business who wanted to replace an under-performing Finance Manager, who earned a $70k per year salary. The benefit of this process is that detailed scoping creates a deep understanding of the client’s needs and deepens the client relationship.

This is time-consuming, and you may have to compromise from your best position.

You need to be able to justify your cost and negotiate if necessary. Not everyone has both of these skills – you need to be able to persuade your client that the price you propose represents the value of the price of the work for them. Winning theses deal requires strong technical and communication skills. Determining what that magic number comes at a price – it involves a time-intensive scoping process. That’s the appeal, and that is the motivation of many accounting and bookkeeping firms for adopting value-based pricing. The promise of value-based pricing is that you can charge more per client. Why Value-Based Pricing? Why Fixed-Fee Pricing? I have experience with both pricing systems, having utilised Value-Based pricing in my consulting business, and having adopted Fixed-Fee Pricing with Bean Ninjas. The question is, “what price will allow me to serve the maximum number of clients profitably?”Īs an example, here’s our current Bean Ninjas pricing table for Australian customers: It asks, “what is it worth to the customer” instead of “how much does it cost to deliver?”Ī fixed-fee pricing method is setting one price across the board. Value-based pricing places emphasis on what each customer is willing to pay.

The Turning Point – Giving Ourselves Permission To Experiment.

My own experience with Value-Based Pricing.

Why Value-Based Pricing? Why Fixed-Fee Pricing?.

Cost based pricing vs value based pricing