Value Based Services and Its Benefits

The creation of a new business requires consideration that will influence the company for the rest of its duration. Some of these factors include: physical location, market, size (sole proprietorship, corporation, etc.), type (non-profit, for-profit), rates, and many more. I would specifically like to discuss the rates pertaining to those companies that have decided to enter the service-based industry.

Eager to start my own successful database software company, I wanted to attract buyers by offering my services at a lower than average rate. I know that many other businesses, like me, have done something similar, but I wanted to offer some advice on a different approach to consider; one in which I should have considered from the beginning. The optio
I am referring to is called “Value-Based Pricing.” This is a method of pricing coined by business management guru Alan Weiss. This is the process by which an agreed-upon price is assigned to a project according to the “value” that the service will hold for the client. For example, a consultant such as Alan Weiss might charge $15,000 for a single 1-hour keynote speech. This may sound very expensive, but if the speech results in a production increase of 15% the client may see this as a worthwhile expense.

At first glance, this approach to pricing may seem entirely in favor of the consultant, but there are also major benefits to the client using this method. First of all, the consultant receives the same amount of money for the job whether they are able to complete it in a week or a month. It is to the benefit of the consultant to complete the project as quickly as possible, which benefits the client. This method of pricing also ensures that the client’s interest is kept in mind throughout the project’s duration. To avoid extra work, the consultant will more frequently collaborate with the client to make sure that the project is progressing in the expected direction. In the end, the client will receive a highly specialized, quality product or service in less time than a typical project of that size would have taken.

It is imperative for the consultant, when determining pricing, to carefully choose rates that will first benefit the client, but not leave the consultant absorbing costs. An ideal project price is one in which both client and consultant benefit mutually.