Blog by Chris Knipe, Digita Business Analyst
Traditionally, there were two ways to charge a client: fixed fee and hourly billing. Now there’s another form of charging – referred to as “value pricing”.
What is value pricing?
Value pricing is agreeing a price before the work is done, based on the value perceived by the client. If the practice offers an arrangement for new small businesses, then value pricing can also accommodate their ability to pay.
Historically, many practices have used hourly billing – AKA “Time and Expense billing” and this is often perceived by the client as the value of the work. With increased access to data and software, both by the client and by the practice, there’s every likelihood that time spent on a particular job for a client will reduce over time. Thus many more clients will be needed to make a practice viable in order to stop a significant increase in hourly rates.
Another approach is to concentrate on the value added by the activities of the practice. This value has to be the perceived value by the individual client and may involve more relationship management in explaining to the client the work done and the value gained.