By Gary Purpura
Until now, B2B professional services firms prospered or faded in large part based on the sum of their billable hours. Shifting business needs, though, are creating a demand for advisory and other types of services that do not fit neatly into the traditional hourly billing structure.
Fixed-fee, or value-based, pricing allows B2B firms to capture a variety of pricing variables in a single fee structure that reflects the client”™s expected return on investment (ROI). Our firm, TaxOps, a business specialty tax firm in Stamford, has been using a value-based pricing model for more than a decade to great success. The firm has found that the model offers the best results and the best working environment for clients, employees and partners.
Professional services firms have a rich opportunity with fixed fee pricing to improve results, strengthen relationships and more confidently predict and communicate meaningful ROI to clients.
Improve results. Fixed-fees are negotiated upfront and tied to achieving client- driven results around a specific scope of work. Once price is set, work can proceed without the distraction of further billing activities, thereby allowing providers to focus on efficiently achieving results. Progress toward these same results becomes the measuring stick of success for both clients and staff.
Strengthen relationships. Up-front negotiations for all-in pricing strengthens the client relationship by getting potential discomfort out of the way early, further clearing the way for a collective focus on achieving results. Lines of communication remain open when clients know they can pick up the phone to ask their service provider a question without worrying about additional invoices. Providers also have the opportunity to collaborate more closely with clients throughout an engagement, learning their business and adding business value at the time when it is most needed.
Predict ROI. Value-based fees ”” and the absence of billable-hour-creep ”” give clients more certainty around what they are paying for and can expect in terms of ROI. Providers also benefit from a more predictable payment stream.
Professional services firms shifting to a fixed-fee model can expect to climb a steep learning curve as they develop their expertise at balancing a variety of pricing factors such as engagement scope and staff efficiency. But when they get value-based pricing right, the value to the client and the firm”™s own business should climb just as sharply.
Gary Purpura, managing partner of TaxOps in Stamford, Conn., specializes in helping partnerships and corporations develop tax strategies and deal with complex compliance and financial reporting needs. He can be reached at gpurpura@taxops.com or (203) 307-2820. Learn more at taxops.com.
