Value is not a number

Value is not a number

Digital Image by Sean Locke Digital Planet Design www.digitalplanetdesign.com

 

 

 

 

 

 

Much is talked about Value, Price and Worth. We are questions like – what is the value of our services to our prospective clients?, what is the worth of what we sell, what price should we charge for our services or products?

But value is not a number.  

We spend so much time trying to put numbers around value.  Maybe part of the problem is us accountants. We put numbers around the value of a business. But that is a story for another day. 

Value is subjective. What I see as of value may not be the same as you.  The price I might be willing to pay for an item will differ to the price you are willing to pay for the same item.

Value is always contextual. The context will change our perception of value. The best example that I like is that of Nepresso pods.  If we compared the coffee to instant coffee it would seem to be very expensive but Nepresso have changed the context. We are encourage to compare these coffee pods to the coffee shop experience. The value in that context changes.

Value is not a number. Value is not a constant either. It changes based on our perceptions, on what comparisons we make, on where we are in life etc etc. 

So before we can start talking about the price you should charge you need to understand the value of your services or products from your customer’s perspective. 

Remember value is not a number. It is much more complex. 

 

 

To build your authority – double your prices!

To build your authority – double your prices!

CB-AI-JohnJantsch

Recently John Jantsch wrote an excellent piece for the great Copyblogger site (here is the article) on building long lasting authority. It is an excellent article. One of the five points that John discusses is “Charge what you’re worth”.  As anybody who has read any of my blog posts or listened to my podcast would have heard – hourly thinking is just way to prevalent. 

John challenges readers to double their prices. To make it work John says there would be 4 questions that allow you to figure out to make it work. These questions are :-

      • What would you have to do?
      • Who would you have to become?
      • What would you have to create?
      • Who would you need to start hanging out with?

I would totally agree with John in these questions.  However one key point that I want to make is this – Doubling your prices comes before you have long lasting authority. Often time I hear the comment from a business owner that they will increase their prices when they are the recognised authority, the go-to firm in their chosen market. But price is a signal. The signal being sent from low prices is low quality, low authority. 

To deliver on higher prices (or as John has stated double your current price) you have to determine how to deliver value on these higher prices. The higher price also sends an important signal to the market.

So what is holding you back from doubling your price?

The answer is you – nobody else. 

If you want long lasting authority in your chosen market double your prices. 

 

#19 – Steve Major – Discussion on the 5 Steps to Pricing Power

In this episode I take the time to go through the 5 Steps to Pricing Power.

Warren Buffett (possibly one the worlds greatest investors) stated in a congressional inquiry that in his opinion the single most important decision in evaluating a business is  pricing power.  He went on further to explain that a business that has the power to set its prices is a great business.

From my 25yrs of working with businesses much too often the business are driven by many forces not of their choosing that limits their ability to set their prices. However it does not have to be this way. As Warren Buffett has clearly articulated there are other options.

With Pricing Power comes freedom.  Freedom to choose. Freedom to enjoy life.

The 5 Steps to achieve Pricing Power are :-

      1. Value – understand what is valuable to your market and communicate your value
      2. Product – move from services to value based services to value based products
      3. Price – create a powerful pricing strategy
      4.  Numbers – measure what matters
      5. Authority – become the go-to firm in your chosen market.

In this episode I go through in more detail these 5 Steps.

If you have any questions please email at steve [@] pricingpower.net

 

 

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Customer Goodwill creates Economic Goodwill

Customer Goodwill creates Economic Goodwill

changing mood Contest

It is not the fair market value of the inventories, receivables or fixed assets that produce a premium rate of return for a business. Rather it is the combination of intangible assets, particularly a pervasive favourable reputation with consumers (clients) based upon countless pleasant experiences they have had with both the product and the personnel.

It is that reputation that creates a real asset for the business. It is that reputation that allows the value of the product to the purchaser to the major determinant of selling price.

So given this simple fact of business why is it that it gets lost in the midst of running a business?

Everything needs to be focused on designing countless pleasant experiences for your customers with both the product and your people.

18 Ben Walker of Inspire CA – the accountant with a coffee shop in his office.

18 Ben Walker of Inspire CA – the accountant with a coffee shop in his office.

inspireca-32-Doggett-St-Newstead

Why would an accountant open a coffee shop as part of his accounting business? Ben Walker did and it has created a fantastic business. 

Ben Walker lists himself as the Chief Inspiration Officer of Inspire CA (the accounting firm) and the Beer Development Manager of Inspire Cafe   Inspire CA has its mission to inspire people to build phenomenal businesses. The dream for the cafe is create a place where you can enjoy a good coffee and something decent to eat with entrepreneurs and business people.  

In the short time that Ben has been in business he has made a mark. I first heard of Ben from a colleague in the United States. Impressive. The cafe is fast becoming a hub for business events and a thriving community. 

And by the way Ben does not do timesheets, he value prices, extensively uses the cloud amongst other impressive aspects of his business. During this interview we talk about why he created the Coffee shop and how that changed his business. As Ben talks about it has not all been plain sailing but he has fought hard to create this fantastic business. 

If you have any comments, thoughts or questions please email me at steve@pricingpower.net

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Is there a community around your business?

Recently I went to an Evernote Users Meetup and I organised an event with Ben Walker at his Coffee shop inside his accounting firm (Inspire CA).  Now at first these don’t seem to be linked in any way.  

But there is…

Both businesses (one digital and global and the other a local accounting firm in Brisbane, Australia) have communities around what they do.  Ben of Inspire CA put the Coffee shop to make it a meeting place of entrepreneurs. Evernote has meetups all over the world. 

These communities are the key to the businesses having continued success and growing further. Yes if either of them do something that upsets these communities their businesses will be impacted.  Equally though both businesses if they listen to and involve the communities will go from success to success. 

Community is not easy to build. You need to have a story that people can talk about.  At the Evernote Users meetup the attendees were giving real examples of how Evernote has improved their working or personal lives. It was in the name of tips and tricks but really they were reinforcing the story of Evernote and what could be done. Free advertising or marketing for Evernote. At Ben’s coffee shop the business owners are telling the story of the accountant who does things differently.

How are you building community around your products or services. 

Podcast Episode #17: Gale Crossley -the business discipline of practice growth

What does it take to get strategic growth? Gale Crossley answers that question in this interview. Gales takes about the three keys to unlocking strategic growth for knowledge firms. 

Gale, was selected one of the Most Recommended Consultants in the Inside Public AccountingBEST OF THE BEST for the tenth consecutive year, one of theTop 100 Most Influential People in Accounting byAccounting Today for the eighth consecutive year and has been named to The Advisory Board Hall of Fame. She consults with mid-market accounting firms, assisting managing partners, partners, and marketing directors, to effectively increase their firm’s revenues.  She guides them through development of the best strategies and tactics to achieve aggressive revenue growth objectives.

Gale’s 35 plus years of experience features a unique combination as a practicing CPA at Arthur Andersen, PwC, and a local CPA firm.  She has also held senior management roles in business development and marketing in the cutting edge technology environment with IBM, MCI and several start-up technology companies.

Gale has helped dozens of large and large-thinking firms, both domestic and international, create high growth cultures, driving revenue from all aspects of the practice.

Join us for this great discussion on the keys to strategic growth.  We also discuss some of the challenges and opportunities confronting the professions.

If you have any questions, comments or thoughts please email us at steve@pricingpower.net   or connect with me on the social media platforms. 

 

 

 

 

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Is manufacturing dead in Australia?

Is manufacturing dead in Australia?

There has been much discussed in Australia about the decline of manufacturing.  We have had all the major car manufacturers announce the closure of their Australian operations. This has followed last year announcements around the steel and other manufacturing industries which are moving offshore.

But let me tell you about a company that is going against the grain…

maton

Yes Maton Guitars.

They manufacture Guitars and have done since 1946. It is still a family owned business.  They are proud to be based in Australia. Recently the owner Linda Kitchen was asked about this and she talked about how they have started exporting guitars to China.  Not the other way around and basing the manufacture in China.

Some incredible artists have played Maton Guitars including :  Tommy Emmanuel, Keith Urban, Neil Finn and even the King – Elvis Presley.

I am learning the guitar so have been interested in Guitars and trying to make a decent sound.  This was when I came across the Maton. Such a rich history and very fine attention to detail have created a business today that employs over 60 people making excellent guitars.

In the interview I saw Linda discussed a choice that was before them some time ago. There was increasing competition from guitars manufactured in places with lower costs in Australia. So how should they react. One option was to take their manufacturing offshore, another was to really drive costs down in the Australian operations or was there a third way.

Yes there was a third option – the option that was in my mind the best.

Don;t try to compete on price. Let the price conscious buyer purchase the cheap imports.

They had history and quality to maintain. But they needed to keep that story being told about their fantastic guitars.

So they decided to introduced custom designed guitars which have prices tags between $5,000 and $20,000.  Yes they introduced the premium product targeted at the true guitar player (maybe one day I will get one). This strategy is fantastic because of two reasons (1) there is better margin on the premium products (2) it amplifies the message about the brand.  The professionals purchasing the custom guitar are going to further add to the brand which will reinforce their baseline products.

So manufacturing in Australia is alive.  It is just that they have worked out how to be different and guess what it is successful.

If you wanted to sell staplers – what would you sell?

If you wanted to sell staplers – what would you sell?

I know crazy question.

Stapler

But bear with me.

You could try to create the routine stapler like the one pictured above and go for mass production & mass distribution.  But because the stapler is in essence the same as all the other common staplers out there you will need to go for huge volume to make huge profit.  This will mean a large efficient operations to make money. It will mean a long tough battle to make a great business.

However there is another way…

What about a premium stapler?  No I have not gone completely crazy as I hear you say that there is no such thing as a premium stapler.  I am not here to provide the greatest thought through business model for the premium stapler business however here are some quick thought. Maybe you get get staplers signed or some other way identified with famous movie stars and sports people.  I am sure there could be the market for a Roger Federer stapler.  And may the price would be $250 per stapler.  You might not buy the Roger Federer stapler but I strongly suspect there would be a market for these.

My point in this post is not to solve the stapler business but rather to highlight the point it is much easier business if we head toward the premium product point.  Yes you can build the large super efficient business that is profitable however I believe that for small and medium businesses the option of selecting the premium option is the more enjoyable business.

Love to hear your thoughts.

Podcast Episode #16 – Joyce Washington of The Common Cents

Joyce Washington is CEO and Founder of Common Cents Consulting (click for her website). Joyce has been quote and recognised far and wide including being noted as one of the future leaders of tomorrow by the CPA Practice Adviser.  Amongst many of Joyce’s consulting service she helps businesses with their pricing.  During this conversation we cover various issues around communicating value and how to price your products and services.

Joyce in her own business has gone through all the struggles of value pricing, removing the timesheet and communicating value.

Thank you for listening – talk soon.

 

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