Value Billing – Does It Work?

Value Billing is a new buzz phrase in the professional services world, but does it hold water? At the last Sleeter Conference Ed Kless spoke about value billing and gave a compelling argument for why this was a much better way to go than any method of billing that considers time. Separately I spoke with him specifically about my software training and how the value billing model would work there. He suggested that instead of simply charging per session I charge monthly subscription and allow people to take as many training sessions as they wanted. That this would provide much more value. On the surface it sounded really good. Then I ran the numbers and made this video. Let’s see what this looks like.


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4 Comments on “Value Billing – Does It Work?”

  1. I agree “value billing” does not work; never has never will. “Value billing” is mail fraud. I wholly distance myself from anything having to do with “value billing.”

  2. Hi Seth –

    I’m no expert at Value Pricing (the preferred term over Value Billing as pricing is done upfront with customer understand while billing is in arrears) but I have been practicing it at my firm, Azamba, for six+ years. The system does work and I believe that the fundamental reason it works is that it’s better for your customers.

    It realigns your thinking around your customers and what they value. The rest is experimentation and details on how to provide a given service or product and even IF you should provide a given service or product.

    If you are serious about learning how this work, I would recommend putting the spreadsheet down and picking up the phone. Call 5 customers and let them know what you are thinking of doing with this program. Ask their opinions – see if they have interest in it and ask them how much they would be willing to pay for such a service.

    From there, you may find that they don’t see value in it. If that’s the case, don’t do it. There are other ways to make money and your conversations may lead to something different that you can build around.

    If they do see value, maybe they don’t want to pay what you want to make. If that’s the case – are there things that you can add in that would increase the value to them and move them to a higher price point? Maybe record your training and make their sessions available at any time while they stay on as subscribers? That’s a low / no cost service that you can add that could create tremendous value.

    Or maybe they even shock the heck out of you and say they are willing to pay more for the service? Wouldn’t that be wonderful?

    A related thought is that not all customers will see value in all things that you offer. That’s ok. Not everyone buys the speed pass at Disney.

    The final thought that I would leave you with is that the concepts of Firm of the Future espoused by the talented, intelligent folks over at Verasage all encourage an attitude of growth and experimentation. So many of us get an idea and stagnate. That’s a dangerous approach in today’s fast paced world.

    Try. Fail. Learn. Try again. Fail better. Learn faster.

    It’s an upwards, virtuous path. You will be better off for getting on the path. More importantly, so will your customers.

    Take care – best of luck!

  3. Seth,

    A few thoughts. I’m not a big fan of it but here are some other variables that you might think of.

    Subscription models usually work when the process is automatic. I think when a bookkeeping service charges a monthly fee, they are actually charging the average monthly billing rate, it’s not really a subscription. So I don’t think a monthly bookkeeping charge is ‘automatic’. It’s better described as ‘average monthly billing’.

    Value pricing relates to high value service work, that’s when it really pays off. So if I’m working with someone and I save them $100K in taxes/expenses, what should I charge? Should I charge them the two hours? Or should I charge them a percentage of the savings?

    Also, I think the person who gave you the advice was counting on something like, many of the people who signed up for the service would not use it every month. Like a gym membership model.

    Have you looked at creative live? They give 3 day free classes for free. Then if you want to view them later you need to pay for the classes and the workbook. They have been pretty successful.

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