{"id":668,"date":"2015-07-28T18:33:43","date_gmt":"2015-07-28T22:33:43","guid":{"rendered":"http:\/\/localhost\/osborne\/?p=668"},"modified":"2022-11-07T14:13:11","modified_gmt":"2022-11-07T19:13:11","slug":"pricing-professional-services-mastering-new-business-skills-for-profitability","status":"publish","type":"post","link":"https:\/\/www.osborne-group.com\/fr\/pricing-professional-services-mastering-new-business-skills-for-profitability\/","title":{"rendered":"Pricing Professional Services – Mastering New Business Skills for Profitability"},"content":{"rendered":"

Pricing Professional Services
\n<\/em><\/strong>Mastering New Business Skills for Profitability<\/strong><\/p>\n

Consulting, legal, accounting and other professional services firms have traditionally been driven by a \u201ctrifecta\u201d of economic measures \u2013 hourly rates, billable hours and recovery ratio.<\/p>\n

Planning involves some simple math.<\/p>\n

Revenue = the number of billable professionals x billable hours available x hourly rate. The final factor is recovery ratio \u2013 the number of billable hours that the client is willing to pay for.<\/p>\n

This model has been around for a long time but is coming under increasing pressure as better informed clients object to sky-high hourly rates and a meter that starts every time they make a phone call. Clients are increasingly asking for professional firms to quote fixed fees for their work resulting in a breakdown of the economics of professional firms.<\/p>\n

But professional firms are not very well versed in fixed fee pricing. They tend to react in one or all of three ways.<\/p>\n

1.\u00a0 Price in too much risk. Without the ability to \u201ccrank up\u201d billable hours, the tendency is to price in the risk of changing scope. The result is an uncompetitive price.<\/p>\n

2. Scale back the scope \u2013 and price – to \u201ccore\u201d services, giving the client a price list of options that will bring the scope back to what was initially specified. This can make the base price competitive, but the client feels nickeled and dimed to death.<\/p>\n

3. Make the price competitive and stay silent on reduced scope. Even if the client only has the budget and expectations of a Chevy solution, most professionals only know how to deliver a Cadillac which they do and which leads to writing off unrecoverable hours – the bane of professional services firms.<\/p>\n

What can be done to correct the situation?<\/p>\n

Professionals need to learn a set of business skills to match their technical skills.<\/p>\n

I once heard an executive in the insurance business say, \u201cThe most important thing is to secure a new client. Even if the deal looks unprofitable at the start, something will happen quickly to change the scope. That\u2019s when you can start to make it profitable\u201d.<\/p>\n

Many clients scope projects with little knowledge of what can be accomplished for the fee they have in mind. Professionals need to have an honest conversation with their client to the effect that \u201cWe can meet the price but not your scope or, we can meet the scope, but the price has to be higher.\u201d<\/p>\n

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