Tim Williams’ Landscaper Story

I hope you enjoy this video I recorded late last year recalling a story I was told by the great Tim Williams of  Ignition Group. Below the video is a slightly edited transcript if you prefer to read it.

The Video

The Story

About a year ago, I heard this great story from a fellow VeraSage Institute colleague, Tim Williams.

Tm is a brilliant strategic mind and he shared this story with myself and a group of VeraSage folks and I’ve been meaning to put this down on video now for quite some time but finally got around to it after a year. (So yes, I have stuff on my to-do list for a year.)

But here’s the story. Tim owns a rental property and one of the things that is always concerning about a rental property is the maintenance of the yard. It has got a small little yard in front of it – perhaps a goat could really take care of it – but what he wanted was a landscaper and he called up, of course, three people to come out and take a look and give them him an estimate or price on what it was going to take to take care of the property.

I need a landscaper

The first guy comes out and says, “Hey listen, I’m gonna be 50 bucks an hour and will probably take me somewhere between two and three hours a week, sometimes longer, if I’ve got to do something else that’s {not in scope]. That’s what I’m going to charge you. Tim was like, “Okay.”

The next guy came out and instead of giving an hourly price, he gave a list of things that he was going to do. He’s gonna mow the grass and he was going to take care of the bushes and edging and you know throw down some fertilizer and whatever was needed to take care of the property in yard.  He listed out the services he was going to do and he said, “That’s going to be a hundred and fifty dollars a week for me to do that.” Tim said, “Okay.”

The third guy came out and he actually asked Tim some questions. “So tell me a little bit about this property?” Tim replied, “Well it’s a rental property I’m not here very often just want to make sure that it’s nice for people who are coming and staying here.”

The guy said, “Here’s what I’m going to do. I’m going to make sure that your property here has the best curb appeal in the neighborhood. I’m going to charge two hundred dollars and it includes absolutely everything. You’re gonna have the best curb appeal in the neighborhood. If I have to change out the bushes or the flowers. Bush dies, I’ll fix it. Change the flowers seasonally. Best curb appeal in the neighborhood. Two hundred bucks a week.”

Tim’s Decision

Which one do you think Tim went with? He had us all waiting with bated breath and most of the folks in the room clearly the third and he said, “Actually I went with the second.”

We’re like, “Well why is that”

He said, “Because the third one doesn’t exist. It was what I had hoped for, but nobody would give that to me, so I had to go with somebody who ended up giving me the second one.”

When you think about this, what Tim is describing here is three different ways of viewing delivery of stuff to a consumer – in this case someone who’s got a rental property. One is by charging for the inputs. The first guy was going to charge for the inputs at 50 bucks an hour. The second was going to charge for the outputs and there was a list of outputs. This is what you’re going to get. This is more menu-type pricing. He was charging for a series of outputs. This is the output that you’re going to get from whatever it is that I have to do.

The third guy, who of course only exists in Tim’s mind, was going to charge for an outcome – the best curb appeal in the neighborhood.

The point

I think that is precisely what professional organizations across the board: lawyers, accountants, engineers, architects, media, bookkeepers, all people who offer professional work should be looking to position themselves as selling and providing an outcome.

Not outputs, and not certainly not inputs, but an outcome. As a professional you are responsible for delivering an outcome, not outputs. but an outcome and that’s what your customers want from you.

My advice is charge for the outcome.

New eBook Available (with a chapter by moi)

I am honored to have a chapter in this new free eBook. Here is more from the press release:

Entrepreneurs starting their own businesses now have a little more help. Start with a Profit: Best-Practice Tips for New Entrepreneurs from Top Accounting Industry Leaders is the latest guide to helping new business owners become successful. 

Editor Sandi Leyva, CPA, asked fellow accounting industry thought leaders one question:  “For someone who wants to start a new business from scratch today, what is the most important strategy or tactic you’d tell them about to help them succeed?” One dozen thought leaders along with Sandi provided their answers.  Co-authors include:

  • Alison Ball, Senior Manager of the Global Influencer Program of Intuit, Inc.
  • Sharada Bhansali, Co-Founder of AccountantsWorld
  • Randy Johnston, CEO of Network Management Group, Inc.
  • Ed Kless, Senior Director of Partner Development and Strategy of Sage
  • Sandi Leyva, Founder of Accountant’s Accelerator
  • Monika Miles, President of Miles Consulting Group, Inc.
  • Clayton Oates, Chief Solutions Officer of QA Business Pty Ltd.
  • Edi Osborne, CEO of MentorPlus
  • Leslie Shiner, Owner of the ShinerGroup
  • Doug Sleeter, Founder of the Sleeter Group
  • Sandra Wiley, COO and Shareholder of Boomer Consulting
  • Geni Whitehouse, Countess of Communication of Even a Nerd Can Be Heard
  • Scott Zarret, President of CPA Academy

“To my knowledge, it’s the first collaborative work of thought leaders in the accounting industry,” says Sandi Leyva.  This is Sandi’s 30th book and her first collaboration as editor. 

Although each author’s contribution is quite unique, a few client-centric themes emerged, including how to market most effectively, how to build customer relationships, and how to interact with clients.  Others focused on business models and pricing.  Still others urged the entrepreneur to embrace their passion and their “why.”

 

Pricing That Makes You Go, “Huh?”

images-4So this morning I called to renew my, errr, son’s subscription to the MLB Insiders Club. It gets us him some “free” stuff as well as a monthly baseball magazine. Overall, I think it is a good deal.

I called because the letter I received had no place where I could renew on-line and, well, filling out a form and sending via the USPS is beneath me. I found it odd that you can join the program on-line, but not renew. So be it.

On the mail-in form the prices for renewal were listed thusly:

  • Three years – $59.00
  • Two years – $44.00
  • One year – $24.00

Not bad. This is pretty standard term-based preferred pricing, but here is where is gets weird.

When I called, the representative took my member number and said she would be happy to renew me at the following “rates:”

  • One year – $9.00
  • Two years – $18.00
  • Three years – $27.00

I renewed for three years, but now I am totally confused.

First, why is it cheaper, significantly cheaper, to call to renew as opposed to sending in the form?

Second, why did they present the prices highest to lowest on the mail piece, but lowest to highest over the phone?

Third, in both cases they used even dollar “9” pricing as the base, yet the form used the three-year price as the base and the call-in used the one-year price as the base. Why is that?

Fourth, why is it that via mail, I get a preferred price for a longer subscription, but via the phone, the price is less, but there is no preferred price for multiple years?

Fifth, is this an example of a great price discrimination strategy – charging more to the people who just renew using old technology (i.e., the mail) or an example of a company without a fricking clue as to pricing?

Sixth, why do I even care about this?

Sorry, that last question was my inside voice.

Your thoughts on the first five questions would be appreciated. I’ll reserve the last one for my shrink.

On Words I Would NOT Use

At a recent Firm of the Future Symposium with the THRIVEal Network in Greenville, SC, Ron Baker and I were asked about some of our word preferences. On the spur of the moment we developed this quick list of words we believe should be avoided by professional knowledge firms.

Staff – This makes us think of a type of infection. We prefer team member, colleague, associate, or people as alternatives.

Client – In ancient Rome, the lawyers of the day functioned as public servants and were not paid for their work. Instead, they were appointed to their duties in working with their clients. The relationship was not one of equal status and implied a sense of duty and obligation to serve the great unwashed. The word still has this connotation in the context of social workers and their clients. We prefer the term customer which is an Anglo-Saxon word derived from the fact that it was the custom of certain people to frequent a particular place of business.

Value billing – Nothing will set a VeraSagi (our made up and officially adopted name for someone from VeraSage) off into a tirade faster than calling the pricing practices we espouse value billing. A bill is produced in arrears whereas a price is agreed to upfront. This term is linked with professionals when the do write-ups to a time calculated bill. We believe this practice to be more akin to mail fraud. The preferred terms are value pricing, pricing on purpose, or pricing with purpose. When discussing price with a customer we suggest the term fixed price or open (meaning transparent) price.

Fee – This word has a negative connotation as it is associated with governmental and penalty type incursions. We suggest the use of the more neutral word price.

Hours – We believe the only place time spent should matter is in prison. We would ban all use of the word hour and suggest a $5 fine whenever it is used. There is no acceptable substitute.

Training – Horses and dogs are trained, humans are educated. Training implies a bullwhip lashing sounds in the background. Also, do you want your 16-year-old daughter to get sex training or sex education.

Service – We believe most professional firms do not provide services. They provide access to and/or transfer of knowledge, results, objectives, and occasionally goals.

Did we miss any of you favorites? If so, please leave a comment with the term to be avoided and your suggested alternatives.

ET HORA LIBELLUM DELENDA EST

Firm of the Future Symposium

On August 9-10 in San Francisco, Ron Baker and I will once again be presenting our Firm of the Future Symposium sponsored by Sage North America.

This symposium will be dedicated to the possibility that a professional organization can be run more effectively when it becomes a knowledge firm rather than a service firm. Creating such an organization is hard work and not for everyone as it requires professionals to think differently than they have in the past about what it is that they do.

Objectives

  • From a focus on revenue to a focus on profit
  • From a focus on capacity to a focus on capital management
  • From a focus on efficiency to a focus on effectiveness
  • From a focus on cost-plus pricing to a focus on pricing on purpose

Sage (Ed’s employer) has agreed to open a limited number of spots for firms that are not partners of Sage. If you are interested in joining us, please send me an email and I can get you registered. The price is $2,500 per person and comes with a 100 percent money back guarantee!

View the Firm of the Future Trailer

 

One of the more interesting stories to emerge from our previous FotFS, was that of Peter Coburn of Commercial Logic. They are publishers of, you guessed it, time and billing software. Peter underwent a conversion of sorts and posted a terrific article on it.

A Pricing Idea Confirmed

For years, whenever I have spoken about offering access level agreements, I have suggested a 20 percent premium if the customer wants to pay monthly instead of annually.

Last week, I got some confirmation that my pricing suggestion is right on target. Google is now offering a monthly subscription price for their Google Apps. The only price offered in the past was $50 per user per year, cheap enough to be sure.

Now, they offer a monthly price of $5 per user per month – a difference of, you guessed it, 20 percent.

Every so often, I get one way right!

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On Why Specialization Often Fails

My friend, VeraSage Senior Fellow and author of the new and essential Social Media Strategies for Professionals and Their Firms, Michelle Golden, was recently interviewed by CPATrendlines on why it is that specialization in professional firms often fails.

Her solution is simple, but not easy for many firms to do.

So if the choice is specialize and increase price or don’t specialize, what are firms more likely to do?

A Question on Pricing and Resource Planning

Some weeks ago I received the following email from Wayne Schulz:

A random thought on pricing that may be worth a mention because as projects grow in scope and typical staffing numbers shrink – load balancing of work is critical and I’m seeing clients get a quote for work in early summer, then the client delays it, then they want to pick it up in year end.

We already tell people to add 50% to the project if any part demands night / weekend work. I don’t see why we should not have a similar surcharge for work that gets delayed into our busy season.

Just a quick thought that came to my mind as I struggle (as I’m sure most of you are) with prospects/clients who you proposed on back in March/April and maybe started some work in June – only to have the client back off because of any number of concerns (not ready, need further data fix-up, etc).

I have four prospects/clients whom I proposed on back in March/April and maybe started some work in June, only to have the customer back off because of any number of concerns (not ready, need further data fix-up, etc). They suddenly want to become active in what I feel is my prime season — November through January 31.

Which leads me to my question – why the heck do I allow customers to be quoted on one price for work scheduled for our down time – and then the customer delays and comes back to us in peak season.

Anyone try booking a cruise in the months of March or May. They’re dirt cheap. Why? It’s off peak. Try booking again when school lets out. Completely different fare structure. Why? It’s peak season.

Yet, I pretty regularly see this happening with my projects. I have one customer where I scheduled an upgrade for June 2010. They discovered out of balance items and rather than purge data they opted to create an adjusting entry (most of which I provided while I was there in June).

Fast forward to January 1 and suddenly they want to be live by January 15.

Ummm – ok so I’m not that fast on the uptake but it hit me this morning. These clients are being quoted during off-season and then moving their engagements into the peak season for no change in fare!

Just an observation – and I don’t have a good solution other than to work into my options that pricing is only valid for engagement started by X and finished by Y.

My reply:

Wayne,

AMEN!!!

The price quoted should have a specific completion date associated with it. If the customer wants to change the completion date it is a change request which may or may not include a price change. In the cases you are describing they certainly would.

Some sample language might be:

  • “I am sorry, but the original quote was for work done during off-peak operations for us. Now that we in our peak season, there is a fee increase. You, of course, have the option to delay this until next summer for the original price.”
  • “I am sorry, but you lost your window. Our company is similar to an airport, we can only land so many planes at once.”
  • “I understand you had to delay, it happens to many of our customer, but…”

I hope this helps.

What might you add?