Episode 188 – Mastering Pricing Strategy for Boutique Pro Serv Firms – Member Case by Brian Doyle

Join this session to gain a deep understanding of how to set, adjust, and optimize your pricing to enhance profitability, attract and retain clients, and stay competitive in the marketplace. We will explore cost-based, value-based, and competition-based pricing, helping you determine which approach aligns best with your firm’s goals and market position. You will learn how to analyze your costs and market conditions to set prices that reflect the value of your services while ensuring profitability. The session will also cover techniques for communicating your pricing effectively to clients, handling pricing objections, and implementing dynamic pricing strategies to respond to market changes.

TRANSCRIPT

Greg Alexander: Hey, everybody. This is Greg Alexander, the host of the pro serve podcast brought to you by Collective 54. If you’re not familiar with Collective 54, we are the first community dedicated to helping founders of boutique professional services firms make more money, make scaling easier, and make an exit achievable. And on today’s session, we have a Collective 54 member with us. His name is Brian Doyle, and he’ll introduce himself here in a moment. But we’re going to talk about pricing, how to set it, how to adjust it, how to optimize your pricing to enhance profitability, to attract and retain clients, and stay competitive in the marketplace. We’ll do an overview today, and then on our private Q&A member session which we’ll have soon, Brian’s going to bring a colleague with him, and we’re going to double-click on several of these items. But with that, Brian, it’s great to see you. Please introduce yourself and your firm to the audience.

Brian Doyle: You got it, Greg. Brian Doyle, I’m the CEO of Holden Advisors, and at Holden Advisors, our goal is to make sure our clients get paid for the value they provide.

Brian Doyle: And that means helping our clients do two things, setting the right price through value-based pricing and getting the right price through better go-to-market approaches and negotiation. We call that combination of those two attributes pricing power.

Greg Alexander: Very good. So let’s dive into pricing power and let’s talk about those two things.

Greg Alexander: So the first one you mentioned was setting the right price which is using value-based pricing.

Greg Alexander: I’ve been a long-time believer in that. It was a huge part of our success at my old firm, SBI.

Greg Alexander: When I mentioned this, I got a lot of pushback. People for some reason feel that value-based pricing isn’t real or too hard to implement, and they default to the terrible pricing model of cost-up which I can’t stand. So would you please define for everybody first what value-based pricing is, and then maybe inspire us to believe that it’s doable.

Brian Doyle: Absolutely. So value-based pricing at its most basic level is just literally pricing for the value that you provide your customers. And we think about that in three main buckets:

– What are you doing to increase your customers’ revenue?

– What are you doing to reduce their costs?

– What are you doing to minimize their risk?

Brian Doyle: And when we start thinking in those terms, two things happen. One is we start talking about how important we are as a professional services firm to our customers, and that starts to change the conversation away from price into that value. It elevates that conversation because those three things I just mentioned, everybody in the C-suite cares about that, not every middle manager cares about that. So when we do those things, it starts to elevate the conversation.

Brian Doyle: Greg, I’ve talked to a lot of people who also are a little concerned. Am I gonna lose clients if I start doing this? What is going to be the impact if I do value-based pricing? I actually have a friend who does sales training and coaching, and he was uncomfortable charging a thousand dollars an hour for his workshops. I told him it wasn’t about him charging $3,000 for 3 hours, it was about him charging $3,000 for 30 years of experience as a sales leader. And frankly, that wasn’t enough.

Greg Alexander: Yeah, exactly. So let’s talk about this a little bit. And I’m gonna play devil’s advocate here, not because I don’t believe what you have to say. I believe in it wholeheartedly, and endorse it completely.

Greg Alexander: I’m just speaking on behalf of our members who have expressed concern with us. They’ll say, listen, I get that. Okay, I have 2 challenges with it. First, I have a hard time quantifying my value. Not every service can prove revenue growth, cost reduction, or risk reduction to use your 3 dimensions. And then, secondly, if I go in there with a super high number based on value, and my competition is pricing based on the hour, and there’s a huge gap between them and me, I’m gonna lose. So help me think through those 2 concerns.

Brian Doyle: Yeah. So when we think about your pricing power, it’s really, you know, like I said, it’s your value. But there’s these other dimensions, and you just mentioned them. Your value, as perceived by your customers, and in the context of your competition. And then there’s also this ability for you to go get it. So, for instance, if you’re providing a hundred dollars of value and you feel good about that, and your customers believe they’re only getting $50 worth of value, that’s an opportunity to drill in and understand how they’re using your product or service, why they think it’s only worth $50, and so on. Another element is, if you provide a hundred dollars worth of value, your customers know you deliver a hundred dollars worth of value, but your sales team consistently discounts in the face of sourcing or procurement tactics. Well, that’s an opportunity, too, and a lot of times that’s what I see is that there is this belief that the customer or client won’t pay the $100 of value that you’re providing. But in fact, they will. And so we have to understand what type of buyer are they? And that’s one of the things we do as we think about negotiation is we have 4 buyer types that we delve into.

Greg Alexander: Yeah. You know the confidence of the team. Our members, to go get what they’re worth tends to be a challenge at times because they approach their own pricing with maybe some preconceived notions that aren’t necessarily accurate. They’re not thinking like the client. What advice would you give somebody? Well, actually, let me give you my advice first, and then I’ll ask you to react to it. When somebody says to me, well, I can’t quantify the amount of revenue I make for a client, so therefore I can’t use value-based pricing, or I can’t quantify how much money I’m going to save them by reducing their costs so I can’t use value-based pricing, or I can’t prove that I’m eliminating a risk for them that could be very costly. So I can’t use value-based pricing. My advice to them was, you don’t have a pricing problem. You have a value proposition problem. If you can’t do those 3 things, or at least one of them, what do you have to offer? You have a vitamin that nobody wants to buy instead of a painkiller that everybody has to buy. I mean, what’s your take when somebody expresses those 3 issues?

Brian Doyle: I think it’s a valid and common concern. And really, Greg, where I would start, is to have more detailed conversations with your customers. It is remarkable how much customers will share when you sit down with them and you say, how do you use our product? What does it do for you? What would it mean if we changed it, or what would it mean if it went away? It is quite remarkable. When you ask the right questions, you turn those customers into bartenders and hairdressers. They’ll start sharing all kinds of information, and you’re like, that’s really interesting. Okay, so what you’re telling me is, and you sort of end up playing Colombo a little bit. Oh, my God! Oh, my God! Greg, are you telling me that if you didn’t have this you would have to shut down for a whole day? Oh, man! So what does a day cost you? And you say, oh, yeah, it cost me, you know, 100,000 dollars. Whoa! And that’s where you start to learn what your value is. Your customers help you with that. This doesn’t have to be a laboratory session where you sit only with your team and think about things yourselves and then unveil it to the customer. Hope they agree with you, interact with your customer and learn from them.

Greg Alexander: Yeah. Okay, so that’s how you set it. And we’ll again go into much greater depth on that during the member session. Let’s talk about how you get it, which is the second part of the equation. So let’s say you’ve cracked the code. How much revenue you make, inform how much costs are taken out and the risk reduction, and you can quantify it. So you then submit a price to the client. Now you gotta get it so. Tell us your thoughts on that.

Brian Doyle: So more often than not, Greg, what happens is you’ve done this fantastic job that you just described to the buyer of your services, and they say, great. I need you to talk to my procurement group. I need to talk to my sourcing folks. Somebody else shows up.

Brian Doyle: And they say, I know you talked about value. But here’s what’s going on. You’re a commodity. You’re just the same as the guy down the street. They’re offering this for 30% lower, and you gotta help me out here. I’ll never be able to close the deal.

Brian Doyle: And so what we see in that is what we call poker playing behavior. So we believe there are 4 different buyer types. There are price buyers who are no kidding, only concerned with price. Maybe a government agency or something like that. There are value buyers, great relationship buyers. You know, we can build relationships. They care a little bit about value as well. And then there are these poker players and poker players are relationship and value buyers pretending to be price buyers.

Greg Alexander: Yeah.

Brian Doyle: And so there are a variety of techniques to deal with a poker player. But it starts with understanding that you are in a game. There are 8 to 10 tactics that poker players use all the time. We recognize those parts of the collective 54 will go through some of these tactics when we talk in greater detail, and they’ll be able to say, Oh, I’ve seen this. I’ve seen this. Greg, I had a client the other day who said I saw 5 of those on one phone call.

Greg Alexander: Wow!

Brian Doyle: They just roll through the playbook. And so once we see these tactics, we say, Okay, we’re in a game. And then here’s how we start playing that game. And it all rests on that same value. But there are techniques to get through it.

Greg Alexander: Yeah. It’s often overlooked when I discuss pricing with members, they always just want to talk about the price level. You know, how much can I charge? And then we do some work, and they come up with a number, and they forget that you’re gonna have to present this price to the customer. The customer is going to object virtually every time and try to get a lower price point, and you’re going to have to negotiate and hold your number. And there’s ways to do that in the context of selling professional services. But I don’t know what it is, but for some reason our members neglect the second part of the equation. And if they do address it, there’s only the founder that deals with it. He doesn’t then teach his team how to do it, and they end up leaking revenue. I mean the great thing about pricing power to use your 2 words. There is, if you charge 10% more tomorrow than you charge today, it’s directly going to the profit line. There’s no added cost there, you’re just expanding margins just by becoming better at pricing.

Greg Alexander: So I guess this is my last question for the podcast and then we’ll put a pin in this, and we’ll save all the good stuff for the session on Friday is, why is this neglected? Why isn’t it a top priority for every founder of a boutique pro serve firm?

Brian Doyle: Well, it’s hard to think through exactly what to charge and what metric to use, you know. So should I be charging by the hour? Should I be charging a subscription or so on? That’s what I mean by metric. So it’s hard to figure that out, and it’s scary. So when we can sit back and be objective, we can see all these things playing out. But when you are the one salesperson, or you are the founder that knows that they have to close this really big deal to make your number or make your company a success for the year.

Brian Doyle: It gets scary to say I’m going to hold my ground. I’m going to negotiate with backbone, which is how we talk about it.

Brian Doyle: Because you’re thinking, Jeez, if I lower my price 20%, I still close the deal, it might be worth it.

Brian Doyle: But the problem is that, Greg, it’s a slippery slope. It’s 20% today. It’s 30% tomorrow. When you renew in 3 years, it’s 50% of what it was, and it’s just like, man, I’m stuck. I’m not suggesting it’s easy. But like you said, this flows right to the bottom line, and so it could be so powerful.

Greg Alexander: Yeah. The way that I used to get my business development experts in my firm over the hump is 2 things.

Greg Alexander: We competed with the largest consulting firms in the world, the McKinseys, the Accentures of the world.

Greg Alexander: And they all did lots of work with the Federal Government.

Greg Alexander: As a result of that, what they charged was in the public domain.

Greg Alexander: I would get the data from the government, and I would show it to my team and say, here’s what our competition is truly charging. And you’re charging X minus Y. What is wrong with you? Even if you were just slightly below them, we’re gonna triple our price. So here’s the fact. Data can really build confidence in someone when they see what somebody else is charging. The best source of that data, of course, is the government.

Greg Alexander: And then the second thing I used to say to them, particularly the people that were in charge of acquiring new logos, new clients.

Greg Alexander: They wanted to give a 30% discount. I would say, you realize you’re getting a 30% quota increase because now you gotta go find another deal.

Greg Alexander: To make up for that 30%. It’s a lot easier to hold the number on a deal that’s late stage in the funnel right now than it is to expend the effort to find another deal to make up for the gap. Those 2 things used to work really well. Well, Brian, I could talk to you about this forever.

Greg Alexander: I cannot wait until our Friday session.

Greg Alexander: I’m gonna conclude here with a couple of calls to action for the members.

Greg Alexander: So if you are a member, and you want to learn more from Brian, which I hope that you do, attend the member session. Look for the meeting invite that will come out shortly.

Greg Alexander: If you’re not a member and you want to become one, go to collective54.com to fill out an application, we’ll get in contact with you.

Greg Alexander: And if you just want to read some more about subjects like this, I point you to our book. It’s called The Boutique: How to Start, Scale, and Sell a Professional Services Firm, which you can find on Amazon. And Brian, if I remember correctly, you or someone in your firm has written a book that talks about this in more depth. Is that true?

Brian Doyle: That’s right. So we have a book called Pricing with Confidence.

Brian Doyle: And we have a book called Negotiating with Backbone.

Greg Alexander: Okay, perfect.

Brian Doyle: And those are about price setting and price getting.

Greg Alexander: Okay, great. So I point everybody to those 2 things as well. But, Brian, listen, on behalf of the members, I appreciate you giving back today. Thanks for being here.

Brian Doyle: My pleasure.

Greg Alexander: Okay, thanks everybody. Until next time, I wish you the best of luck as you try to grow, scale, and exit your firm.

Note: This transcript was generated by Zoom.