To uncover the value you’re pricing for, ask questions:
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Situation: How did they get to this point?
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Situation: What is really motivating the client to solve this? What is their personal goals?
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Problem: What do they perceive the issue to be? A good trick to really drilling down and understanding the fundamental problem is asking “why” four to five times.
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Implication: What might happen if this problem goes unsolved? Personally? Professionally?
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Need-Payoff: How will you measure progress toward solving this goal? What KPI best describes the problem?
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Need-Payoff: What will solving this problem mean to the client from a financial perspective?
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Need-Payoff: How long can they survive without solving this problem?
For example you might uncover through this process that your client’s sales are going up but profitability is remaining stagnant. They want to increase profitability to match efforts of their sales team because the company is 10 years old and it’s time to start thinking about a transition plan.
You and the client have spoken about how their business will be valued based on earnings and earnings potential, that earnings growth rate needs to start ticking upward over the next 3-4 years.
Additionally, the client wants to buy a vacation home with their spouse in the shorter term so wants to take home more earnings distributions.
The both of you agree that to do that they’ll need a 10% increase in take-home distributions.
The client perceives the problem to be their overall margin, but after diving into their product mix, the problem actually appears to be a particularly low margin product line that sales team’s have been pushing harder than others. This gave the illusion of a hot product but didn’t help earnings, which isn’t aligning with the business goals.
Let’s say the goal for profitability improvement is $100,000 annually over the next 2-3 years. That’s $300,000 in value to start.
Distributions as a result of increased profitability? Another $100,000 increase over the next 3 years.
Quality time with the family at the beach as a result of increased financial position? There’s value in that too.
All said and done it wouldn’t be far-fetched to say this engagement will contribute $450,000-$500,000 in added value to the client. If you’re shooting for a 10:1 ROI, this can reasonably be a $45,000 engagement over 3 years where you could bill around $1250 per month.
Extrapolate this out to the rest of your team and client base and you’ve landed on an incredibly lucrative business.
