As value pricing gains popularity, the pool of firms that have "been there, done that" deepens. So, too, does their collective knowledge, as these firms ditch the time sheets to brave the frontier of customizable and customer-centric pricing. Here, a few of those pioneers share the major lessons they've learned.



San Jose, Calif.-based CPA firm Morris + D'Angelo first made the big switch from traditional time billing to its current value pricing model in the late 1990s, according to senior partner Daniel Morris.

"I came in one day and said, 'We're not doing it anymore.' Those days, I had two partners; one probably still kept time sheets in his drawer. ... A long time ago I would have said, run it parallel for a while - keep time sheets but start to price on the value method. I wouldn't do that anymore."

One particular estate case helped lead Morris to his value-pricing epiphany. "I helped save $300,000 because I knew something about the family no other advisor knew," he explained. "I gave the consultation, sent the bill [and they responded], 'It only took you 10 minutes!' 'But I saved you $300,000.' ... I know time sheets are full of lies, I hate them."

While not everyone will agree, if you are committed to the switch, Morris advocates a full pivot.

Itasca, Ill.-based Corbett, Duncan & Hubly has been one of the largest accounting firms to make the switch, according to Ron Baker, founder of professional-knowledge-firm think tank VeraSage Institute.

"We did it relatively quickly," said Bernie Lietz, the firm's chief operating officer, of the transition in July 2012. "From saying we were going to get rid of time sheets to doing it was about a year. There are a lot of advantages to getting rid of time sheets - it forces you to operate differently and you can't use it as a crutch."

Firms will benefit from the outside help of like-minded experts, however, whether from a consultancy like VeraSage, a network like Thriveal CPA Network or some other method of sharing best practices. "Get some coaching," Morris advised. "Don't just read a book. And recognize that 20 percent of your customers drive 80 percent of your revenue. We learned, most of the time, that customers were happier."

Josh Zweig came to the same conclusion in an even more condensed time frame. Starting as a sole CPA practitioner in January 2013, billing clients by the hour over Skype, he now operates the Toronto-based virtual firm LiveCA.

"I started experimenting in May with a switch from time-based billing to value-based," he explained. "And it accelerated the practice at a speed I didn't expect. It was an almost 10-person firm in six months ... . The practical element is to experiment."

Firms should budget a sufficient amount of time for both experimentation and preparation. "I didn't realize how much work it would be, and with more lead time to price engagements," Lietz shared.



Of course, not everyone will be a convert.

"There were a few smaller customers who would rather be billed by the hour and we said, 'We can't do that, we have to do the same thing for everyone,'" Lietz explained. "It's a trust issue; you have to trust us to do right by you. For those few, we said, 'If you insist on being billed by the hour, we'd be happy to refer you.' There were less than five of those."

Morris + D'Angelo was very successful in retaining their clients, Morris shared. "There were no dramatic issues; we didn't lose anybody after we switched over," he recalled. "We had spent inordinate amounts of time to do this and one of the largest pieces of overhead is the time and billing process. When you give that up, you move on. It's enlightening, there's freedom and you start to think about it differently."

With some guidance into this new mindset, clients will as well. "Overall, the response was very favorable," CDH's Lietz shared. "They like to know how much they are going to pay and when. Customers are willing to pay in advance if they know exactly how much it's going to cost. The only issue with doing that is people are aware of what they spend when they see it written down in black and white, especially six figures. With all of the fees, all at once, they can say, 'Wow, that's a lot of money.' But you have to look at the history: 'This is what we've done for you, how it compares, and what you're getting.'"



Firms should hire just as selectively, as their people are equally critical to the process - making and supporting the tough pricing decisions. "Certainly, as you move up the pricing paradigm and risk paradigm, you should have other people looking over your shoulder to have more courage," Morris advised.

Many firms, including Corbett, Duncan & Hubly, have formed an internal group to facilitate these negotiations. CDH's value council is a cross-section of seven to eight members of the firm who meet weekly (as available) in a typical rotation of two-year terms.

After a firm professional meets with a prospective client, they "prepare what's in effect a finished pricing agreement and submit it to the council," Lietz explained. "It's an internal submission process that's fairly rigorous with quite a few questions: is the prospect a good match with our values, what kind of services do they need, what's their budget, what role would they have an accountant or advisor play if money was not an object-a whole list of questions in addition to looking at risk [etc.]."

Someone on the council is designated to review the agreement and present it to the group, with their thoughts, during the Monday meeting. After a discussion, the group comes to a consensus and the agreement is either approved as-is and sent to the prospect, or the designated council member comes back to the submitter with feedback so they can amend and resubmit.

The decision-makers at Morris + D'Angelo are less formally grouped, but equally collaborative, and also begin their process with prospective client questionnaires. "Generally, it involves at least two people in the firm," Morris explained. "The engagement person, whether they are the partner, senior manager or manager, and it will likely involve the office manager who has been with us 10 to 15 years and has an understanding of the 'pain in the ass' price."

LiveCA has a three-step process, according to Zweig, that begins with an initial Skype call with the prospect. Should they prove to be a good fit, a second call will include the technology team explaining the process and demonstrating the applications to be used. The final call will be between the CPA and client and cover value pricing.



Once the right people are on both sides of the negotiation table, many firms find success in a tiered pricing approach. Morris estimates that his firm uses that method 90-plus percent of the time. "You always want to give people options. One of them is an anchoring option, a huge, high price; the black card option. Then, last, the stripped-down Chevy Nova option. Start with the highest option first, set the anchoring point so the [middle option] is likely chosen."

In addition to these models, a world without time sheets requires tighter structure in other areas. "There is no magic bullet for project management -- you have to figure out your own methods for that," Lietz shared. "It's a different way of operating the firm. Project management is a lot more important - understanding what everyone is working on and managing deadlines, which you do whether you're billing by the hour or not, but now it becomes paramount. You can't manage a firm by looking historically at time sheets, but by understanding what the customer values: when they get stuff, is it on time, is it what they expected."

"Be prepared to have things to measure and track," Morris said. "Practice management and turnaround time... Other things you look at: Was it a high-satisfaction day? How do you feel about yourself? Friday afternoon I got a text from a nice lady, a CEO going through a tough audit where I'm a deep expert and I was brought in as a hired gun to win something hard to win, with a low probability shot. She texted me: 'Have I told you how much I love you?' That makes me feel good. And look at referrals; how often people are referring you."

Morris stresses the need to be inventive. After the firm switched to a value pricing model, he and a longtime customer were debating a price. "I wanted $15,000 for the job and he wanted $13,000, and we had both committed to our teams that we would not go below or above that price [respectively]. We flipped a quarter. I won. I would've been okay either way. I went back and told another partner, we didn't cave, we gambled and it turned out I won, though I was willing to go the other way. You've got to be creative."

In addition to harnessing a spirit of creativity and experimentation, firms should not be afraid to fail.

"Are we perfect? No," Morris conceded. "But perfection is not here on earth."

"The only thing is, you get it wrong a lot," explained Zweig. "It's not something where you walk in and it just works; it's a never-ending process. You don't just create a standard menu of pricing and say, 'Check: We've figured out value pricing.' It's awesome when you do get it, but it's a never-ending process, a process of self-improvement."

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