Today, ensuring your firm delivers exceptional value and effectively captures that value through appropriate pricing is crucial. Traditional approaches to scoping and pricing jobs have often been fragmented and inconsistent. Partners and managers handle their own pricing on a client-by-client basis and often end up undercharging. The same client might get a quote from two offices for the same service priced drastically differently depending on who they call.
A value committee can help you address these discrepancies and turn pricing into a center of excellence in your firm.
Value committee vs. pricing committee
Firms might use the terms “value committee” and “pricing committee” interchangeably. However, while a pricing committee focuses on determining the right price for client engagements, a value committee goes a step further to ensure that both the price and the scope of work are aligned.
This nuanced distinction is critical to transforming pricing from a transactional activity into a strategic center of excellence within the firm.
A pricing committee might be adept at analyzing market rates, competitor pricing, and cost structures to set competitive prices. However, without a comprehensive understanding of the value being delivered, there is a risk of commoditizing services and eroding profitability. On the other hand, a value committee takes a holistic view of client engagements, ensuring that the scope of work, the resources deployed and the pricing strategy are all in sync to deliver and capture optimal value.
Addressing the traditional approach to scoping and pricing
For too long, scoping and pricing jobs within accounting firms have been treated as an afterthought or a necessary evil. Professionals across the firm, regardless of their pricing expertise, have been left to navigate these critical decisions on their own. The result? Skilled auditors, tax consultants and business advisors undercharge for their services and undermining the firm’s profitability.
A value committee addresses this inconsistency head-on, establishing best practices, providing guidance and ensuring a consistent approach to pricing across the firm.
Structuring your value committee
For a value committee to truly make an impact, it requires a champion—a leader within the firm who can provide resources, remove obstacles and drive firmwide buy-in for the committee’s work. This champion is critical in embedding a culture of value and excellence within the firm, ensuring that the committee’s recommendations are taken seriously and acted upon.
The value committee should review proposals and engagement letters, particularly for higher-value clients or engagements that meet specific criteria. This oversight ensures the firm scopes and prices all significant engagements appropriately, reducing the risk of undercharging and ensuring alignment between the value delivered and the fees charged.
The committee can also conduct retrospective reviews of completed projects to identify lessons learned and opportunities for improvement. This feedback loop is crucial for continuous improvement, guiding future pricing and value decisions to ensure ongoing alignment and excellence.
Some firm leaders look for outside consultants to guide their pricing strategies. However, while a consultant can provide valuable market insights and best practices, the real work of embedding a culture of value and pricing excellence must come from within the firm.
Establishing a value committee is a strategic investment in your firm’s future success and sustainability. By ensuring alignment between the value delivered and the price charged and fostering a culture of excellence in pricing practices, your firm can confidently navigate the complexities of the modern marketplace and achieve long-term profitability and success.
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Tags: Advisory, Firm Management
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