Value pricing and self-esteem.

• Author: Baker, Ronald J.
• Position: PCPS BRIEF

In today's world, intellectual capital is the chief source of all wealth. Napoleon Hill wrote in Think and Grow Rich: "There is no standard price on ideas. The creator of ideas makes his own price, and, if he is smart, gets it."

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With that in mind, what are your ideas worth? Unfortunately, most CPAs under price their intellectual capital. They justify this with a variety of excuses:

* We do not have enough quality clients.

* Clients view what we do as a commodity.

* Clients do not understand the value we provide.

* Our people do not understand their worth.

* When clients engage in hardball negotiation tactics, we capitulate.

* Our profession has too much capacity, which drives prices down.

* We operate in what economists call "perfect competition," where no one firm is a price maker; rather, we are all price takers.

These are nothing but excuses to explain away a lack of purpose, strategy, marketing effectiveness and poor client selection. But I believe there is a deeper reason, which I truly did not understand until I began teaching value pricing to my colleagues.

No More Begging

Many participants in my courses have commented that they would "feel guilty" about charging a substantial multiple of their hourly rate. They say this as if they are taking advantage of the client. This attitude is shocking. Not only is it a misunderstanding of how wealth is created--both sides to a transaction profit--it is a telling sign of low self-esteem.

The epiphany for me was that this was not a strategic, or even a pricing competency issue, but rather a low self-esteem issue. Some of these professionals truly did not believe that they were worth more than costs plus some arbitrary profit margin.

Then J read an article by the late Timothy J. Beauchemin, "No More Begging for Work: Self Esteem Is the Key to a Better Practice," which appeared in the August 1996 issue of the CPA Profitability Monthly Newsletter (now out of print). What he wrote resonated deeply with me and the colleagues with whom I discussed the idea: "I see too much of what I call 'begging' in the profession--begging for work (especially by under pricing) and then begging to get paid. I have never really understood why this is, particularly when you consider the training, hard work and risk that accountants undertake. The only conclusion is that the problem seems to be one of self-esteem."

Low self-esteem (or self-respect) does go right to the heart of why professionals...