A drunken encounter with procurement…

If I could say one thing to leaders of creative businesses right now, it would be this:

"You're leaving money on the table!"

We've all been there, and the majority still are, trapped in the time-and-materials pricing model. It's what we learn, what we see practised, and for generations, it's just been 'the way things are done'.

Pricing based on the amount of time and resources it takes to deliver a project is so limiting. There's no real option to make super-profit because you're constrained by your markup and the extra percentage point you can eke out.

In all of my career, the biggest lesson that I learned was that there is another way to get to a price: a price based on value creation and offering options. And once I saw the light, you couldn't, and can't, keep me quiet about it.

I remember a conversation with a procurement guy at our local pub. Slightly drunk and ‘enthusiastic’, I engaged in a friendly debate when he teased me about needing to provide more detail to get projects approved. I asked him, "Why do I need to provide more detail? When you bought your shoes, did you ask how much the leather, stitching, and labour cost? No, you paid a price based on the value the shoes could provide to you."

Did my drunken ramblings change the world?

Hmmm.

But it didn't put me off. I'm so passionate about this. Whenever I meet leaders of creative businesses, you can be sure that I'll ask about their pricing strategies, raising an eyebrow if I find out they're based on time and materials.

What’s happening in your business? Do we need to talk?