December 9, 2016

Reader question: “How would you manage value pricing for a non-profit organization?”

A dear reader asks:

> How would you manage value pricing for a non-profit organization?

The same way I do with for-profits: I start with a Why Conversation to uncover the desired outcome of the engagement. In the case of a non-profit, the desired outcome won’t be “increased profits” but there will still be a measurable goal that has a value to the organization.

> Would you still go to hourly billing from time to time for this kind of work?

No, I wouldn’t. Whether the client is for-profit or non-profit, I never bill by the hour for project work because it’s bad for the client.

ASIDE: I suspect that the reader believes hourly billing to be a less expensive way to offer services than value pricing, to which I say:

  1. Hourly billing is not necessarily less expensive than value pricing - Hourly billing is not a cheaper alternative to value pricing. In fact, it’s often the opposite. Something like 50% of hourly projects go over budget by double. Value pricing forces the seller (i.e., you) to uncover what the buyer’s (i.e., your client’s) desired outcome is, which means that results can be achieved sooner and with less waste.
  2. There is no inherent business reason to offer lower prices to non-profits - The fact that non-profits don’t create profits does not mean that they are broke. A quick search on shows that 469 non-profit orgs brought in over a billion dollars of income last year. 4,485 orgs brought in over $100M. If you want to support their mission, great! Make a donation. But monkeying around with your pricing based on an organization’s chosen business model is a bad habit to get into.