Implementing Value Pricing: A Radical Business Model for Professional Firms

CHAPTER 34

Step Seven: Scope Creep and Change Orders

Imagine you hire a contractor to build a game room in your home. After he walks around the house taking measurements and drafting preliminary plans for the job, chances are at some point you are going to ask what every customer wants to know: “How much?” If the contractor could not quote you a price up front, but said instead, “Well, I’m not sure, but I will keep fastidious track of the time and the cost of materials, and will bill you when I’m done” my conjecture is you would find another contractor. More likely he would quote you a fixed price for the job and you would enter into an agreement.

Assume then, that on the first day his crew begins the job, while tearing out one of your walls, they discover dry rot and termites. They will immediately stop work, inform you of the problem, tell you what the price would be to fix it, and let you decide how you want to handle the issue. This is what separates a contractor (or auto mechanic) from a professional. In contrast, professionals would simply plow ahead and fix the problem, with no input or authorization from you, track the time spent, and simply send the invoice when the work is complete. At that point, the firm would lose the pricing leverage and would be at risk for a write-down, or sometimes, a write-off. This is not an effective way to sell your services or keep customers happy.

Notice you expect the contractor to quote you a price before he begins work, even while knowing ...