Confessions of the Pricing Man, How Price Affects Everything Financial experts often struggle with setting fees for their own services and expertise. It is easy to see how someone could have trouble with decisions involving hourly billing versus fixed fees, premium pricing, bundling, discounting, and adjusting for scope creep. The author in this article shares insight from Hermann Simon on the above considerations. Financial experts often struggle with setting fees for their own services and expertise. It is easy to see how someone could have trouble with decisions involving hourly billing versus fixed fees, premium pricing, bundling, discounting, and adjusting…
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Relative to “Those” Competitors Many BVFLS practitioners have a mind-set that presents a self-made obstacle to successfully marketing their professional services. In this article Rod Burkert shares three reasons he has observed that may explain why we, as professionals, struggle with pricing relative to “those” competitors and suggests ways to address those concerns of losing out on price. I want to go on record that I am not immune to price compression. And if I haven’t said that before, I’m saying it now. But if I’ve been more fortunate than others it’s because, in the years after the Great Recession…
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Measuring the Relative Performance of Small Stock vs. Large Stock and the Cost of Equity Roger Ibbotson and James Harrington discuss two different ways of measuring the relative performance of small stocks versus large stocks in this article: (i) the “small stock premium” and (ii) the “beta-adjusted size premium”. Ibbotson and Harrington demonstrate why using a non-beta-adjusted size premium within the context of the capital asset pricing model (CAPM) to estimate cost of equity capital will likely “double count” beta risk, and therefore overstate risk and understate value. The authors also demonstrate that a non-beta-adjusted size premium used in conjunction…
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Be a Trusted Advisor Valuation analysts are in a unique position to help their clients. Most business owners have never looked at their business the way a valuation professional does. If the valuation analyst does a yearly check-up or checks in with their clients but does not include a discussion or a strategy to build value in their business, perhaps it should. This is an opportunity to expand the work base with existing clients and establish good or better relationships. Coming into this year-end, now may be the perfect time to discuss the steps to take today.
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Focus on Value Management In this article, the author discusses the importance of using business value as the baseline driver of business performance and how we use it as a measurement of success.
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How to Implement Value Pricing in Your Firm In this second article of the three-part series, Ronald J. Baker challenges professionals to move from value billing to value pricing. Value pricing inverts the hourly billing model by recognizing the economic facts that it is the customer who is the ultimate arbiter of value. If value is created, the customer understands that cost is secondary.
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Value metrics and capital formation Robert Cimasi serves as chief executive officer of HEALTH CAPITAL CONSULTANTS (HCC). Mr. Cimasi’s firm is a nationally recognized healthcare financial and economic consulting agnecy headquartered in St. Louis, MO, serving clients in 49 states since 1993. He is author of a three-volume set that offers a comprehensive reference guide to the factors involved in consulting with and valuing healthcare practices. In this article, Mr. Wandtke reviews Volume Two, Professional Practices. See http://www.healthcapital.com/advisersguide.
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The Unjustly Neglected “Margin Call” Ross Douthat at the New York Times thinks the Oscars missed crediting an important film this year: Speaking of Noah Millman, reading his Oscar post reminds me that my own comments on the year in movies neglected to mention what was perhaps the most striking injustice of the Best Picture nominations: The lack of any love for “Margin Call,” which was, as Millman writes, “not only extremely well-written and well-acted … but an extremely rare effort to accurately depict the culture of Wall Street.” (Be sure to check out his perceptive take on the movie’s moral and professional dilemmas.) The movie did…