Clearing the Fog: The Hidden Pattern in Professional Services Pricing

Professional services leaders are confused by commercial complexity as AI eliminates billable hours. Every proposed solution seems to pile more layers of difficulty onto already overburdened teams. What if the path forward is actually simpler than we think?

How can we call the next play?

"This is complete garbage."

The senior partner's outburst silenced the room. "Everyone keeps telling us to get off billable hours. Fine. But every alternative feels like we're trading a simple problem for a complex one. Fixed Fee with contingency? Value-based? Gain-share? Service as a Service? Each 'solution' seems to pile more layers of complexity on top of our already overburdened teams than the last. How exactly are we supposed to move forward without putting our client relationships and revenue at risk?"

Elena Kovac (not her real name) understood the frustration. As head of commercial transformation for her consulting firm, she'd seen too many of these discussions devolve into anxiety about complex pricing models and fears about disrupting successful practices. The whiteboard behind her was covered with competing approaches that seemed to multiply with each passing week.

"Maybe we're making this harder than it needs to be," she said finally. "Before we debate pricing models, let's start with something simpler: What are our clients actually asking us to do?"

That question changed everything. The room's focus shifted from complex pricing structures to fundamental client needs.

The Four Fundamental Client Needs

The answer has become clear. Every client engagement falls into one of four fundamental needs:

1. Add Capacity: Provider will assist in the work client is controlling

2. Deliver Output: Client needs a specific thing -- an assessment, strategy, system, or solution that you (provider) will deliver

3. Drive Outcome: You (provider) will deliver measurable impact on our business

4. Provide Capability: You (provider) will deliver an ongoing service at specified levels of quality, quantity, and utility - from cyber threat coverage to strategy production

Aligning Client Needs with Commercial Models

Service Type	Client Need	What They Value	Commercial Model
Capacity	Provider will assist in the work client is controlling	Control and expertise access	Time and Materials
Output	Client needs a specific "thing" that the provider will deliver	Certainty in scope, time, or budget	Fixed Price
Outcome	Provider will deliver measurable impact on client's business	Business Impact	Performance-based
Capability	Provider will deliver an ongoing service at specified levels of quality, quantity, and utility	Service reliability & predictable payment	Subscription/ managed service

The Benefits of Alignment

When firms align their pricing models with what clients actually value, several benefits emerge:

1. Better Conversations: Discussions naturally focus on what matters to clients

2. Meaningful Choices: Instead of negotiating resources, clients can choose between clear value options

3. Clearer Boundaries: The line between client and provider responsibilities becomes obvious

4. Natural Collaboration: Both sides focus on maximizing value rather than minimizing costs

The senior partner who had initially protested leaned forward. "Fine, I see how these four models align with what clients want. But we're still trading a simple pricing approach for more complex ones. With all these new methods, how do I know what a good price is?"

Elena smiled. She'd been waiting for this question. "Here's something that might surprise you - the transition has a more natural starting point than you might expect, because it builds on how we all think about price."

Price Anchoring

Elena smiled. "Let me share a simple story. How much did it cost you to fill your tank with gas last time?"

The partner looked puzzled but played along. "About eighty dollars."

"Now imagine I told you about a revolutionary technology that dramatically reduced the cost of refining oil. How would you judge whether you're getting a good price at the pump?"

"According to what I paid last time," the partner said, then his eyes widened as he caught on.

"Exactly. Clients will 'anchor' on what they've been paying. And in a world that expects to pay more every time due to inflation, what would paying last year's price look like to them?"

"A good deal," the partner said slowly.

"Precisely. So if our costs are dropping faster than inflation is increasing thanks to AI and automation, while we maintain last year's prices, something interesting happens: clients think they're getting a deal because prices aren't

rising with inflation, and we're actually improving our margins because our costs are falling. It's genuinely win-win."

"And not only does this create value for both sides," Elena added, "it actually simplifies pricing decisions. When you know last year's price was good, and you know your costs are dropping, maintaining that price becomes an obvious choice."

The partner wasn't fully convinced. "That's all well and good, Elena, but we don't have systems to track this stuff, and our partners aren't equipped to handle these new models. We'd need a whole new infrastructure."

"Actually," Elena countered, "that's another place where we often overcomplicate things. Yes, we'll need new systems eventually. But let me share how other firms have started this journey successfully."

The Reality of Transformation

She outlined how successful firms approached these challenges: "The key is starting simple and building from there. Here's what actually works:"

Manual Before Automated

"You're right that our systems aren't built for this," she explained. "But that's okay. We start manually:

• Track new metrics by hand at first

• Model different scenarios in spreadsheets

• Manage costs in new ways before automation

• Learn what really needs to be systematized

Real-Time Support

• Create a "pricing war room" for on-demand support

• Provide coaching for crucial client conversations

• Offer immediate guidance on new approaches

• Share learnings across the organization

Financial Backing

• Develop new funding mechanisms

• Provide a new class of partner metrics

• Provide short-term methods to track client investments

• Provide vision for a new business model

Cultural Shifts

• Balance individual autonomy with collective success

• Create safe spaces for learning from failures

• Implement new incentives and recognition

• Initiate disciplined learning in the new methods

Leadership Commitment

• Maintain sustained focus despite discomfort

• Provide visible support for transformation

• Celebrate early wins and learnings

• Demonstrate long-term commitment

"This all sounds good in theory," the senior partner said, leaning back in his chair. "But let's be honest - our comp structures still reward traditional metrics. Until that changes, this is just more blue pen on a whiteboard."

The room fell silent. It was the uncomfortable truth they'd all been dancing around.

"You're absolutely right," a voice came from the doorway. The CEO had been quietly listening. "Our compensation structure is designed for a world that's disappearing. When AI can do in minutes what once took weeks, holding onto old metrics isn't just uncomfortable - it's existential."

He walked to the whiteboard and picked up a marker. "The question isn't whether we change our metrics and compensation - it's how quickly we can do it while keeping our talent. Because if we don't figure this out, there won't be any comp structures to debate."

Elena watched the room's expression shift from skepticism to recognition. Sometimes the most powerful motivator isn't the promise of something better, but the stark reality of what happens if you stand still.

"So," the CEO continued with a slight smile, "shall we talk about what those new metrics might look like? After all, I've got two kids in college, and I'm betting some of you do too."

The senior partner who had started the meeting with "this is complete garbage" actually chuckled. "Fine," he said. "But I want Elena leading this. At least she admits when things are going to be hard."

Elena nodded. The path forward wouldn't be easy, but having the right conversation was always the first step. And finally, they were having the right conversation.

Disclaimer: The stories and insights shared in this blog are based on my personal experiences and conversations throughout my career. While some content reflects recent events, they are drawn from a broad range of interactions with professionals across professional services, including friends and colleagues from various organizations, and do not specifically refer to or represent any single employer, past or present. Identities have been anonymized, and quotes may be paraphrased or combined for clarity and storytelling purposes. This post is a personal endeavor and does not reflect the views or proprietary information of any employer.