Intangibles have value. And value is the precursor to price. If you’re not great at measuring so called intangibles, you won’t appreciate their value, and if you don’t appreciate their value, you’ll underprice, and when you underprice,...
Intangibles have value. And value is the precursor to price.
If you’re not great at measuring so called intangibles, you won’t appreciate their value, and if you don’t appreciate their value, you’ll underprice, and when you underprice, you’re going to leave a lot of money on the table.
Then you’re going to have to work really hard to compensate for not understanding how to measure, value, and price intangibles.
3 sections today:
CPAs especially get so caught in this question, moreso than in some other professions, because of a few factors:
Next up what we need to do is debunk 3 intangible myths.
Where people get stuck is the idea that it has to be a physical object to be measurable. More things are tangible than you might have realized if you go inside your body and ask if you can perceive it with your senses.
Scales and tape measures aren’t the only way to measure things.
If I want to measure stress, one way is to draw a vial of blood and test for cortisol. But if a person reaches for the video game console to destress, then we can measure how much time they spend playing games to destress.
Once you start doing this, you may find that you use indirect measures more often than direct ones
It doesn’t need to be exact to be useful.
As long as it’s precise enough to be useful, you’re allowed to use it.
The actual steps to get you closer to measuring, valuing, and pricing the intangible
Learn to listen for the intangibles that are important to your buyer.
“Save me from snapping a box of #2 pencils in half because I never would have figured this out.” That’s frustration. Tune your ears to these things.
Find out what they use to measure that intangible - how often they play video games or golf to destress or unplug, to how many games of golf they play a week if business is running smooth - Find out what their indirect measures are.
And ask what that would be worth to them to have those things.
And you can get at the value of improving their condition through the backdoor, with a question like,
“Let’s just say, hypothetically, we WERE able to create that outcome. Would that be worth a million bucks? Or $500K or $250? Or Just $10,000?
They’ll GIVE you a range.
Now you have an answer of what the intangible thing, is worth to them.
And WHAT they tell YOU, is how you price intangibles.
Perhaps that’s Myth #5 that needs debunking, is the very nature of the question is flawed, when framed as “How do I price intangibles.”
How can I understand, appreciate, and translate into a dollar figure what intangibles are worth to my buyer?
YOU don’t determine the price of intangibles, your buyers do.
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