You Know Your Costs. But Do You Know Your Value?
Adapted from concepts developed by Tim Williams in his original March 2017 article, You Know Your Costs. But Do You Know Your Value? Updated to consider AI, automation, and procurement transparency.
Most firms walk into pricing discussions armed with spreadsheets listing roles, rates, and estimated hours, ready to defend their costs. Fewer walk in equally prepared to articulate the value they’re about to create.
It’s little wonder that professional buyers consistently hold the upper hand. When we define our worth in terms of effort instead of impact, we’ve already given up our power in the conversation.
From Cost Defense to Value Leadership
Think of the last effective salesperson you encountered. Perhaps the one who sold you your last car. They didn’t focus on labor costs or assembly hours. They sold you on performance, reliability, resale value, and on how well the product fulfilled your purpose for the purchase.
Now imagine that same salesperson saying:
“This car costs $45,000 because it took 180 hours to build.”
How would your perception of value be different?
This is exactly how many professional firms talk about their work. They carefully defend costs while skipping past what the client is actually buying: the ability to solve meaningful business problems.
When you sell cost, you invite comparison. When you sell value, you establish difference.
Estimate Value Before You Estimate Cost
To shift from defending cost to selling value, firms need to reverse their thinking from bottom-up costing to top-down pricing.
Bottom-up costing starts with the product and works upward:
product → cost → price → value → customer
Top-down pricing does the opposite:
customer → value → price → cost → product
In time and effort-based models, clients can easily calculate your cost structure using industry benchmarks and by researching and comparing other providers. However, the concern we’re raising here isn’t about whether your buyers will know your numbers. It’s whether you understand your own worth.
When you begin with value rather than cost, you can start to understand the economics of your expertise.
Here are five questions that help firms estimate value instead of estimating cost. Rate each from 1 to 10 to form a “value score” for your next engagement:
Strategic Importance – How critical is this assignment to the client’s larger objectives?
Value Horizon – Will it create long-term value, or is it purely tactical?
Value Classification – How specialized or scarce is the expertise required?
Unique Qualification – Could anyone else realistically deliver the same outcome?
Financial Impact – If successful, what will this be worth in revenue gained or costs reduced?
Firms that can answer these questions with precision, from the perspective of their clients, tend to command stronger pricing power and, more importantly, confidence.
The Framing Effect
Behavioral economists call this framing: how a number is presented matters as much as the number itself.
In pricing, language is framing.
Most firms still use the language of cost—rates, estimates, billable time, utilization. Those are procurement’s words. They belong to buyers, not sellers.
The language of value sounds different. It uses price instead of cost, solutions instead of services, and focuses on objectives, outcomes, results, and success.
It shifts the mental model from expense to investment.
As much as this might sound like semantics, it’s more accurately a strategy. Research from McKinsey & Company and behavioral economists such as Richard Thaler and Daniel Kahneman has shown that simply reframing how a price is presented—focusing on value delivered rather than cost incurred—can increase buyer acceptance by double-digit percentages, even when the number itself doesn’t change. Studies cited in William Poundstone’s Priceless and Rafi Mohammed’s The 1% Windfall found similar effects in B2B pricing and negotiation contexts.
The AI and Procurement Reality
AI has rendered time unusable as a measure of value for most firms.
By accelerating delivery, the correlation between effort and outcome collapses. Work that once justified days of billable time now takes hours, sometimes minutes. In a labor-based model, when results arrive faster, professional procurement teams fairly make the assumption that costs, and therefore prices, should fall.
Inside every time-based agency, the better the firm becomes at using AI, the harder it will become to defend margins. And it’s why every conversation about “AI disruption” is, at its core, a conversation about pricing power.
The firms adapting most effectively are re-architecting how value flows through their business. They are designing models that separate effort from worth and turn efficiencies from AI into advantage.
This is the foundation of what we call Value Model Architecture—a system that connects expertise, outcomes, and economics by design:
Defining value in terms of client outcomes.
Designing value through specialized expertise and systems.
Delivering value through repeatable, scalable frameworks.
Capturing value through pricing tied to measurable impact.
Reframing the Conversation
Walking into a pricing discussion armed only with a spreadsheet is walking into an unfair fight. Procurement is trained to focus on cost, and if you enter into that game, you’ve already lost.
The only effective strategy is to redefine the conversation entirely. Lead with outcomes. Quantify impact. Frame your pricing as a reflection of results, not effort.
Because when clients buy cost, they negotiate downward. When clients buy value, they invest upward.
Closing Thought
The firms positioned for growth are no longer defined by their rates or headcount, but by their ability to articulate, with clarity and conviction, what their work is worth: to the client, to the outcome, and to the future they’re helping create.
