What is Value Billing?

Value billing is a charge to a customer based on the value received, rather than the cost of the services provided. This type of billing is most common in situations where the value provided is unique and essential to the customer. In areas where there is a competitive market for services, it is not possible for a supplier to enforce value billing, since similar services can be provided by competitors that are cost-based, and therefore much lower.

Examples of Value Billing

As an example of value billing, an investment banker can issue value billings because the value provided in securing funding for a client is so great. Similarly, a defense attorney can issue value billings because the value to the client of staying out of jail is extremely high.

Advantages of Value Billing

There are multiple advantages to the use of value billing with a client. First, the provider of services can use any approach required to ensure that the targeted outcome is achieved, with no oversight from the client regarding the methods used or costs expended. Second, the provider of services and the client are both focused on exactly the same outcome; this differs from the standard billing model, where the provider merely bills for hours worked. And finally, the provider of services has an opportunity to achieve dramatically higher revenues, provided that it can produce the results desired by the client.