Pricing and the Art of Not Selling Yourself Short – B Side

Just like those old 45 RPM records it’s time to flip to the B Side and follow up on yesterday’s post.

On Side A, we met three different Business owners.

Mark gave the best proposal for a big corporate but they turned him down because of one thing which I’ll talk about in a second.

William on the other hand won his big projects because he is able to deliver something much more valuable to his clients than being the cheapest provider.

And Finally, Natalie was new into her business and making a common unforced error where she would be sure to attract lower quality clients and more difficult conversations too.

Your Price is too Low

That was a shock to Mark. The corporate told him bluntly.. “We are looking for the best and the fact that you priced your proposal 8 times less than what we are willing to pay makes us think you aren’t the best…”

Let that sink in for a second..

Especially those of you who are worried about cheap competitors whose only pitch is that they are the cheapest…

Done Right One Time

William wins his projects because he promised his clients two things: 1) the job will be done right and only one time (i.e. client won’t be coming back repeatedly to fix issues) and 2) the project is scoped on what the client needs not on what William hopes to sell him.

William shared an example of a client who wanted a huge forum built for his website. But this client was a 3 man shop and no one would have the time to properly monitor it. William told the client that he should not build the forum and the client gave him the business.

Why?

Because the other proposals didn’t mention the fallacy of a forum and they all included the cost of developing one. In short, the other vendors put the transaction before the customer.

Think like an Owner – Not an Employee

Finally Natalie was pricing her expertise by time. A half day costs XYZ. But here’s the problem. That will attract clients who want to stuff her half day with everything under the sun and complain that it’s not getting done.

Then it’s endless discussions about refunds, and is she spending her time like she is being paid, etc.

I gave her the Dan Kennedy story of the plumber who comes on an emergency to fix a blocked pipe. He takes out a hammer, gives the pipe a knock, and the blockage is gone. It takes all of 2 minutes and the plumber gives a bill for $245.

When the homeowner complains and angrily demands an audited receipt for how the $245 was calculated, the plumber writes the following:

“$5 to strike pipe with hammer
$240 knowing where to strike the pipe.”

Employees are paid by time. Unless they are commission based, they get a salary based on some time component (per hour, per month, etc).

Business owners though are paid by both physical labour and the expertise they bring to the table.

Which is why pricing should not be reduced to a simple formula, a time based exercise, or other shortcut that is independent of the impact or value you provide.

I can go on and on… but these lessons as well as other key pricing concepts will be discussed in our 17 January Do You Charge What You’re Worth? Workshop (details to be soon released).

If you find yourself struggling to find the right price for your services or if the thought of raising prices make you uneasy than check it out.

You can reply directly to me and I will send you the details first before everyone else.