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Can you run a business and not talk to anybody?

At my core, I am a computer nerd. I am excellent at talking to computers. Not so much when it comes to other human beings.

For a long time, this was the only thing I would do. I was the happiest when I got the project specs on paper, so I could read them and implement them, by myself.

But when I decided to become a freelancer, I realized that I had to talk to other people. I had to talk to the people I wanted to serve about their goals and their vision, but also about money. There were times when I knew had to say “no,” but I couldn’t. There were times where there was a conflict that had to be resolved through better communication.

I wish I could say there is an easy “how-to guide” to learn to communicate better, but there isn’t. I just had to practice — one awkward conversation after the other.  

And it is still hard at times. Especially when I need to make a change in how I price things, or in the terms of the engagement. 

So why go through all this trouble and stress of learning to be a better communicator?

Although it seems obvious now, here is the lesson I resisted the most: to find clients and to keep finding better clients, you need to learn to communicate. There is no way around this. 

You need to know how to tell your story compellingly; how to communicate your pricing and how to negotiate in your favor. You need to be able to use your conversation skills to determine how you can best create value for your clients. And, in some cases, you need to know how to let some clients go. 

By avoiding communication, I would frequently make wrong assumptions about what was valuable for my client, and that would jeopardize the relationship and the project. 

If you don’t learn to communicate better, you will have to let someone else do the talking, write the copy on your site, create the video, and tell your story. And even if they do a good job, they are not you :). You will continue to depend on someone else. It will be comfortable, but you will be limited to your view from the “back seat.”

If you are still not convinced then maybe this will shake you up a bit (as it did me): 

“The better communicator will determine the price.” 

A business-savvy website should consider money, and therefore price. And you can spend a lot of time and money optimizing the technical bits, but if your communication is off, your success will be limited.  

I will end this post with a book recommendation. It is the most expensive book I’ve ever bought, but it’s worth every dollar: Pricing Creativity by Blair Enns. Don’t think that if you don’t work in the creative business that this book does not apply to you. It does! And it is all about communication.

What is Value Based Pricing and Why should your business care?

If you hire me to do a website for you and it takes me 40 hours to do it, would you pay me $6,000 dollars? What if it takes me 20 hours? Should I charge only $3,000 because it takes less time and effort?

I used to think that indeed, if something takes less time to do, then I should charge less.

But there is a problem with this approach. Charging for time punishes me for being good!

As I have built many websites, I can work really fast, I have a lot of prebuilt components that I know how to integrate, and I can foresee and prevent a ton of problems. This means that I can produce a quality site much faster than a couple of years ago. But because I put less time into it I get less money for much better work. The better are more efficient I get, the less money I make.

Because of this conflict, there is always a counter pressure that says: “don’t work fast, don’t be efficient… because the slower you work the more you can charge the client”. When I charge for time-spent there is no incentive for me to deliver high-quality work fast, other than my personal integrity.

An alternative way is to do “value based pricing”.

This means that you should charge what is worth to the client, regardless of how much time or effort you put into it.

This may sound unfair to you. I know that was my first reaction! Just because I have more money to spend this means I should be charged more? That sounds like a rip off!

So let’s look at an example.

You have realized that you have more mobile users on your website than you used to. But your website is not mobile friendly! This means you are potentially losing a lot of customers.

After crunching the numbers you realize that if you got 10% of the mobile users to buy from you, you would double your annual revenue from say $200k per year to $400k. So that is an increase of $200k per year.

Do you think is fair to spend $20k to get that increase in revenue? That is 10%. I think it is fair. And there are people willing to spend 50% to get that increase because they will continue to generate the new revenue year after year.

So the question should not be how much does it cost, but rather how valuable is this to me and how much of that value am I willing to spend to get it? 10%, 50%, 80%?

Why would you spend 50% and not 10%? The answer is that spending more reduces the risk of failure. You know the saying “don’t spend a lot of effort to solve a small problem and don’t spend little effort to solve a big problem”.

Why is value based pricing important to your business?

The short answer is that it gets you to think on how you can add value, instead of how you can cut costs. There is no limit on how much value you can add, but you can only cut costs so much before there are no more ways to cut.

And when you think about value, instead of cost, you get clarity.

Here is what I mean. When a client wants to hire me to do something I try to work with them to determine the value of what it is they are trying to do. And in some cases, they realize that they were focusing on the wrong thing. They were willing to spend money on a change that did not actually add any value to their customers.

Thinking about value first made that clear and allowed them to make better decisions on how to serve their clients!

Credits

This post was inspired by Chris Do from TheFutur. Thank you, Chris!