Captain’s log, stardate 20161105
Sent by Jonathan Stark on November 5th, 2016
Reader Nicolás Ignacio Gómez Espejo wrote in to ask a follow-up question regarding my recent message about justifying a higher fixed price vs lower hourly estimates by pointing out the difference in risk.
Here’s his message (shared with permission):
I found interesting that I haven’t seen developers in my city that charge using estimates.
What they do is charging fixed prices based on a estimate:
Calculate how much time it will consume and multiple it by your hourly rate and by a risk factor.
That is a classic quote from my peers at facebook groups when beginners ask how much to charge.
Your answer is good but may not work here at all (Santiago, Chile). Although for some reason I haven’t heard it yet.
Anyways, what might be a good alternative answers for the question?
The solution here is to differentiate yourself from your competitors.
If your prospect can’t detect any meaningful difference between you and your competitors, then they’ll choose the least expensive one.
Why wouldn’t they?
An excellent way to quickly differentiate yourself from your competition is to specialize.
Once you have created a meaningful distinction between you and your competitors, your prospects will no longer be able to make an apples to apples comparison.
When they ask you why you’re more expensive than the other options, you can point to your unique difference. If it is meaningful enough to them, they will agree to your price.
P.S. Are you still stuck in the hourly billing mindset? My book will get you unstuck -> http://hourlybillingisnuts.com