Captain’s log, stardate 20170403

How to set “no-brainer” prices

Sent by Jonathan Stark on April 3rd, 2017

What price should you quote for a project that would save your client $100,000 per year?

This is tough to answer without knowledge of several factors including...

the depth of the relationship
the level of collaboration
the certainty of the outcome

...but in general, quoting $10,000 (i.e., 10% of projected first year savings) would make the deal a no-brainer.

But what if you guesstimate that the project will take you 500 hours?

A $10,000 price tag for a 500 hour project would result in an effective hourly rate (EHR) of $20/hr, which by most standards would be terribly low.

Let’s say you wanted to make an EHR of at least $100 per hour... what should you do?

Some options:

Bad — Estimate the project at $50,000 (500 hours at $100/hr) and hope for the best
Better — Don’t take the project
Best — Quote the project at $10,000 and come up with an alternative approach that you can deliver in 10 hours

Once you start setting prices by working backwards from the client’s perceived value of the project, you’ll find that you get much better at the sort of creative thinking that makes option 3 a reality with increasing regularity.

Yours,

—J

P.S. As promised, the price for 1-on-1 coaching calls has been increased (but according to past buyers, it’s still too low) https://jonathanstark.com/call