May 30, 2017
Chatting over potato salad
Over the weekend we went to a backyard barbecue and oddly enough, I found myself in a conversation about pricing.
I was talking with a woman who is a very successful college professor. She has published a lot over the course of her career, has a blog that gets millions of views, and has appeared on network TV shows more than once.
Somewhat out of the blue, she mentioned that someone had approached her about a consulting gig and that she had no idea how to price it. She briefly described the nature of the work which consisted of a day or two of onsite consulting work.
She concluded by saying that the prospective client had mentioned $1500 as a fee for the work, but that that seemed a little low to her. I said, “Yeah... I was thinking you could charge closer to $50,000 for that.”
Her eyes didn’t quite pop out of her head, but it was close.
To be fair, I was mostly basing my estimate on her level of notoriety and a very vague assumption about the benefits that she could provide to the client.
She asked me to explain my reasoning which I did by role playing a quick Why Conversation with her. (Because she had so much experience with this type of client, it was pretty easy for her to answer on their behalf.)
The Q&A went something like this:
Q: “What would happen if they didn’t hire you (or someone like you) to do this?”
A: “They’ll have a harder and harder time attracting new students.”
Q: “Is that a big deal?”
A: “Huge. Their attendance is dropping more every year. It’s an existential crisis.”
Q: “Do leading institutions hire people to do this?”
A: “Oh yes. Harvard has 3 full time employees doing this.”
Q: “Is it safe to assume that Harvard pays these employees at least $75,000 per year?”
A: “Yes.”
Q: “Why doesn’t your prospect hire a person or three to do this in-house?”
A: “They couldn’t afford it. Or at least they couldn’t get budget approval without first demonstrating the value of hiring internally.”
So on and so forth...
By the end of about five minutes of me trying to talk her (pretending to be the client) out of hiring her, I lowered my estimate to something more in the $30k range that would take her 2-3 days onsite.
We also agreed that the current prospect probably couldn’t afford that fee but brainstormed a couple of quick and easy tactics for identifying prospects who could afford it and how to attract those buyers through outreach and educational content marketing.
She wrapped up the conversation by saying, “I’ll be damned. What a mind shift!”
Then we headed over to the bouncy house to watch the kids try to slap each other out of the air with Nerf swords.
Takeaway:
Basing your prices on the value of the business outcome to the client rather than the amount of work you have to do on the client’s behalf is a total game changer.
The mind-shift is difficult, but once you see the world in this way, it’s hard to imagine how you ever did it any other way.
Yours,
—J
P.S. The launch of my upcoming private mentoring program is imminent. Each qualified participant will be entitled to six months of unlimited 1-on-1 access to me by email, phone, fax, or carrier pigeon. Participation will be limited to 10 people (19 have expressed interest in the last few days) and the fee for the entire six months is $3500. Click here to add your name to the early announcement list -> Yes, add my name to the list!