January 21, 2018
Reader question: “What if I have no clue what the value is?”
Long-time reader Alexandre Lyoen sent in a very nice message - thanks for the kind words, Alex! - in which he asked the following question (shared with permission):
When you really have no clue about the concrete value you provide (e.g. feeling safer) and it could be $1k or $10k, how do you determine a price on that? Do you randomly give a price and wait for the reaction of the prospect?
I have a three thoughts on this that I’ll list in the order that they occurred to me:
1) You have a clue—I know it’s hard but it’s probably not the case that you have literally “no clue” what the value is. Lots of times when someone says, “I have no idea,” what they really mean in, “I don’t know exactly.”
You probably can make a safe guess that the value is more than ten bucks and less than a trillion dollars. That range is too large to be useful, but you do have an idea :-)
Here’s the thing... Could you narrow the range down to something useful? Could your intervention be worth as much as the client’s annual revenue? As much as the CMO’s salary? As much as they spent on that new delivery truck?
2) Try again, or pass—If you still have no clue about the value to the client, you probably shouldn’t quote the work. Either politely take your hat out of the ring or have another Why Conversation by saying something like:
“I’ve been going over everything we discussed on the phone and I just don’t see how you’d get a positive ROI out of an engagement with me. I understand if you’d prefer to go with someone else but if you’d like to have one more call to work it out, I have time on Thursday at 1pm.”
3) Offer options—If you still have no idea whatsoever what the value to the client is, and they won’t engage in another conversation, and you really need to quote the work anyway, I’d write a proposal with three options.
In terms of pricing, I’d base the price for option 1 on what I imagine my time & material costs might be and then multiply that number by two to arrive at a price. In a situation like this, folks are prone to dramatically undervaluing their value. Doubling your estimated costs will decrease the odds of you getting killed by scope creep and faulty assumptions.
Then, I’d set the price for option 2 at about 2.2x the price of option 1, and the price for option 3 would be about 5x the price of option 1. So if your base price for option 1 is $10,000, option 2 would be $22,000, and option 3 would be $50,000.
Having three options probably won’t increase your odds of landing the gig, but it will definitely decrease the odds of you leaving money on the table if you do get the work.
I hope that helps!
Questions? Just hit reply and start typing - I read every message :)
P.S. Friends don’t let friends bill by the hour. Gift options available at check out -> http://hourlybillingisnuts.com