Sent by Jonathan Stark on May 15th, 2018
List member Dominic O’Toole replied to my “Estimated Price” is an oxymoron message to share a long list of AH-HA moments (shared with permission):
Hi Jonathan, I’m just going through this experience for the first time. I’m 4 weeks into my part-time consultancy ( the first two weeks were spent gardening ;-) but now I’m getting serious ). I have always worked full time and this is a big shift for me, but I have been reading your material for the last year or so and I have decided to only do value pricing from the start. It was very tempting to price by the day, and I was asked for this in my first two jobs, however, I know the more I do value pricing, the better I will get. Some things I’ve noticed ( you have mentioned them many times before ): * There is a curious mental shift that occurs when you are solely responsible for the success and profit from the project. I feel it focuses me more. * I’m actively looking for tools that will make my life easier. Even if there is a cost involved, if they save me time in the long run then I’ll invest. * I’m doing more due diligence up front, tying all the loose ends together. I’m taking the risk now and it will be on my head. Previously as a full-time employee, I would have jumped into a piece of work and figured it out as I went along. * In terms of implementation, I’m looking at things from a longer-term perspective ( in terms of code quality ) and the design in my head is forming to ensure it’s as robust as possible. * I left money on the table when I submitted my first indicative estimate. I had included support in the price but didn’t explicitly call this out. The client followed up asked me for a separate quote for support. In hindsight, my initial quote was low. * People love having options. For one road mapping session, I gave the normal 3 options and the client went for the highest one. I was surprised at this. * Talking money is difficult at the moment as I’ve never had to do it before. As I’m just getting established, I don’t want to price too high and be sitting twiddling my thumbs for the next few weeks. dominic
Thanks for sharing Dominic!
I have heard from many people that they have similar experiences once they start moving over to value pricing. It’s a fundamental shift that affects pretty much everything about your business.
Before I go, there’s one thing I want to call out:
I don’t want to price too high and be sitting twiddling my thumbs for the next few weeks.
When you first start out, you’ll repeatedly price yourself too low, so you should almost certainly price yourself higher than you think.
If you actually do price yourself too high and lose the engagement, you don’t need to be twiddling your thumbs for a few weeks. You can use that time productively to work ON your business in a dozen different ways.
It’s worth pointing out that once you’ve stopped trading time for money, there’s no reason to be doing client work 24/7. It’s normal to have “thumb twiddling” time to devote to marketing, optimizing, creating IP, and other non-client related business activities.