December 20, 2018
What if you don’t make good on your promise?
A pre-condition for value pricing is to first understand what specific business outcome your client desires. Without that, there’s nothing to price.
So let’s say that in your initial meeting that you successfully uncover the client’s underlying goal for your engagement. You then quote them a price based on the value of the outcome. They accept and pay, and you get to work. Yay, money!
What happens if six months (and 1000 hours) later you’re no closer to reaching the goal? Do you give the money back? Do you keep working indefinitely toward the goal? Do you try to split the difference? Boo, stress!
This a tough situation that raises several considerations. I’m going to spend the next few days exploring each. For example:
- Picking a metric that you are confident you can improve
- The difference between leading and lagging indicators
- Knowing when to give up (and how to do it)
- The interplay between risk, price, and guarantee
- Distributing risk across multiple clients
- Diversifying your income streams to mitigate risk