Captain’s log, stardate 20190310
Sent by Jonathan Stark on March 12th, 2019
Let’s say a potential client named Alice wants you to do some work for her and asks for your hourly rate. You tell her you don’t have an hourly rate, but would be happy to give her a fixed price for the work. She agrees to this idea, the two of you discuss the project, and you send a proposal to her with a fixed price.
Later in the day, Alice emails back to ask:
“Approximately how many hours will this project take you?”
Oops. Bad sign. There are a few reasons why someone in Alice’s situation might want to know how many hours are involved, but I’d say the most common one I come across with students is this:
Your price seems high and she’s trying to justify it.
Folks who are new to value pricing often fail to uncover the perceived value of the project during the sales interview. Without this, there’s nothing to anchor the price against in the proposal.
This is a problem because clients want to compare prices to something. If you don’t articulate the value in the proposal, they will sometimes default to anchoring against what they estimate your costs to be. Hence, the question about the number of hours.
Here’s how I’d reply:
“I don’t know how many hours it will take, which is exactly why I don’t bill by the hour. I just don’t think it’s fair to ask you to start paying me before you know how much the project will ultimately cost. Why do you ask?”
With this short message, I point out the fact that there is uncertainty involved with this kind of project, and I highlight the fact that I’m shouldering much of the risk associated with this uncertainty by providing a fixed price.
Notice that I close by asking why she wants to know. My intent is to start a dialog and turn the conversation around to the value of the project, instead of the cost of my labor.
Again, establishing the value is something that you should do in the sales interview before you submit your proposal, but in a case like this it’s not impossible to salvage the deal by uncovering it after the fact.