Are You Getting Paid What You’re Worth?
Karl R. LaPan, President and CEO of The NIIC
One of the most difficult tasks for any small business or entrepreneur is determining how to price their products and services. Often, startup ventures are unproven and feel in order to get a foothold into a new customer relationship, or out of desperation, that they have to “under-price” their products/services to win the customer.
Ash Maurya, author of Running Lean, makes an incredibly important and insightful point when he says “pricing drives behavior, what behaviors are you driving when you set your price?” Are you trying to be the K-mart of consulting or are you trying to offer a high-end Von Maur service experience at Walmart prices? If you give your value or worth away for little or nothing, you will be setting the ceiling and marketplace expectation for what your services are worth.
If you’re in a service-based business, like a graphic designer or a management consultant, you know it can be hard at times to gain legitimacy in the marketplace. Unlike a tangible product, a service is not as easy for clients to fully grasp or appreciate. Because you can’t see it, touch it, smell it or taste it, it’s more intangible what your offering really is. This is particularly frustrating because most wouldn’t dine and leave without paying the bill. Why should you as the service provider be expected to give a lot of your expertise and value away for free? Setting boundaries in the various phases of a consulting engagement is paramount.
How then can you shift from a mindset of scarcity to one of abundance? It starts with asking the right questions. You’re probably asking yourself two questions when you set your prices. They are, “What are my clients willing to pay?” and “What is my competition charging?” While it’s true that these questions may influence the client’s decision, you can’t put too much weight on any singular factor. If you do, there is a chance a cost-conscious client will take advantage of you, or worse it leads to scope creep and unrealisitc expectations – the proverbial client from hell or even worse a toxic relationship.
Pricing services should be based on deeply understanding the needs of the customer/client, the value you create by monetizing your knowledge and as the master consulting guru Peter Block advises in his seminal work Flawless Consulting “on how to ask better questions, how to deal with difficult clients, and how to leverage your gifts/strengths in consulting engagements.” Peter also covers authenticity in consulting engagements and walks you through clear methods of engaging with your clients. (This is a must read for any consultant or anyone thinking of becoming a consultant selling your professional services). The book has been around for over three decades. I was first exposed to it in one of my graduate school classes in organizational development in the early 1990s.
So, next time you are putting together a proposal remember to capitalize and measure the value you create and not strictly measure your worth or impact by the hours you bill. Put yourself in the client’s shoes and figure out what difference/impact you will make on advancing their agenda and outcomes and then price accordingly. What skin in the game with you have? Are you transactionally oriented or are you relationship driven? How you price your services will set the table for the type and quality of engagement you will have. You’ll thank me later.
What was your biggest horror story about a consulting gig gone wrong? How did you recover or learn from this experience? Share your insights.