One of the hardest things to do when you first jump the cliff is pricing your work. It’s especially hard in a service business. When you sell a product, you have at least one benchmark in terms of pricing and that is your cost to buy or build the thing that you’re selling.
In a service business, especially when it’s just you, there may be little to no direct costs for each new client. You’re basically alone in the wilderness and if you didn’t do a lot of pricing in your previous career, this can be an uncomfortable process that leaves you feeling lost.
In my last post, Stop Pricing to Win, I talked about the dangers of pricing on your own. It can lead to more work and less money. I call that a real problem. The answer to this problem is the concept of the “value council.” A value council is a group of people who help you with pricing. It does not have to be a complex governing board with defined term limits; it can simply be other business owners that you know.
In Ron Baker’s book, Implementing Value Pricing, he says, “The value council is a deliberate strategy to slow down the process of pricing to focus on value creation.” In other words, pricing too quickly is bad.
Here are a few reasons why a value council can make a HUGE difference in how you price your work.
They are objective. When first starting out, a lot of decisions can feel like they are made in a vacuum. You don’t have an office full of people to bounce ideas off of; it’s just you. If you get off track, there’s no one to straighten you out. A value council, even if it’s just one person to start, gets you out of your own head.
You are your own worst enemy. As I mentioned in my last post, scrambling to build your cash flow can lead to rash decisions and pricing solely to win a proposal. While drafting a proposal, you will immediately start talking yourself down in price until you reach a number that you think will seal the deal. You may go even lower than that point to ensure a victory, but as I mentioned, this will lead to some serious negative side effects.
They will raise your price. Left to your own devices, you will only talk yourself down in price. You will start to question the value you’re bringing or how the recipient of the pitch will perceive your level of experience. With a value council, not only will they stop you from talking yourself down, there’s a good chance they will actually tell you to pitch higher than your initial estimate.
Every time I price a client without consulting at least one member of my value council, I regret it. So don’t leave money on the table. Find your value council.
Bryan is a recent cliff jumper looking forward to running a firm his own way. He aims to catalog his experiences here for future generations of cliff jumpers to learn from. Starting in January 2015, he will also be the Visiting Instructor in Accounting at Assumption College located in Worcester, MA. Bryan is also the co-host of a new podcast, Ctrl Alterego, which follows the saga of two new businesses in different stages of development. He has joined forces with Barrett Young of The Green Abacus for this adventure. Follow along atwww.ctrlalterego.com.