Pricing sometimes comes up when I talk to people about business, often they aren’t sure what to charge and worried about either losing the business or undercharging. This is especially true for people in consultancy or service type businesses. Often you are basically pricing yourself and perhaps, underestimating your value.
Over the years in my other consultancy business, I have been asked to provide proposals or even take part in competitive tenders. Some you win and some you lose (for a variety of reasons) but the key to pricing is in having a formula that gives you a good shout of winning.
Recently we won a piece of business. I thought our price was reasonable, not too high but not underselling ourselves by any means. Unknown to me a 2nd quote was sought, and this came in higher than ours by some 30%, which was rejected by the client. At that point the provider went back to the client saying they had neglected to offer a discount at roughly 40% of their original quote. Of course, the client (my client) rejected this and went with our proposal. If they could do the project at that price, why didn’t they offer that before? The actions of the competitor only strengthened our position and showed us to be fair in our pricing.
Now this is down to having a good idea of your costs. We have a fairly sophisticated spreadsheet that details our costs, allows us to scale up the project by volume and also creates a series of margins from which we decide to ‘pitch’ a particular price. As I said, in business some you win and some you lose, but my general rule is to pitch a price that is fair, gives a decent margin and provides confidence putting forward any proposal. Having a sense of the market rate and working in your target market also helps.
My advice is to create your own system, be clear on your costs and margins. Take the wider view, treat the client with respect and put forward a price you think is profitable for you and is a fair representation of the value you add.
Give me a call or email on johnd@asentiv.com if you want more information, especially those of you who are selling ‘yourself’ and want to be confident of your worth.