It’s a loaded question, isn’t it?
If you ask someone (let’s say in a friendly conversation, where you’ve both agreed to work together), “what’s this worth to you?” they and you will probably both stumble.
You could Google it.
You could ask about market rates? (Who set them, anyway?)
But every situation is different. In fact, even if you did exactly the same work for two different clients, they would each benefit differently.
So, how do you work out how much you charge?
First, we’re talking about a situation where there aren’t any fixed rates. You both agree to work together, and you both come to an amount that you shake hands over.
No procurement. No RFP process.
One rule that sales professionals might recommend is: “whoever names a price first, loses.” I don’t exactly agree with that approach.
Remember the premises here: you’re ready to work together.
This is not playing poker with each other. It’s simply good will, a little bit of embarrassment and “how do we come to a number?” You both want a fair price.
The power of boundaries
If you have ever been to a lookout on the top of a cliff, you know how much value there is in having a fence to protect you from going too close to the edge.
That’s the power of setting boundaries. Being vague makes it hard to set goals or to make decisions. And the same happens for pricing.
If a restaurant had a “name your price” option, they would go out of business.
But once you see even the beginning of a range of prices, you have a starting point.
“I really don’t have a clue!”
I was speaking to someone recently – let’s call her Anne – who had this problem: she was offering a series of, four career coaching sessions, and a résumé rewrite and LinkedIn profile rewrite.
So, I asked: “what do you charge for that?”
Her: “I don’t know. I really don’t have a clue.”
Anne could have Googled it, and got a range of … anything! How much is her service worth?
She couldn’t answer.
The value of an anchor
The reason she couldn’t answer that very simple question was that she had not terms of reference. How much should she charge? She didn’t want to price too high, because she might lose the deal. Also, she didn’t want to charge too low, and leave money on the table.
Even worse, she didn’t want to attract people who were not in a position to take advantage of her expertise (and pay for it!)
So, here’s how we proceeded.
I asked Anne what her four sessions PLUS résumé and LinkedIn profile makeover were worth, altogether.
Anne: “I don’t have any idea.”
Me: “Okay. Let’s call it $50,000.”
Anne said: “that’s ridiculous!”
I then said: “Fine. Too expensive? Okay, then. Let’s call it $20. Entire package – four sessions plus the profile rewrites – all for a grand total of $20.”
Anne naturally said that was too cheap. But it gave her a starting point.
From there, I was able to tell Anne: “So, all of this value you’re bringing is worth more than $20 and less than $50,000.”
That was all that was needed for Anne to start heading down the path of finding a price for her services.
“So, how much did she end up charging?”
I’m not going to say. But there were three key lessons here:
- Starting with something—however ridiculous—was all that was needed to get Anne to find a price point she was happy with.
- Pricing is an inexact science, and it’s silly to expect a specific number in a service business where you can set your own prices.
- Anne needed to be comfortable that the price she charged was one she could stand by. She needed to be able to see the value for herself, and of course her client also needed to be able to see the value.
Whatever the problem, pick an anchor
Choosing some broad-brush parameters is powerful. Even having wildly inadequate boundaries—such as between $50,000 and just $20 for several hours of work—is enough to get you to focus on the real value you’re providing.
This approach works with determining how much money you want to make in a year or how much time you want to spend on an activity. It works because it allows you to move away from vagueness and to get a little closer to a number you are happy with.