Pricing of professional services is something I think about a lot–both for my clients, and for myself. I recently put together some tips for a couple of clients, and thought I'd share them here. If you have other tips, please add them!
1. If you know how to price Fixed Fee, it is nearly always a better option than TIme & Materials pricing–for both the client and you. It aligns your goals with those of your client, avoids making your time into a commodity, and rewards you for delivering great results quickly and efficiently.
2. You only want to work when you have what Alan Weiss calls a “peer relationship” with the buyer. This means that the buyer sees you as an equal—someone worthy of respect—and not simply as a vendor or an order taker. If they see you as a peer, they will be more willing to be honest about what they need—and more likely to want to work with you on an ongoing basis. Cutting price too quickly detracts from the peer relationship.
3. Make sure you understand what the client really wants and is willing to pay for before you structure the proposal If they don’t want the “leather seats”, give them cloth, and charge them less for the lower-vaue offering.
4. Give your best fair price the first time. You don’t want your clients to think they have to negotiate in order to get something reasonable.
5. If the client asks for a better price, your first task is to understand why they are asking. Do they not see the value you are providing? Or do they see the value but just not have that much budget available?
6. If the client doesn’t see your value, you didn’t build credibility prior to creating the proposal. Next time, do it better (and do it differently). But for now, go back to “what they wanted” and ask what’s missing for them—focus on meeting their objectives, rather than on your unique process. No one cares about process when negotiating price. People care about outcomes.
7. If the client sees your value, but doesn’t want to pay that much (think Lexus vs Toyota) figure out where you can remove cost and value from the project. Never, ever, cut the price without removing some value.
8. Consider offering discounts for other benefits. 10% off for full payment up front, for example. Or 15% off project if they commit and pay deposits on all three phases up front.
9. Keep proposals simple enough to sign but detailed enough to prevent misunderstandings down the line
10. Sometimes it makes the most sense to “lose” the project — not all business is "good business". If the client doesn't have budget, doesn't need your specific services, or is not willing to pay for your value–let them go somewhere else.
