This question came up as I was doing research for an article on value-based pricing for an upcoming HOW Magazine article (watch for it in the Business Annual in November 2013).
I was interviewing Mike McDerment, CEO and Founder of FreshBooks.com, a simple cloud-accounting solution for small business owners and the co-author of a new (free!) book, Breaking the Time Barrier: How to Unlock Your True Earning Potential when he made a very provocative statement:
“When you say to a client, ‘This is what I do and this is how much it costs,’ you are demonstrating a lack of interest in your client, which is fundamentally disrespectful.”
In the article, I wrote, “An alternate – and arguably more effective — mindset starts instead with a question about the client’s objectives. When presented with a prospective project, you could ask, “What is the client looking to achieve? What can I do to help? And what could that be worth to them?”
This is the essence of value-based pricing. An old but not well understood concept: pricing your services based on the impact they will deliver for your customer.
And be sure to download Breaking the Time Barrier: How to Unlock Your True Earning Potential. It’s is a very quick read, a primer to think differently about the value you offer and see if through the eyes of your client and what they’re trying to do. This insight changed everything in Mike’s previous web design business.