When the time is right
John La Valle
Some discussions in a program I was running have been centered around how much to charge for services, whether consulting, or others. This is not necessarily the place to start, as I discovered through the School of Hard Knocks, thankfully many, many years ago.
Back in the first days of my opening my consulting business, I had the opportunity to be introduced to the Vice President of a large company here in the US, who also happened to be interested in what I do with teambuilding, etc. Anyway, as I was leaving my house for the appointment, Kathleen asked me how much I was going to charge him and I replied, "I don't know." She said, "Come back in here and close the door." I did, of course, and she said, "You have to have a number in mind, you know," and I knew she was right (as she usually is). So I said, "Yes, dear. My good friend Charlie is a consultant and he gets $600 per day, so I'll charge that." In the mid 80's $600 per day was considered good as the average to good consultant goes. She said, "OK, good." And I took off for the appointment.
To make this one a bit short, in my just less than one hour drive, I kept giving myself increases for various reasons and by the time I got to the appointment, I was up to $1,200 per day, and thought, "Wow! That was easy!" I went to the person's office, introduced myself to his secretary and she said, "I'm sorry, he got tied up in a meeting and will be a while. He wants you to wait. I said, "Yes, of course," or something pleasant and immediately thought, "$1,400 a day. I'm not waiting for free!!"
He came around about a half hour later and we went into his office and "chatted" a bit before he asked me what I charged. I said, "$1,500 per day plus expenses." His replied: "That's all?" Well, I moved fast and said, "For the first time you use me because it's like an audition." (I was a musician in another time long ago). As I calibrated him carefully, he asked, "And how much is it after that?" I said, "2,500 per day plus expenses," held my breath, watched as he smiled, let my breath out as he said, "That's better. That's what the really good consultants are charging, anyway." He hired me for a day, checked me out, paid the $2,500 on a $1,500 invoice and gave me lots of business after that.
So where did I get the $2,500 figure from? Just pulled it out of my head based on what information I had up to that point, including his nonverbal cues.
What type or kind of people do you want as customers? There's a relationship, obviously, between the price, the time span of the project and their expectations based on their perceived value afterward. While this may initially seem complicated, it really isn't. People who are willing to pay more for something are already prequalifying themselves for you regarding the price and what they expect, or not.
When Kathleen and I first started doing public seminars here in New Jersey many years ago, we played with prices for a one day introduction program, a teaser that was well packed with great information, anyway. We priced from $100 for the day all the way down to FREE! That's right: FREE! And here's what we learned:
The more we lowered the price, the more people we got to attend the intro program!! Great, right? But the less people we got to sign up for our longer, higher priced seminar, which is why we were conducting the intro's, anyway. And as we got closer to "Free", we started getting questions like, "Are you providing lunch?" and on and on. So we raised the price, got more quality and more qualified people, less attendees in our intro's and more people signing up for the longer, higher priced seminars. And no questions about free lunch.
Most people who know me know that I "work" about 6 months per year, sometimes a bit more. People want to know why? I really say, "Because I can." But that's predicated on other things I realized when I first started out. The first thing was that I didn't want to work and travel 50 weeks per year as I was, and second, I wanted to qualify my corporate customers so that I'd have quality companies to work with.
So assuming that you have a quality product or service, why should you charge more?
First, you shift your market appeal from the shoppers to the buyers. Period. Shoppers shop, buyers buy. A store that is full of shoppers with a few buyers, isn't as valuable as a store full of buyers, and just a few shoppers. Shoppers are looking for the "bargains", the "deals". They'll be sure to tell you what so-and-so is charging, as if that matters. Shoppers often don't know what they want and when they do, it's usually then just the price. Buyers often know what they want and want it. Period. They will sort through their "higher quality" expectations, too.
Second, if someone else is charging more, the buyers want to know why. If it satisfies more of their criteria than the lower priced guy, they'll go for the higher priced item.
The next part of the pricing aspect is what you think your services are worth, or what you are worth as a resource commodity. When you think about it, even with so many seminars being priced low, doesn't it raise that question in your head? What does this person really think they are worth? Why would they charge so little? How do they pay their bills? How long will they be able to stay in business? I wonder if they know how many potential customers they may have lost?
I was asked once by a very good friend and mentor the following question during a seminar for consultants when it came to pricing: "What are you worth?" Answers from around the room included, "With what I know, I gotta be worth 2 million a year," "$750,000 with my skills,", etc. etc. Joe looked at us and said, "You're worth what you're making." The silence was deafening, the heartbeats, the sighs, the shifting in seats. And he said, "Go to lunch. See you all afterward."