are you leaving money on the table?
by martin bissett
business development on a budget
there probably is not a bigger issue in professional services selling than pricing. the war between timesheet and value pricing has been going on for some time now, with no sign of resolution in the near future.
more on business development: how to prepare for the first meeting with a new prospect | the five fastest ways to kill a new opportunity [video] | use this spreadsheet to evaluate prospects | before the sales meeting | lowballing is undervaluing yourself | do you have a pipeline or just a list? | overcome recurring fee apathy
pricing is a huge topic, and it’s not within the scope of this post to cover it in detail. i do, however, want to give you my two major rules for the pricing aspect of any proposals you present.
first, know your walk away price. this is the price below which you are just not prepared to take on the work, and if you enter into a negotiating situation you must know that number in advance.
so if you have the proposal price set at $12,000, for example, you may decide that even though that is your preferred fee, you may actually be prepared to take $9,000. below that, it’s not worth it to you to take on the work, so $9,000 becomes your walk away price.
the advantage of having this figure in your mind is that you won’t be tempted to accept a ridiculously low fee just to get the work, which creates the impression your original asking fee was pulled out of thin air and not based on reality. so the walk away price helps maintain your professional credibility.
second, don’t assume the prospect will not pay your asking fee. i’ve often seen partners look at proposals that have been presented for their approval, see the price and respond with, “they’ll never pay that. drop it by a thousand.” so they have dropped the price before ever presenting it to the prospect.
maybe you have done this, and maybe you would argue that you got the business anyway, and at a price you could live with. well, before you do it again, consider this. that $1,000 dropped 100 times a year over 10 years means you will have left $1 million on the table because you assumed the client wouldn’t pay your fee. what if your assumption was wrong?
next time you find yourself assuming they won’t pay your fee, ask yourself why you think this. if you have priced the work according to the process i’ve already discussed, it should be a fair and reasonable price, which you can easily justify both to yourself and to the potential client if necessary.
business development tasks
- establish your walk away price for each proposal, and commit to yourself not to go below it.
- understand that discounting $1,000 from a price 100 times a year costs your firm $1 million in revenues over a decade.
- break the price down into a monthly investment figure to make it more palatable to the prospect.
- justify the price increase per month over what the prospect is currently paying, rather than stating the full amount you are asking.
- schedule specific, uninterruptible time in your diary to set your walk away price and your pricing strategy for each proposal.