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What should I charge?

Posted Mar 01 2009 12:00am

I’ve been negotiating several contracts lately, which got me to thinking: How does one determine what to charge for their product or service? Who makes up those rules? Are there any rules? And if so, what are they?

You pay for value. The more value something provides, the more you are willing to pay for it. So the question is not how much should you charge, or how much is it worth. The question becomes how much value do you provide.

Let’s take web design, for example, since I happen to know that business pretty well. I’m going to do basically the same thing for 2 different companies. I charge them both $10k. Company A nearly has a heart attack and runs out of the room screaming. Company B says, “Where do I sign? I can’t wait to get started.”

Company B understands the value they’re getting. Company A clearly doesn’t see that same value.

There are a lot more Company As out there than Company Bs. If you let Company A dictate your pricing, you’ll always be undercharging. But if you only work with Company Bs, your sales pipeline will go stale quickly and you’ll be out of new business in no time.

It’s your job to convince Company A of the true value you provide. And that’s not easy when they’re only looking to spend a few hundred bucks. You have to offer them something unique. Do something for them that no one else will do. Be different, and they will remember you. Come up with a crazy idea that your competition would only laugh at if they thought about doing it. And then say, “Why not? Let’s do it.”

But hey, if you find Company B, you should drop everything to work with them. They don’t come around often.

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