Top Ten Pricing Potholes Service Professionals Often Fall Into

    June 23, 2003

These issues have happened to us every now and then. Unfortunately, they are rampant in certain industries, like IT or engineering consulting. These people tend to perform tasks for a price and often end up being traded like sacks of potatoes.

1. Revealing your fees on your materials. As soon as people can see your fee, they make a mental note if it, and start comparing you to other people in your field. You have just educated them to focus on price, tasks and deliverables. And since this is the kind of education people have received over the years, you only confirm that they are right.

2. Using time as a basis of your fees. Look, there are only 24 hours, and as long as your fees are tied to time, your income is limited. The best way of avoiding the Wal-Mart syndrome (high volume and low margin) is by charging for the value your offer. Time-based fees will almost always lend you in downhill negotiations.

3. Discussing your fees to early. By all means, you must avoid mentioning your fees before submitting your proposal for the gig. First you must make sure that you are meeting the economic buyer and nobody else, and then build the relationship and the conceptual agreement (objectives, metrics and value). You must postpone the mentioning of your fees until buyers can see them in your proposal, juxtaposed against the value buyers stipulated to you during your meeting. And for the proposal, use the buyers’ words. People love reading their own words.

4. Volunteering fee reduction. Sometimes buyers may push you, saying that you have been doing this for many years, so you can do it quickly and effectively. Then you can say, that it would be premature [options: dishonest, unethical, disrespectful] of me to you to pull a figure out of thin air, which could be lightyears out of your ballpark.

5. Discussing projects with anyone but economic buyers. The to recognise non-economic buyers is that they keep pushing you on fees and on details. They do not raise to strategic heights because that is the altitude where economic buyers congregate. Low-level managers are at tactical levels, so they want to know prices, detailed methodologies and deliverables. Repeat the comment you use at volunteering fee reduction.

6. Giving in requests in RFPs. Be careful, for you can waste an awful lot of time and money on this puppy. These committees (A committee is a group, reporting on progress it has never made.) (RFPs are usually issued by them) have no real power, and some mysterious buyers are hiding behind them. Get to the real buyer.

7. Forgetting to ask about budgets. If you have a hard time to get the value of projects from some buyers, then ask about budgets. Explain the value of the improvement you bring to the table, and ask what the buyer is willing to invest to realise those improvements.

8. Taking the competition too seriously. When your are in a bidding situation, and the buyer is about to give the gig to another firm, then ask for the name of that firm. Find out what that firm is perceived to be able to do better than you. The buyer may overlook some added value you offer but nobody else does. Make sure that the buyer fully understands what s/he will not get by rejecting your offer.

9. Not presenting valuable alternatives. You want to offer some innovative and valuable alternatives. You do not have to conform to specific expectations, just because the buyer says so.

10. Not taking time to build relationships with real buyers. This is vitally important. You must take time to build relationships with economic buyers and make them understand that you are not a vendor or supplier but a peer, and your relationship must be based on mutual trust and respect, otherwise you fold up your tent, get lost, leaving buyers with their problems. Who has told you must work with jerks. No way!

Tom ”Bald Dog” Varjan,
Tom “Bald Dog” Varjan helps service professionals to build high-margin, low-volume businesses that semalessly blend into their richly satisfying personal lives. Request his FREE fee-setting guide “Why Most Service Firms Grossly Undercharge for Their Services?” by sending an email to with “booklet” in the subjectline.