No Happy Glasses!
Recently, a client in a professional services industry told me these words: “We never discount without changing scope. If we change price for a customer, we remove something from the project.”
Call me a skeptic. It’s rare to have that kind of discipline and price integrity. I asked them about how they price a project. They said they figure out who from their team will work on the project (which levels of which functional expertise are required) and how many hours, days, and weeks from each are needed. Then they apply the standard rates from their price schedule for each team member to calculate an overall price for the project. While there are other (value-based) approaches to pricing, this type of cost-plus approach to service-based projects is fairly typical. So far, so good.
I said, “Tell me this, guys. Do you ever get to the end of that process and look at that final number and say, ‘The customer will freak out when they see this number!’ or have some other internal sticker shock moment where you are sure the price is too high for your customer? Then you go back through the project with your happy glasses on and start magically slashing some hours out of the project until it feels ‘acceptable?’ Does that ever happen?”
There were sheepish nods and some smiles and some drooping chins as they admitted that yes, sometimes they do this. They were discounting without scope change before the customer ever saw the price. They did it to themselves. Then when they completed the project, they would put in the time required to make the project a success for their customer (as originally budgeted!) This meant the project would come in over hours and under profit because their internal sticker shock made them put on happy glasses and slash hours.
Regardless of your industry, regardless of whether you sell hours or fixed-fee work or widgets, this example applies to you: don’t talk yourself out of the price you deserve. Don’t discount yourself before you even quote the customer. Let the customer be the one to beat you up; don’t do it to yourself! (And then be ready to defend, of course!)