Ditching Hourly

Hello, and welcome to Ditching Hourly. I'm Jonathan Stark. Today, I've got an audio excerpt from an answer I provided on my YouTube channel. You can check it out at thejonathanstarkshow.com, and it'll redirect you to YouTube if you're into watching videos. Otherwise, you can just listen to the audio here on the podcast. Enjoy. Hey, Jonathan here. I've got a question from Clemens Pavel, and it is this. Our work is often starting from scratch and exploratory in nature. As strategists, we sort of build the theoretical foundation. We are at the very beginning of the value chain. Many clients that hire us do not yet really know what they want or need. They do not have a business plan in mind. They need someone to help them cut through the clutter to decide on a starting point and to organize all of the information and to decide on a plan to move forward. You've explained that first, one needs to assess what a strategy might be worth to the client and then base the fee on a fraction of that value. We understand the concept, but what can be done if the value is qualitative rather than a number? What if we do not know that sales should increase by X percent or that market share should improve by Y percent? How can we determine a fee if the value is qualitative? All right, so I'm going to start off by saying that what Clemens is trying to do here is a very tough thing to value price for the exact reasons that he lists out. When you have a company that is extremely immature, doesn't even have a business plan yet, it's really hard for them to imagine you pulling some levers for them and that having a result on the other end because they have no track record. They don't know what levers to pull. They kind of know nothing. You're sort of in an R&D phase. It's almost like a marketing phase, like a market research phase at this point. So the easiest thing to do would be to just set a price for a strategy workshop, strategy engagement. Do it like a productized service and it's 10,000 bucks or it's 50,000 bucks or whatever it is. And then you get on the radar of people who will find that kind of value from someone like you. So that came out weird. Put it another way. If you just have a relatively fixed scope service that takes not a long time to do, sort of maybe five, 10 hours delivered across a week or two or three, few meetings, some number crunching, maybe some research, not a huge project, just a small exploratory sort of research-driven project that, like you described, comes out with a roadmap of recommendations and platform selection, all of these sort of big picture early term decisions that need to be made. And you sort of describe that, you list the benefits of what the ideal buyer should expect to receive from this strategy session or whatever you call it, and you put a price on it, and then you jump into a market where that price would seem reasonable to a lot of the ideal buyers. Then you can just sell it like that and not worry about having these tense sort of value-based conversations with a business that doesn't even exist yet. It's much easier to have a value conversation with an established business that has a history of numbers. They know what their goal is. They know what their strategy for the upcoming year is. They know what their objectives are. They have a strategy or they need a strategy to reach the objective. They're not really sure. They need an expert to come in and help them with it. And they believe that by changing certain things and maybe you doing these tactics for them or you describing what tactics they should do, that you'll have some contribution to this objective that they've got. It's much easier to predict from the past. You can sort of draw a line. If this line goes up even a little bit, that's going to represent a lot of money or a lot of improved brand recognition or whatever, whatever business outcomes they're looking for. So all that said, so a productized service is probably the best approach here. So pick something, set a price, and find people for whom that is a good value. That's probably the easiest approach. All right, but I do want to point out that you can value price anything because even if it's qualitative, it's worth something to the person that's talking to you. It might not be worth enough to them for you to have a profitable arrangement or an agreement. It might be worth a thousand bucks to them. But to you, any kind of engagement with someone like this is going to sort of cost you $10,000 in time and effort, maybe money, research, assistance, whatever. So there might be no fit. It might not be a good fit because what the outcome of your engagement, not the maybe someday sales outcome, but the actual thing that they're buying. So if they buy a strategy session from you, what do they...

immediately get out of it? What would they not have if they didn't buy it? They'll have clarity, they'll have a plan, they'll have confidence, they'll have decreased risk, they'll have a sense of decreased risk. They'll have all of those things immediately, not maybe someday if everything else goes right and the stars align and they get acquired by Google, but right now, as soon as you're done, they're going to have captured some value or they're going to have an immediate benefit. That's what I'm trying to say. They're going to have an immediate benefit from that, like the things I just listed. And that's worth something to someone. Like when I choose a coffee in the morning or a smoothie or something, it's all qualitative. I can't say, oh, I spent $5 on this smoothie and I made $3 in profit. Most buying decisions that we make are qualitative. So you could theoretically have a conversation with one of these potential clients and have a why conversation with them and say, well, why would you bother hiring someone expensive like us to do a strategy anyway? Why don't you just start working? It'd be a lot cheaper for you to just experiment on your own. It'll definitely take longer, but you could do it. Don't you have time? Why not just wait? Why not just explore this for a longer time? Why not wait for a competitor to break into the market and then draft off of them? So on and so forth. And they could give you all these reasons why. And if they have answers for all these questions, you can't talk them out of doing it with you, then they'll be telling you why they really want to do it, why they really want to have a plan because things are really risky and I'm going to be investing my money. I'm going to do a second mortgage on my house and I'm investing all of these things. This is my last shot. My kids are going to be going to college in two years. I need to have some kind of income. Whatever. They're going to have all of these reasons. And they're talking to you because they believe that what you do is going to have an immediate benefit for them. Like I said before, maybe it's clarity, decreased risk, getting unstuck, escaping from being overwhelmed with all the possibilities. All of these things have value. Even if you can't put a number on it, you can say to them, well, okay, how will you know if this strategy session is a success? How would you know if it was a failure? It was another way to ask that question. So we get to the end of this. What would make you happy at the end of a strategy engagement? And the person would say, well, this list of things. I would know what to do next. I would have a list for the next six months of the order of things that I should do. Whatever comes out of your strategy engagement that the person values, they're going to list. They're going to say, and it's going to all be qualitative in a case like this. I'll just feel confident. I'll be able to face my spouse. I'll be able to walk into a pitch meeting and talk to a VC with confidence. Like, okay, how much is that worth to you? Is that worth $10,000? Maybe it is. Maybe it's not. Is it worth $100? Maybe it is. Maybe it's not. So if you could get that information from them, and in a case like this, it's hard because they don't have a track record. Yeah, it's just trickier. But if you wanted to do it, that is how you would do it. You would try to talk them out of working with you. You would identify what a home run looks like to them. And if they can't say that, at least an abject failure, and understand what they're trying to get out of this immediate engagement right away. What is the benefit of having this engagement done? And value that and say, well, okay, you know, if that's, you know, I can give you, you can do it like this. You could get to the end of a conversation like that, and you could just have a rough gut instinct on how much it might be worth to, you know, a person who's shooting, you know, for the moon and drives a $200,000 car and has an Italian suit on. So you could just sort of make a judgment call on how much buying power this person has, how important of a project this is to them, how urgent it is, and all of those things. And you could say, like, all right, so thank you for this meeting. And I think I understand what you're going for. What I want to do is put together a proposal for you. I'll have three different options in the proposal possibilities. I can think of at least three different ways that we could engage on this. And from a pricing standpoint, you're probably looking at $250,000 on the high end and $65,000 on the low end. Is that kind of in the ballpark of what you're expecting? And if they completely panic and get sticker shock, then you know that there's no, the value's not there. So whatever, you've agreed on what they're trying to achieve qualitatively, and you've thrown out some numbers, and they panicked, and you're just like, okay, well, in that case, we probably shouldn't work together, but I can give you the name of, like, a junior company, or I can sell you some other product where you can do it yourself, something like that. Or you can join our mailing list for free, and sort of, we can interact there periodically.

some other options if they get sticker shock at the prices. More likely, if you're in the ballpark, they'll say, oof, I mean, $250,000 would be out of the budget, but $65,000 kind of makes sense. So yeah, why don't you put together a proposal and give me the options, and then I'll take it to my investors, or I'll think about it with my spouse or my partner. Then you know you're in the ballpark. If they say, oh yeah, no problem, then you probably underbid it. So make sure that a high-end number is pretty high so that you kind of want the high-end number to be too high and the low-end number to be reasonable when you do kind of suggest a price range before you go to the trouble of putting together a proposal for somebody who might just be a tire kicker. Okay, so hopefully that helped. I'm Jonathan Stark, and if you have a question for me, you can hashtag AskJonathan on Twitter, LinkedIn, or YouTube, and we will find it and add it to the list. See ya. Would you like to learn how to get paid what you're worth? How about selling your expertise and not your labor? We work through all of this together in the Pricing Seminar. Pre-registration starts soon, and you can sign up to be the first to know when early bird pricing is announced at thepricingseminar.com. That URL again is thepricingseminar.com. Hope to see you there. Hey, Jonathan again. Do you have questions about how to improve your business? Things like value pricing your work instead of billing for your time, or positioning yourself as the go-to person in your space, or maybe productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal. Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes you to get ready for work in the morning. Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call you don't feel like it was worth it, just say the word and I'll refund your purchase in full. To book your one-on-one coaching call, go to jonathanstark.com slash call, C-A-L-L. That URL again is jonathanstark.com slash call. Hope to see you there.