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 James who sent me sort of a long message. I'm just going to summarize it. Basically, he had a sales call, sales interview with a prospect, and they determined together that the project outcome was worth approximately £80,000 in opportunity for the customer. So James suggested three tiers of pricing, which is what I recommend everyone does in their project proposals. Option one was £4,000, so 5% of the ADK, and option two was £8,000, which was 10% of the ADK, and then option three was £12,000, which was 15% of the ADK. And then he says, the client couldn't shake my hand quick enough for option three, which as you say, should always be the blue sky offer. Or maybe because he openly admitted to being wealthy, 12K just wasn't that much of a big deal to him. So then James asks, maybe I should have suggested option one 10% of year one, option two 10% of year five, and option three 10% of year 10. So my Jonathan question is, when value pricing, do you measure the value to a specific date? If not, is there a good guide to measure value? Okay, so the thing that James is wrestling with here is how to graduate the pricing, what curve to use to increase the pricing across the three options. And here's what I do. First of all, the specific answer to his question is, I'm only thinking about the value that will be derived from the client or what it's worth to the client for the first year. After that, things, who knows what's going to happen after that. I'll just say, you know, to myself, or when I'm talking to them in the why conversation, I'm thinking about the first year. So, you know, so client, what would this do for your, what if we had a home run? What does year one look like after we launched this? What's the first year after this goes live, or that I finish this or deliver this, or we finish this project? What does the first year after that look like? What would a home run look like? What would be your dream numbers at the end of the year? However you want to ask that question, but I'm not thinking 10 years out or five years out. So the next obvious question is, well, how do you pick the three prices? And the way I would do that is I would say, you can use, I use two different pricing curves. I recommend two different pricing curves, basically. One, my preferred pricing is what I call Goldilocks pricing, and another one, which is useful in specific situations where you really, really want to get the job and you want to leave the least amount of money on the table is called might as well pricing. So I'll talk about those real quick. So let's say I'm going to use $100,000 in value. So you talk to the client and they say, I'd be 100,000, you know, you get the feeling, maybe they tell you, or you just get the feeling that it's worth about 100 grand to them in the first year alone. Okay, so I'm going to start option one is going to be 10% of what I'm pretty sure it's worth to the client. So that's a very small percentage considering. And then I'll set option two at 2.2% of the overall, sorry, I keep saying this wrong. Option one is going to be to say $10,000. Option two is going to be 2.2 times that. So almost a little bit more than double option one. So in this case, it'd be $22,000. And then option three would be 5x option one. So it'd be 50,000. So the percentages would be 10% of the value, 22% of the value and 50% of the value. And what this does is it makes option three significantly higher than two or one, which is going to drive them to the middle option, the Goldilocks price, the middle one, this one's just right. And, but really, anyone that they pick is going to be fine for you. Because once you set your prices, then you reverse engineer what you're going to do for each price. So if I had $10,000 to help this client move this needle, what would I do? I can do these things. And it's not going to get them all the way there. But it'll definitely move the needle and I'd be happy to do it for 10 grand. So that becomes your option one. And then you do the same thing with the other two prices. What can I do for $22,000 to really help this client achieve this objective or this business outcome? And then you come up with some scope to do that. And the same thing at 50,000. So with the Goldilocks pricing curve, I base the price for option one at 10% of what I think the project is worth. And then I multiply for the other two options by 2.2 and then by five, sometimes even 10 depending, but usually five for option three. And then quickly, I mentioned might as well pricing. So I'll just talk about that real fast. If you really want to land the project,

nervous about giving them sticker shock or overpricing it or something like that, you can use might as well pricing where option one would still be 10% of the value. Option two is 1.5, so 50% again higher than option one. So if option one is 10,000, option two would be 15,000, and then option three would be 17,500. So they're only going up a little bit, and in fact the curve is sort of maxing out. And the effect that that has is that the client will be like, well, if we're going to spend 10,000, we might as well spend 15, and then geez, if we're going to spend 15, we might as well spend 17,500. So it drives them to option three. And if you're new at having value conversation and you're really not sure about the value and you really want to land the project, might as well pricing is the safer one where the Goldilocks pricing is a little bit more swinging for the fences and more likely that they're going to pick option two. Last thing on this I'm going to say is that if they picked option three immediately, then you can raise your prices, obviously not in this case, but in the future. So if you came across a similar client in a similar situation, you could probably charge more because with that kind of a curve, well, your curve wasn't that steep. So it would be too bad we can't A, B this. It would be nice to know what would have happened if your option three was 20,000 pounds, which would be 5X of your option one. I wonder if you still would have jumped at it. Anyway, if you are using this Goldilocks pricing curve and people are consistently picking option three, your prices are too low. They should more often be picking option two and option three is the kind of, they should only be picking once in a while. If they're picking it all the time, you can definitely raise your prices. Okay, that's enough for now. I'm Jonathan Stark. If you have a question for me, you can hashtag ask Jonathan on LinkedIn, Twitter, or YouTube, and we will add it to the queue and I'll answer as soon as I can. Bye. 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.