~ by Alan W & Candice R
Four cardinal rules for consideration when costing your next piece of work to facilitate a better experience around your commercials.
1. Talk about money early
Example: When we walk into the grocery store, the price is evident, never hidden. We expect to pay a price for what we are intending to purchase. It is part of our shopping experience. Openly and transparently communicated to us. In fact, we get annoyed when there is no price tag, we don’t want to fall in love with a product only to find out we can’t afford it. Being informed helps us as the purchaser to make an informed decision.
Always have the money conversation upfront. As the saying goes, time is money, and when we don’t speak about money early, we fall into the trap of having many valuable conversations and even proposal versions before we hit a dead end. When we talk about commercials upfront, we have the ability to ascertain whether the client has money to buy what we are selling. Better still, we may realize what we can give them within their realistic budget. Get a feel for their budget. Ask what other similar projects cost them or ask them what amount they expect to hear. Don’t mention amounts before you have heard them on this front. If you absolutely have to then anchor high. Give a range.
2. Add 10-20% on time and cost
Example: The grocery store has to factor in all the costs undertaken to get the product in store for purchase. If a shelf needs replacing, or batteries bought for load shedding, or fuel costs go up, even covering themselves for defect products or those that aren’t sold before expiry, or different prices for goods depending on the shelf position, etc. They factor in all these costs - unashamedly.
Stop being optimistic with your time and costs, let’s be honest, often business services and offerings take more time and cost more than we expected. Why? Because we cannot always predict the future. Sure, we can get a pretty good estimate, but the truth is that’s what it is, an estimate. We forecast based on what we THINK will happen. So what happens when we are under time or cost? WE take the hit. Stop. Switch. Add 10-20% to your estimated time as things always take longer. Add 10-20% to your initial estimate as things always run over.
3. Provide pricing options
Example: As consumers, we are used to having options. When I buy butter, I can choose the more cost effective, standard or premium option. Or when I buy a cake I can either buy all the ingredients to make it myself from scratch, or I can buy a cake mix which will save me time and lessen the chances of a flopped cake, or I can just buy the already made cake. Each option offers me a different cost and different type of solution to my problem.
Many times we feel we know the right solution and being experts, we advise clients why this solution is right. Challenge yourself to come up with three options for your client. Just try it, the exercise for one, will stretch your imagination to see how you could potentially reach a solution in three different ways. Sometimes we realise in the process that we were actually going to offer the client everything for the cheapest cost. When we break it up into three options, we start to show them the value when options are placed next to one another. This is when real value is realised. There are many ways to do this, the simplest version being:
Option 1 - basic
Option 2 - basic plus added value
Option 3 - option 2 plus added value
Important: show the biggest amount first. This is anchoring - when one is likely to rely on the first piece of information/cost to guide their decisions. You’d be surprised how often clients surprise YOU by going for this option you never thought they would (the option you thought was a long shot!).
4. Set boundaries
Example: Ever been to the till at a grocery store and said I want to pay half the price for my loaf of bread? If you have, they’d say, sorry this bread cost x. If you can’t pay, you can’t buy it. The next customer will come and buy that loaf of bread, no questions asked.
Children, pets, clients - we ALL need boundaries, it’s in our nature to test how far we can go when there are no boundaries or rules of engagement in place. Simple additions to your proposals and contracts can commercially protect you in an open and transparent way:
Cost in time delay penalties: If you have made yourself available for a project that has a two month delay, and you have turned away work because you expected the project to commence. You take all the risk, and the remuneration becomes non profitable as we said earlier, time is money. You are not a charity, clients pay for you to make yourself available, and penalties need to be in place to cover your costs should projects be delayed.
Expiry on proposal: proposals should expire. This means that those clients who mean business and see the value in your solution, will close the deal. If not, you are free to move on to opening other client engagements. You cannot have a client hold you to a cost on a proposal delivered six months ago. Value changes with the times. Proposal offers expire.
There are many creative pricing strategies when you allow yourself to think openly about how you cost and engage with the proposal and costing phase of a client engagement. Allow your natural creativity to be incorporated into how you do business, not just on your craft.
Work with Alan W
Work with Candice R
"Solving niche challenges founders face”.
Illustrator: Lisa Williams (Instagram: @artist_llw)
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