Carlos On Web :: Going techie without going broke

Pricing is the most important marketing decision that you could ever make. The price of your product or service almost always dictates the income of your business.

One of the deadliest mistakes a new freelancer makes is to price his services too low just to get the business. I also made the same mistake when I started. Luckily, I was quick to wake up to the realities of the importance of profit. I could almost hear myself swear I would never, ever accept a deal where I am a loser by default. Thus, I was able to craft a new mantra: “Profit or no deal.“

(Please take note that I am talking here about pricing a service. If you are selling a product, there is indeed some wisdom in pricing low but that will not be discussed in this article. Hopefully, I will cover that when I get more requests in the future.)

Pricing 101 : In Search For The Perfect Price

Pricing a service consists of many factors making it almost impossible to strike a perfect price. The following is a short list of those factors – plus a short explanation, mind you.

1. Market demand. Unless your clients are living in a cave, it is safe to assume they have an idea about the market price of your service. Having a crash course on Good old Economics is helpful in this regard.

Take a look at your competition, how much are they charging? Should you price lower, just equal or a little bit higher than the rest? Up to you, actually.

Is there an over-abundance of professionals in your field offering the same services as you are? Or, you are one of the endangered species walking around the planet offering such services? Is the market in dire need of what you have to offer? That’s the law of supply and demand at play.

2. Professional Expertise and Experience. Provided that your client is aware of it, your expertise and experience can greatly contribute to the price of the services that you can offer. It’s something that you can take advantage of.

Are you considered a well-trained guru while the puppies in your community are just not “there” yet to compete with you? You’re a lucky dog, you can command a premium price than the rest of the puppies running around the field.

3. Perceived Value Of The Service. How much is a 500 mL bottle of drinking water? The last time I bought one, I was on my way to a prospect’s office and the price tag was PhP 20.00. I’m sure some of you would disagree. At the very least, it depends on the brand, the place, and most importantly the buyer’s perception of the benefits the product brings. If you are selling me the same volume of water at the top of Mount Apo for PhP 2,000.00 a bottle, I wouldn’t hesitate buying it if I am deprived of water for 48 hours straight! I would even thank you for your generosity.

The same can be said of services. The client who realized the great benefits of your services will move heaven and hell if you are the one who can give it to him.

Unsolicited Advice On Pricing A Service

You should price your service in such a way that you eventually make the most profit! If you really want to be a real entrepreneur, you better be on good terms with the word “profit.” Otherwise, just do yourself a favor by getting out of your way and do something else more meaningful… like taking up Law and offering pro bono.

Profit, in simple terms, is just Income minus Expense. You already know what Income means so that leaves me to explain a bit about the word Expense. Well, that’s not really a challenge. Just give a few dollars and I will show you what Expense means.

Profit allows you to stay in business.

Why do you want to stay in business?

Well, why are you doing it in the first place?

Once in a while, I get interesting emails from some interesting visitors who are interested in my services or simply interested about this blog.

Sounds interesting for an intro? You be the judge.

Mario is such a visitor. And I personally find my email exchanges with him will make for a good topic of discussion, which is about pricing your services.

This is a two-part article series. For this part, I just want to share with you my email conversations with Mario and maybe offer a few explanations so that you will be guided accordingly. In Part 2, I’ll share my personal opinions on the topic of Pricing. If you are a freelancer and you are still confused about Pricing, the next part should shed some light.

Synopsis: Mario wants to know how much I would charge for making a “simple website” for the software products he is planning to sell. Of course, if you are following this blog, you already know that I don’t give a quote out of thin air. One quick reply to the email inquiry and I was finally able to convince him to elaborate a bit more about his project. Thus, Mario wrote:

Read the complete article »

This article is a little late (as usual) for the simple message I want to convey. To the new graduates, let me echo the special greetings my university friend Don said to me upon my graduation: “Welcome To The World Of The Unemployed.”

I don’t have the time to check the statistics, but it appears to me that the local unemployment rate in the Philippines is on the rise since I bade farewell from the university.

As a new graduate, should you be worried? After school, what now?

To job or not to job? That is the question (which is obviously in wrong grammar).

I mentioned I don’t have time to check the statistics. What I really mean is, I couldn’t care less what the statistics are saying and neither should you. I care more about you, my dear fresh graduate readers. (If you know a fresh graduate, please pass this on.) I believe it will be to your advantage if you scrap the employment statistics altogether and focus instead on how to make it in the real world.

Read the complete article »

This is the second installment of a two-part article about getting the money that you deserve. I’d like to call this “The Art of Getting Paid.”

Before giving you the meat, a short quiz first: As a freelancer, which of the following is the most important to you?

1. Closing a project
2. Finishing a project
3. Getting paid for the project you’ve “finished”

Personally, I would put item number 3 on top of the other two. Call me greedy or anything, but at least I am not a hypocrite. In any business deal, my objective has always been to get satisfactory compensation for the value that I am giving. I don’t know about you, but for me I don’t see any “conflict” in doing something valuable for my client and in return being compensated for a job well done.

Read the complete article »

Have you ever been shafted out of a fee that you feel you truly deserve?

Perhaps, you have been working so hard on a project day in and day out for about a month or so and when it’s all done you were disappointed to discover that the promised cheque will never have a chance of arriving in your mail box.

Perhaps, you were lured into a million-dollar share of the profit when the website you are trying build eventually sells to some giant corporation looking to devour a startup pet project. After all, it looks promising and what is an extra two hours a day (or night) spent over the project, right?

Perhaps you have partnered with a son-of-a-rich (dad?) who provided the financial capital to materialize that something only you can explain though given a nice Integrated Development Environment you are 100% sure you can implement the thing and offer to the marketplace. Too bad, your partner turned out to be a jerk and sucked all the proceeds of your invention.

Or perhaps simply, your client just flatly never paid you for your effort. Period. OMG, how can the bastard afford to do it to you, a technical guru who knows how to code even while asleep?

Does any of these sound familiar to you? Well, I can relate to you, my friend.

And this I am sure: hundreds, or even thousands, of other freelancers out there who have the guts to lay open their experiences in the jungle can relate to that as well.

Those are classic examples of money lost by one’s failure to face the realities of a business deal. It’s expensive; it’s stressful; and it hurts. But there’s definitely a lot of lessons to be learned from your failure to collect the money that you deserve.

In Part 2 of this article, I will share some techniques I use to handle those kinds of deals and ensure that the money I demanded, is the money that I get.

Don’t worry it’s all for free. A street philosopher like me loves to share his philosophical insights to someone like you. If you like to be notified of future articles, you can subscribe via RSS using the form below. I am using FeedBurner, so you can unsubscribe anytime. Promise: I won’t be clogging you inbox – I only write sparingly.