Go out of business, go broke and die alone in a ditch

My old startup founder friend once told me:

Pricing is really hard and nobody has it figured out, even the smartest consultants the world. But although you’re not going to win on pricing, you can lose on it. And if you don’t act appropriately in the pricing realm, all the other work you do will be obscured.

With that, here are some assumptions about price.

One, price is a story. It sends a social signal to the world that frames you as a professional interested in fairly exchanging value for money.

Two, price is a perception. The human brain automatically assume the highest priced product is also the highest quality. Lower fees might make you more affordable, but they also make you less attractive.

Three, price is an expectation. When people spend more money for something, they value it more, and as a result, get more and better use out of it. Being expensive is doing them a service.

Four, price is an identity. You are what you charge. And if you raise your value, then you’ve earned the right to raise your fee accordingly.

Five, price is a nuance. There’s a fine line between a product that’s so cheap customers would question the quality of it, and so expensive that customers would never consider buying it. And short of flat out asking people, it’s difficult to strike that balance. Do all the research you want, but most initial prices are guesses.

Now that we’ve gotten those assumptions out of the way, let’s dig below the surface of price and address the deeper issue.

Namely, that price is never really about price. It’s always proxy for value. Truth is, nobody really does anything for the money, they do it for what the money stands for. That they’re worth it.

I think back to one of my first mentors, who asked me this question during one of our coffee meetings:

If you were arrested and charged with creating value for people, would there be enough evidence to convict you?

That always stuck with me. It’s a powerful exercise for gauging the worth of your labors. Almost prosecutorial in nature, you’re essentially looking for evidence to make a winning case for yourself.

Regrettably, despite being guilty as charged, there were many client engagements, products and jobs where I undervalued my contributions, and therefore, undercharged for them. I left hundreds of thousands of dollars on the table, as I didn’t want to rock the boat by asking for more money and creating tension in the relationship.

My passive aggressive, conflict avoidant, awshucksy midwestern personality pulled my price back down to the ground like gravity. The fear was that by raising my price, clients would get sticker shock, reject and abandon me and I would ultimately go out of business, go broke and die alone in a ditch.

Isn’t pricing a ridiculous and complicated element of business?

One final exercise that helped me make peace with my struggles around pricing was to frame it terms of personal growth, not professional income. If you’re struggling in any way with this issue, trying asking yourself this question:

Who do you have to become in order to contribute differently to your business so that it generates more income?

Another way of phrasing it is, how can you raise your value so you will be worth a higher price?

These framings work for individuals and businesses alike.

Remember, you’re not going to win on pricing, but you can lose on it.

Try to act appropriately in the pricing realm, otherwise all the other work you do will be obscured.

If you were arrested and charged with creating value for people, would there be enough evidence to convict you?