How Much You Can Charge Depends on Two Things

Thursday, August 14, 2014

The word is getting out! With the imminent release of my book on software pricing strategy, everyone is asking me about what they should charge for their small businesses and startups.

Here's one conversation today.

Friend: I'm going to start offering classes. What should I charge?
Me: Fantastic! Who are you targeting and what is their biggest pain?
Friend: I have no idea.

That's a problem. If you don't know who your customers are and what their pains are, you can't figure out the two most important pieces of information for choosing a price:

how much money they have
how much they're willing to part with

Do you have a room full of billionaires who have too much cash and don't know where to invest? You could probably charge $100,000 a head, if you could convince them that you knew of some great opportunities.

Do you have a room full of random people who are bored? You might be able to get them to part with a few dollars to listen to a standup comic.

You need to get a laser focused vision of your audience. The less defined the audience, the less able you'll be to address a pain that they all share.

Jane Fonda was right when she said "no pain, no gain". If you can't find a customer pain, you can't gain money, reputation or anything else of value.

I spent some time with him, found a very narrow audience - narrow enough that he could call up a few dozen people who all shared a pain that he could solve. How much can he charge? Let's just say next time we go out to eat, the bill is on him.