TapRun Consulting

The Pricing Newsletter

October 2018 issue

Hello Pricers!

Halloween is just around the corner. It's a time when people spend their hard-earned cash for candy, only to give it away for free.

Does that sound like a good pricing strategy to you?

Pricing Question from a Reader

Today's question comes from reader M. B.

A company wants me to write some custom software. It's eager to get started, but there is a lot of uncertainty about its requirements. How can I quote a price when I don't understand the company's needs?

Pricing out a custom service can be extremely challenging. Attempting to do so in the realm of software engineering is even more difficult.

Not only do unclear requirements prevent both you and your customer from understanding a project's value, but they also prevent you from figuring out the time and resources that will be necessary to complete it.

Nevertheless, the reality is that few companies will be willing to cut a blank check and simply hope for the best. They're going to want a fixed price, or, at the very least, an estimate.

Let's take a look at some of the most common ways that business owners like you can and do compensate for unknowns when setting their prices:

None of the options above is perfect; the one that best meets your needs will depend greatly upon your individual circumstances, the nature of your unknowns, and the preferences of your customer.

That said, there's another approach that will de-risk the contract for both you and your customer, increase your earnings, and enhance your ability to command high rates in the future.

Let's take a step back and examine the situation:

Do you see where I'm going with this? Couldn't you offer to sell the company some analysis services to help it figure out exactly what it needs?

Beyond the income that an analysis service could generate, think about the benefits that would accrue:

All too often negotiators spend their energy attempting to shift risk onto another party. Worse yet, many negotiators convince themselves to accept very high levels of risk in exchange for the tiniest sliver of opportunity for profit.

There are plenty of methods that business owners can employ to ensure that both parties wind up better off. You just need to be able to identify them.

Questions come from readers like you. If you'd like your questions answered, send them my way.

Pricing in the News

From the Blog Archives

Notable Pricing Quote

"The bitterness of poor quality remains long after the sweetness of low price is forgotten." -- Benjamin Franklin

Shameless Commercial Plug

Do you have questions about your company's business strategy?

Why not schedule a consultation session with me to clear things up?