Conquering the Fear of a Fixed Price
Fixed-Price, Fixed-Scope are words guaranteed to strike fear in software developers everywhere.
The benefits of value pricing sound obvious. No ambiguity; fair compensation; a multiple-of-X return on your customer’s investment; no surprise invoices (or subsequent “difficult conversations”), and so on. It seems like a clear win-win.
So why is it that when you’re ready to use value pricing and talking with a prospective customer, you suddenly get hit with the fear?
It usually happens just after you’ve been given a long list of requirements, and hear the words:
So, how much will this cost…?
Despite all the reading, all the podcasts, all the books and all the time spent convincing yourself of the benefits of value pricing, a dark cloud of doubt is suddenly cast across your mind.
As you try to consider your customer’s needs, and understand their goals, your head races with questions, such as:
- Do I know enough about this project?
- What if they want to do X?
- If I give a price now, what if they decide to use Y?
- What if it takes longer than I think?
- Is my price too high?
- Is my price too low?
- What if doesn’t take as along as I think? Will they want a refund?
- What if they want to add more stuff?
- But what if…?
You start to second-guess yourself. Are you really ready for this value pricing? Imposter syndrome sets in, and suddenly time-based billing doesn’t seem so bad after all (it is). You’ll just do it one last time, but next time you’ll definitely try out value pricing…
The reason behind this fear, I believe, is that we often don’t accept (rather than don’t know) the value we deliver.
It is an indicator that there you are missing a piece of the puzzle. You haven’t yet uncovered the real value — the pain that has caused the customer to come to you in the first place.
It’s a sign that you need to continue the conversation.
What Does Your Customer Value?
Value to your customers is likely to be very different to value to you. Perfect test coverage and a flawless CI setup probably won’t interest them — unless you can demonstrate the benefit to them (e.g. “we won’t unknowingly break something when we deploy”, or perhaps “we can confidently deploy at 5pm on a Friday…”).
To your customer, though, perhaps there is immense value in a simple conversation; learning about how the latest release of iOS or Android will help benefit their customers; a video on the latest trends in their industry; implementing an off-the-shelf piece of software that will make their lives easier, and so on.
Even something as simple as sending an article or blog post to your customer can provide incredible value — especially if they receive it at just the right time to be relevant to their needs.
Take the time to have conversations with your customer, and understand the benefits they receive a result of your work. This is the best way to conquer the fear, and be confident that your proposal represents immense value to both you and your customer.
Have you started using value pricing in your business? Do you get hit with the fear when asked to give a price? I’d love to hear how you’re conquering those fears and using value pricing in your business. Let me know by getting in touch.