Self-made expertise often brings up issues...
To be taken seriously as an expert, you have to charge expert-level fees. My guess is those fees are 3x to 10x higher than what you're charging as a generalist right now.
Next time you're in front of a mirror, think of the biggest price you've ever proposed to a prospective client and multiply it by 5. Assume that they'll see this as expensive-but-worth-it. Now look in the mirror and say, "the price for this is going to be [price that's 5x the highest you've ever charged]".
How does that feel? Not how does it feel to deposit the check, but how does it feel to look a prospective client in the eye and say that price with your mouth?
If you feel any hesitation or internal questioning about the price while doing this in front of the mirror, I can promise you those insecurities will be magnified when you actually do this with a real prospect.
To charge expert-level fees, you need one of three things:
- A near-psychotic level of innate self-confidence,
- Or the support of a professional organization that keeps fees high for the entire profession,
- Or, your mouth needs a damn good reason to say big numbers when you talk price with prospective clients.
So let's assume you, like me, lack that near-psychotic level of innate confidence. And I know that if you're a self-employed creative like a software developer, designer, or copywriter you don't have the support of a professional organization that keeps fees high for the entire profession, so how do you move into a position of power with your pricing and sales?
In other words, how do you create a damn good reason for your mouth to confidently say big numbers when you talk price?
Unless you simply publish all your pricing up front like I do, you'll start the sales process before you price a piece of work. So let's talk about power in the sale first, before we talk about pricing power.
To get a sense of what having power in the sales conversation feels like, imagine for a moment that you've just gotten a letter from the IRS (or your local tax authority) saying that your last year's tax return is going to be audited. You talk to your CPA and they get kind of worried, and say they can't imagine how this has happened, and tell you you should probably hire a tax attorney because tax attorneys deal with this kind of stuff all the time.
How do you behave in your first conversation with the tax attorney? The one where you’re still deciding whether to hire them.
For most of us, 80% of the power in that conversation resides with the tax attorney. They're working within their area of deep expertise. They know so much more about what's happening in an audit than you do. They know what questions to ask; you don’t. They know the hidden dangers; you don’t. The fear your CPA exuded earlier tells you this is serious stuff; it's important. And the audit has a deadline, which creates urgency. And this tax attorney is part of an established, licensed profession that discourages any member of it from pricing too low, so you the prospective client have a limited ability to price shop different tax attorneys. All these factors combine to give the tax attorney most of the power in the sales conversation with you.
In general, power in the sales conversation comes from the following factors:
- How was the lead generated? (inbound gives the seller more power)
- How important is the problem the expert can help with?
- How urgent is the problem the expert can help with?
- What level and type of expertise does the expert have to offer?
- How confident is the expert during interactions with the prospect?
- How well-developed is the expert's diagnostic process?
Think of each of these 6 factors as a volume knob you can turn up or down.
When they're all turned up to maximum volume, you have most of the power in the sale.
What if every knob except for the "confidence knob" is turned up to maximum volume? I would argue that you'll still have a lot of power in the sale, and with 5 to 10 repetitions of the sales process with different prospects, your confidence will increase all on its own.
What this means is that you can use expertise to increase your power in the sale, even if you lack near-psychotic levels of innate confidence. Well, to be complete, you can do these two things to increase your power in the sale:
- You can specialize in solving problems that are urgent and important to people who have the budget to pay to have them solved.
- You can become a self-made expert in solving those problems and--as I mentioned in the previous email--share that expertise as you go to build up a reputation and attract inbound leads.
These are the two damn good reasons your mouth needs to be comfortable saying big numbers when talking price. And you need to be comfortable with those big numbers in order to be taken seriously as an expert.
Power in the sale does not automatically give you the power to set a high price. But you'll have fewer opportunities to deliver proposals with high prices in them if you don't claim some of the power in the sales process. So that's why we started there.
Onward to pricing power!
My friend and colleague Jonathan Stark talks about pricing power using the following formula:
PRICING POWER = ( BUYING POWER * DESIRE ) / AVAILABLE OPTIONS
By the way, if you're not a member of Jonathan's email list, you're missing out on really great insight and advice on pricing your services, so fix that now: https://jonathanstark.com/vpb While I’m pointing you to great sales/pricing resources, join Liston Witherill’s list (https://liston.io/articles/), Kai Davis’ list (https://kaidavis.com/), and Blair Enns’ list (https://www.winwithoutpitching.com/free-resources/) if you haven’t already.
Buying power is largely a characteristic of who your point of contact in the sale is. How much control do they have over spending money? Are they spending money because someone else told them what to spend it on or because they are responsible for what shows up on a profit and loss sheet for their business division? How aware are they that they have a problem and you could move the needle for them by solving it?
Desire is a function of importance, urgency, and personal factors. Yearly tax filings here in the United States are due on April 15th. You'll notice that lots of people have very low desire to deal with tax filings until about a month before April 15, when their desire magically increases. Though the importance of filing taxes does not change (it's always important), the urgency does change as that April 15th deadline gets closer. That's how importance and urgency feed into desire.
There are numerous personal factors that feed desire as well. Things like what others in your social group are doing, or how we think our actions will be perceived by those we want to impress. Those are intangible--but very real--factors that drive desire, which effects pricing power.
OK, so want to maximize your pricing power? Do the following:
- Specialize in problems where people with lots of buying power know about the problem and are self-motivated to solve it.
- Develop expertise and a point of view that differentiate you from others with roughly similar experience.
Pricing power and power in the sales conversation are two sides of the same coin, and the same set of inputs (specializing wisely, developing valuable expertise, developing a good diagnostic process, getting leads coming to you rather than the reverse) increases your power in both sales and pricing.
And this increased power, interestingly, feeds into the perception of your level of expertise. When you get all the components working well, it's a virtuous cycle.
Tomorrow I'll talk about another important aspect of money, which is profitability.