Tag: Pricing

If you are a small business owner or entrepreneur, you are likely asked frequently to provide a discount on your rates. This is especially tempting during an economic recession where your sales levels are lower than usual. Although some people will tell you to lower your prices or provide discounts to increase business, I believe doing so actually hurts your business financially and non-financially. Let's examine why.

Fixed-Fee projects can be dangerous commitments for service providers and consultants. If you use fixed-fee pricing, I have developed a simple model that can help you account — and be compensated for — your level of risk by using a complexity factor.

The model I use for quoting projects is below using a fake widget-making project that assumes an hourly rate of $10/hr. I'll follow up the model with an explanation of how it works and breakdown its various components.

This approach has really increased my quoting accuracy dramatically - and is pretty straight-forward to setup using Excel.

If you are a service provider, you likely bid engagements on either an hourly or fixed-fee (project, not-to-exceed) basis. You might even alternate between the two. How do you decide which approach to use? In some industries, there may be a set or unspoken standard that decides this for you. In other industries, you may have the option of using either. I use both - and have found that looking at it from a risk perspective has helped me eliminate headaches.