As a young adult, I had my wisdom teeth removed by an oral surgeon. When I received the bill, I was shocked at the cost; over $400 per tooth. When I returned for the follow-up visit the next week, I mentioned the bill to the surgeon.
"It seems like a lot of money," I exclaimed. "Why it only took you about 10 minutes per tooth."
The dentist smiled and said, "That is exactly what you are paying for. If you want me to take an hour or more to remove each tooth, I can do that. In fact, most anyone can do that. But there is value in a 10 minute extraction."
Good point. I never forgot it.
True value is never based on time or even effort. It is based on intellectual property, ability, and the value of the service to the customer. Each item needs to be carefully evaluated when you are pricing your products, services, or time in the marketplace.
- Evaluate your intellectual property. This is the sum total of education, experience and expertise in your field. Most of us severely underestimate this value mistakenly believing that "everyone" knows this or "anyone" could do that. The accumulated knowledge after years in a discipline has tremendous value and establishes you as an expert. List your areas of expertise and include them in your resume, marketing and sales pitch. Make sure you differentiate yourself in a crowded marketplace.
- Appraise your ability. Are you among some of the best at what you do? Can you accomplish quickly what it may take someone else extra time? One of the consultants I work with can evaluate the efficiency of corporate operations very quickly and make recommendations for money and time saving improvements. Organizations are willing to pay a lot of money for her time because she can accomplish in short order what it would take a team of consultants months to do. People that have high ability make what they do look easy (think of Tiger Woods). But that does not mean that it is. Make sure that you have an accurate appraisal of your abilities for pricing.
- Know the market value of your services. What is your value in the marketplace? Do you perform a specialty service or one in high demand? Do you provide goods or services that are hard to find? If the market assessment is low, you have to be very clear about the special value and expertise you bring to the table. Your worth (and pricing) should be based on how much value you can bring to your customer. If you can retool operations so that the company saves two million dollars, your value (and pricing) should reflect this.
- Resist requests to price your time. There remains a bias to equate pricing with time. Focus discussion on the three elements above and avoid the "piece work" mentality. As you become more comfortable thinking of your contributions in terms of value, others will see them as more valuable.
Remember, price is what you pay. Value is what you get.