#090: Three Simple Ways to Transition to a Value Pricing Model

Welcome to the High Income Business Writing Podcast, helping you propel your writing business to a whole new level. And now, here's your host, Ed Gandia.

Well, hello there and thank you for joining me for episode 90 of the High Income Business Writing Podcast. My name is Ed Gandia and this is the podcast for business writers and copywriters who want to take their writing businesses to the six figure level or the part time equivalent. As a quick reminder, you can find details show notes for this episode by going to b2b launcher.com forward/episode90. You've probably noticed that there's kind of a growing interest or trend in many freelance circles about this idea of value pricing. I have talked about this before. I've brought in an expert to discuss it in my Smarter Freelancing podcast last year, and I'll include a link to that episode in the show Notes for this show. But you know, even though this concept of value pricing is interesting to many people, it still feels like a theoretical pie in the sky idea to many of the freelance writers and copywriters I talked to. So I wanted to bring it back to the surface and I wanted to discuss it a little bit differently this time around. And in this episode we're going to discuss three simple ways you can begin transitioning your business to a value pricing model. My guest this time around is Jonathan Stark and Jonathan is a mobile strategy consultant who helps retail brands thrive in a post PC era. He has written three books on web development, including O'Reilly's Building iPhone Apps with HTML, CSS and JavaScript, which has been translated into seven languages. And he's a real pro at value pricing. He really gets into this stuff, but I really love the perspective he has on this subject because he doesn't get lost in this kind of esoteric world of value pricing. He brings kind of a straightforward and very applicable perspective to the discussion. I love how he presents it, I love how he talks about it, and I think you're really going to enjoy and appreciate the very simple ideas he's going to give you on how you can transition to this type of model. Now, just one quick thing before we get started with the interview. Just because Jonathan has a software development background doesn't mean that what he will share with you here is not applicable to your work. In fact, I think it's very applicable. So just keep an open mind. I think you're going to get a ton of value out of these ideas and it will get you thinking in the right direction. Jonathan, great to have you man.

Hey thanks for having me. It's great to be here.

So today we're talking about a topic. It's been brought up a couple of times in the show before, but, you know, I really like your take on this and how you think about it and how you teach this idea. And this is the concept of value pricing. And many people in my audience love this concept or they're at least interested in it. The challenge becomes, how do you make that transition? How do you go from, hey, I'm either charging by the hour or flat fee based and I'm not really sure how to make that work. So I'm excited to have you on to discuss this further.

Great. Yeah, I mean, it's my favorite topic, so looking forward to it. Awesome. I could just jump right in.

Yeah. Before you do that though, I want to make sure that everyone understands kind of where you're coming from. So tell us a little bit about yourself, your background, what you do today, what you're known for.

Sure. Today I'm mostly known for mobile strategy consulting. I had a really popular book come out in 2010 called Building iPhone Apps with HTML, CSS and JavaScript and it's been translated into seven languages. It's still selling, which is amazing for a software book that was written almost six years ago. And it positioned me as an expert at responsive web design, mobile web development, phone gap, hybrid applications, and that sort of thing. So I, you know, for a while I was doing that kind of work and that's when I was approached to write the book. And after the book came out, it sort of accidentally positioned me as an expert in those areas. And I started getting a lot of customers or prospects come to me who wanted me to just advise their web team or advise their business about how to move forward with mobile. Because it was really not obvious. In 2008, 2009, 2010, it wasn't obvious what to do. People seemed like mobile was going to become big and so I basically started to get hired by people to give them advice. And it turns out that that is far more lucrative for your sort of level of effort to income ratio. So it's a lot less work and you get a lot more money and it's also extremely valuable to the customer because businesses are allergic to risk. And that's what they were faced with, is like really a lot of risk. So let's hire an expert to do the really critical decision making or to help us with the really critical decision making and then have our internal people train up to execute. So. So that's my main thing. But over the, and I do talks about it and how I do value pricing for that instead of by the hour or any other arbitrary measurement. And people started to come to me and, and say, jag, you wish you could teach us how to do that. We've tried fixed bids and it just blew up on our face and that sort of thing. So now I also do business coaching for software developers where I, you know, just walk them through the process, take them through a five step process of how to go from hourly billing, which is prevalent in the software community, over to value pricing.

Excellent, excellent. So that's what I love about this topic too. You're used to working in a market that has a lot of similarities with writers and copywriters in terms of the way they price their work. So you understand the plight, the pricing plight. Before we get into some of your ideas, I think we should need to get it this out of the way. Can you define value pricing for us?

Sure. Value pricing, it's a form of delivering a fixed bid to a client. I'm sure everybody knows what fixed bids are. Where you've got a project and you say, you say customer, this project is going to be $10,000 or $1,000, full stop, no change orders, no messing around, no nickel and diming. You give them a price like you were selling them a car, you know, and the value pricing part of it is how you set that price appropriately. So that amounts to finding out what the project outcome means for the company. So you know how much they're going to make off it, to put it bluntly. And you think, okay, they're going to make, let's say they're going to make a million dollars in the first year off of this project. I can surely charge them 100,000 for it. They'll get a 10x return on their money. And from a scope standpoint for developer, I'm thinking, well, I don't really know the scope yet. We didn't talk about that very much. But I wouldn't be able to call myself a developer if I couldn't finish this project in whatever 100 hours or some amount of time that would make your effective hourly rate extremely high.

Okay, makes sense, makes sense. So the context is this, right? A lot of listeners are in situations where it's either they're charging $90, $100 an hour and you know, either they're used to doing it that way or their clients are asking them what's your hourly fee or they're doing fixed bid for this white paper, it's $4,000. If that's the world you're coming from, that's what you're used to. How do you start experimenting with this idea of value pricing?

Okay, so there are three ways that I suggest people do it, and I actually do coach people besides software developers. So I've got like a photographer in there in my coaching program and stuff. So I find that these apply. So far they've applied across a wide range of professional services. So I don't want copywriters to immediately say, oh, well, he's just talking about software developers, so this won't work for me. Okay, so that said, there are three things that I recommend people do to kind of dabble in this before they get. Before they go full force. Because my experience is that most people, when they start doing value pricing, they price themselves way too low and they don't do a good job of the value conversation that you need to have before the proposal where they give a price and they, it either scares them away from doing it anymore or, you know, jeopardizes their livelihood. You have to do it carefully because if you price yourself too low, you're just gonna be working like a dog for less than you were before. So the, the first thing you can do to kind of ease your way into this is if you are charging by the hour, or in this case for copywriters and maybe people are charging by the word, you can just do your normal process. Talk to the client like you normally would, ask them about whatever you normally ask them about, but really change nothing about your initial conversations with the client. Then put together a proposal just like you normally would. And let's say they, they have, they write up an entire hourly proposal, all the payment terms and all that stuff. Then before they send it, try adding an option. So, so the hourly option, let's say it's $100 an hour. Sorry, yeah, $100 an hour. They think it's going to be 10 hours. And so it, instead of just sending it, add a second option where they say, or I'll give you a flat rate for 50% more. Basically. So, you know, you do the multiplication and then add 50% on top and say, in this option, I guarantee the desired outcome, whatever that was that you agreed to on the phone with them, I guarantee the desired outcome there. This is a final price. You don't have to worry about sort of going back to your boss and saying, oh, we need more money for the copywriter, or whatever, and, and see what happens. And so when you send that to the customer, two things are going to happen. One is that if you are bidding against anybody else you have just made all of, and they all do hourly estimates, then you've just made all of their hourly estimates seem risky to the client, including yours. So they will. You've made it viscerally obvious, you've made it explicit that there's an inherent risk of them paying anybody by the hour because they don't really know the price. You've really given them no price. If the hours are variable, then they're basically agreeing to a financial investment for which they don't know the price. So like we're agreeing to pay you some amount of money, we don't know how much. And when you, when you put that right next to a fixed bid, then it calls out the fact that they're taking all the risk. And when you end the fixed bid, you take all the risk. So that's, that's a nice way to get started. I would recommend doing it with small projects. So maybe something you think is only going to take five or 10 hours and go, you know, see what happens. See if they, if they pick the higher one.

I love that. I never thought about doing that. Just by showing that contrast, I can see how it would get a client thinking.

Yes. And, you know, not everybody's going to pick it. You might have clients already who you've attracted who are just not amenable to the concept of value pricing. It's not for everyone. You know, higher ed, you can never get them to do this. They need hours, they need an hourly rate because they need to compare. What they think they're doing is comparing apples to apples when they put something out for bid. Government's the same way. It's really hard to not do hourly because it's baked into the project management process. So, you know, you could be thinking, dear listener, could be thinking that, oh, this will never work with my client A or my client B. And my answer to that is that's probably could be right. Give it a try anyway. But it could mean trying to attract clients that are, you know, client C instead of trying to convert client A to a value model.

And I'm curious, is that 50% an arbitrary number or have you found that to be about right?

It's about right. So it depends on a lot of things, of course, like your sense of the seller. In this case, the copywriter is taking on the risk that they know how long it's going to take them to finish the project. And I Don't know how variable it tends to be in the copywriting. But in software, it's more than extremely common. It's almost like every single time people estimate too low and by the time the hours are eaten up, the project's only halfway done. So it's extremely common in the software world for the, for projects to go 50, 100% over budget, you know, and the client doesn't care when you give them an estimate for 100 hours at 150, $200 an hour. So maybe for iOS development or something, the client hears, you know, they hear $100,000 and they don't, they don't, they don't hear the word estimate. So when you go over that number, they're mad and finger pointing happens and you start eating hours and you have these horrible meetings where they drag you through the old hours entries and try and fight you about like, oh, how come this took two hours this week but it only took one hour last week? I want an hour off. And you know, it just turns into a nightmare.

Yeah, they want the best of both worlds, don't they? They want the low hourly with the, the low risk of fixed bid, essentially.

But the whole, the whole group of everybody is in this consensual hallucination, basically, because it's the way things work, it's how everybody does it. It's how the customers ask you, you know, the first thing they ask you is, what's your rate? And you just have to snap that right at the beginning. This is a little more advanced, but you just need to snap that right at the beginning and say, I don't have an hourly rate, but let's talk about your project and I can give you a fixed bid for that that is going to take all the risk off you. And they say, well, why don't you bill by the hour? And I say, because it's bad for you and it's bad for me, it's bad for the project. We can't, you know, we can't partner if we're constantly watching the clock.

Would you say that? And I know we'll talk about two other strategies, but in projects where the scope is kind of all over the place, for instance, a website where you're trying to bid on something that you haven't even defined the scope really well yet, really, there's two parts to it, right? The way to do that right, is, well, let's determine what needs to be built so we know how many pages and what these pages are, the nature of the work.

Absolutely. Not right. So what have you found that's totally. That's funny because that's what everyone thinks and that's why they can't get their head around how they would possibly not get Scope creeped to death. And in you. You talk about that stuff because that's what the customer wants to talk about anyway. That's what's in their head. They've already, you know, self diagnosed and they want to prescribe what you're going to do, but you are the expert and you know this. In my opinion, the same way a doctor shouldn't just give you a triple bypass because you asked for one. I shouldn't rebuild somebody's entire web presence just because they told me to. I need to go in there and, you know, I need to do my own diagnosis and decide if that is going to be worthwhile for them from on a financial basis. And the way you get there and the way that the scope part matters less and less is that you don't talk about the scope, you talk about the desired outcome. What is the objective? And if the objective is big and is potentially valuable in some way, maybe not financial, maybe they're looking to increase the number of Rails developers they have on staff and they're not getting enough job applications through their website because the mobile experience is horrible. Whatever it is, whatever their goal is, they have one. And eventually that goal is going to lead to some rough financial calculation that you can make because these are businesses and they're in business to make what? Money? Yeah, so they're. And they are going to take dollars out of their pocket or you know, something else if you're international, I suppose they're going to take dollars out of their pocket and put them in your pocket and the expectation is they're going to end up with dollars back in their pocket, preferably more dollars back in their pocket. It's really simple. I mean, in, in concept, it's like they want to get a good return on investment in the investment they're making in you. It's not complicated conceptually, but it's weird how very few people think of it like that.

It is a simple concept, I guess. Playing devil's advocate. I think one of the challenges is that the client doesn't believe it. So they know, they know what the goal is, but they don't believe necessarily that you could actually deliver that. I mean, actually I shouldn't say that. Just. Have you seen that to be the case?

Yeah, no, you're, you're right on it. You're right on it. So there's, there's a trust factor and it's, there's not a trust factor. The only factor is trust you. They must trust you. So if they don't trust you, this will never work. And, and frankly, you shouldn't work with customers who don't trust you anyway.

Yeah.

Because that's where you end up with being micromanaged and people asking you to, you know, change that is, make the logo bigger. Could you make this black a little blacker? You, you know, I think the text is a little too small. Could you bump up the text size or it looks too harsh, whatever. That's when they start trying to do your job for you because they don't trust you. So you need to do, you know, and this is part of coaching, actually a huge part of coaching is picking who your audience is going to be and then becoming an expert, becoming a recognized authority with that audience. And it takes time, but it's just like everything else, you start small and you work your way up, you know, thousand dollar projects, maybe even $500 projects. Thousand dollar projects. And then before you know it, you're doing $50,000 projects or more.

Yeah, exactly, exactly. You build your way there. So first option is, or the first idea is to offer a second option that's fixed bid. I think that's a very natural place to start. What would be a second idea?

A second one is to when someone comes to you with a project to try and identify if there's a piece near the beginning that you can break off as a, as a first phase and do that as a fixed bid. So in the software world, a lot of times there will be, you'll get a request for proposal that's really ill defined and is, it's, it is risky. It's, someone's going to take on the risk, either the client or you. So you can say, look, this is risky project. If we're going to do this by the hour, all that risk is on you. Because I'm not going to commit to any outcome. I'm just going to commit to, you know, showing up and doing, doing the hours and you're going to pay me until you're happy with it. And that's, that's, that should be scary. So what do you say we do a, either call it a roadmap, a design phase, a tear down some kind of, some kind of early phase that decreases the risk for everyone and you charge a flat rate for it. So of course, depending on the size of the project, this number needs to be fairly small in the scheme of the overall project, which you'll have a rough idea for. You know, you'll have a rough idea that, like, you know, there's, you know, it's a. It's a really big project. It's probably going to take six months to 12 months. So let's do the first three weeks, like either design fees or something and just do that, say for, you know, for a thousand bucks or for 5,000 bucks or whatever it is we'll go through and we're going to create style guides, we're going to create wireframes, we'll do prototyping, we'll do early user testing. There's a whole bunch of things you can do to minimize risk at the beginning of the project that it's going to make the rest of the project a lot safer for everybody. And so you say, at the end of this process, I'm going to give you. You're going to get deliverables, you're going to get a portable artifact that you could then have us quote or you could have if, you know, if you think that us doing the implementation is going to be too expensive. You can take this exact same document or series of documents or videos or wireframes or prototypes or whatever it is, and you can take that to you shop it around. That's fine with us. And they almost never will because at that point you're up to speed, they trust you, things like that. So then you say, okay, I can do a quote for this project now. And you can either do it just hourly, as they're expecting. You can do the first option at this point, do hourly and then add a fixed option because you have a sense of the project. You've been talking to them for three weeks, you know more about the company, you know all about the goals, all that sort of thing.

I love that. I love that. In fact, one example I mentioned earlier I think would work really well for this as a copywriter, web copywriter. They want to revamp their website completely and there'll be other people involved, right? There's a designer and a web developer and so forth. But from a content architecture standpoint, they're not really sure how they want to organize the information. And this could be a separate project on a fixed bid basis where you help them define that and map that out. Same thing with a white paper. So one thing that I started doing a couple years ago is a white paper plan, because I was working with a lot of clients where they weren't really sure what they wanted to write and how they were going to use it or how they were going to do the project. So I started working with a white paper plane. It's a separate deliverable and I just charge a fixed price. It's 950 bucks. And really it's not a big money maker, but it's, there is somewhat of a loss leader and it's a way to help me better define that and make it easier for me on the second phase, which will be the actual white paper. And I found, man, not only did, not only was the conversion rate much, much higher, but it made the process go so much more smoothly in the writing phase. And I had so much buy in at that point that it was kind of a no brainer.

So think back to when you first started doing that and if you were, you know, if you were charging hourly before that or by the word before that. When, when, if you're like me when you first did that, that chunk that you were not billing by the hour by the word, the, the feeling of doing the work, all of a sudden you're like, oh, I am, I want to finish this as quick. You know, I want to do a good job, but I still want to get it done as quickly as possible. So. Because that's in my best interest because that means my effective hourly rate goes way up. But it's also in the customer's best interest because it gets done faster. And in virtually every scenario, the customer want would prefer to have something done faster than, than slower. And what that does is it sets up a virtuous cycle where it makes sense for the provider to, you know, you to come up with, you know, in my case, it's like code libraries and writing their own gems and creating tools that make the kind of work they do go much, much faster. I don't know, I can't think immediately of an analogy for a copywriter. But the, the, the push to make yourself more efficient actually starts to create financial benefit for you instead of, you know, if you got more efficient at writing, maybe, I don't know, maybe it's an intake process where the customer fills out of a form instead of you talking to them or whatever it is. Then you know, that would just take away, you know that that decreases your income. And sure, you can try and raise your hourly rate, but that's a very, very static number. It's hard to raise your hourly rate a lot.

Yeah, in my case, I was charging fixed bid for the white paper project itself. The reason I broke it off is that this first planning phase was the most unpredictable. This is where we would waste a lot of time and this is the most frustrating. So by kind of decoupling it from the project as a whole and turning it into a very specific fixed bid set situation. Hey, there's a fixed price for this is 950 bucks. Here's what you'll get from me. Two things happened. First of all, they were now paying for something very defined. That was before. Before it used to be part of what I included. So they, they were more serious about it because hey, we're paying for this, we need to take it seriously. And I was including that anyway before. So now it took it away from that and it just made everybody happier and yeah, and you're right. And it made everything go much more efficiently.

That's a perfect segue actually into the next, the third and final recommendation for making the transition which is to create a productized service which is what you just described.

Yes.

So productized services are kind of the reverse of value. It's like value pricing in reverse where you have a sort of a limited scope high touch project. So it's kind of high touch service. So it's a one on one customized service that you do deliver manually if you will. It's not an automated thing where somebody just buys a PDF and they get the PDF and it's not customized to them at all. It's exactly what you just described where you've got a well defined, relatively fixed scope piece of work that you can publish a price for that is the same for you. Don't change the price for each different potential client. And what that does is causes customers to self select. So when people come, you know, if you have this on your website and people can come and see it, they can, they'll, some will think this guy's crazy. I'd never paid, you know, 900 bucks for this. But other people will be like, oh, that's a deal, that's a huge deal. And so what you're doing is, you know, yes, you're losing customers but they're probably low profit customers that you don't want anyway. And you're going to attract customers who are high value customers who are open to the concept of fixed bids and aren't going to ask you your hourly rate. And it's a great way to use your website or you know, and whatever drives traffic to your website to start to attract the right kind of clients. The ones that, whose minds are open to this and see your price as you know Maybe not a no brainer, hopefully a no brainer, but maybe like a good deal at least where they say, oh, that seems like a really good deal because in their minds they don't know an exact number of, you know, how much money they're going to make off the eventual white paper. But they do have a general sense of how important it is to their business because they know that they're going to take the white paper and then they're going to do this with it and then that is going to turn into, you know, based on historical numbers, they're probably going to be able to get 200 enterprise, high quality enterprise leads for whatever it is that they sell and they're going to have some sense that what did you say it was, $950 or.

Yeah, 950. It's a no brainer.

Yeah, they're going to have the right kind of. Customers are going to be like that's a no brainer.

It's a no brainer. Because in that specific situation, clients know that that's the most frustrating part of a complex writing project like this is defining the topic, what you want to accomplish, how we're going to tackle this, who are we going to interview, what's the timeline? A lot of these things are kind of boring. But by including that in my original scope of work, what was happening before is that was kind of all over the place and the client wouldn't respect, wouldn't respect my questions, my time getting back to me in a timely manner, that sort of thing. But when I suddenly took it into kind of a separate deliverable that they were paying for and they knew what they were going to get, they were going to get this actual plan. Then everything changed.

Absolutely.

And I was still charging the same amount for the back end project, by the way. All I did was add another 950 bucks to, to my pocket for something that I was including previously.

Yes. Right.

So productized services. I love this concept. I mean heck with, with white papers that could be a productized service. Look, the key thing is like you said, well defined, fixed scope or fairly fixed scope. So you'll get a white paper and it will be so many between this page, this number of pages and this number of pages, it will include this, that and the other, right? Yeah, maybe not necessarily, but just so the client has no doubt what they'll get.

Right. The pages thing is, so there's this sort of thing that you don't want to slip back into as you make this transition is you don't want to slip back into deliverables. These are the things I'm going to deliver because it becomes another arbitrary measurement. So the number of pages, arbitrary measurement. If the white paper, if you do that research in the first phase, and it turns out that the most effective thing we can do is a high level one pager executive summary, because our buyers that your customers are eventually going to try and attract with the white paper, it might be much more important for it to be a single page, but. But you probably do have to put that stuff in writing somewhere just to give clients who haven't worked with you yet an idea of what it would be like to work with you and roughly what's included. Because they're probably still going to be thinking deliverables, but you want to downplay it when you start to actually talk to them and say, you know, yeah, you know, it's not going to be 100 pages, it's not going to be one page. It'll be somewhere in there. And after we do this discovery, this first $950 discovery thing, you know, we'll both agree on what the right length is and that sort of thing. So I just, I just wanted to call out that you have to be a little bit careful that your mind doesn't start switching over to deliverables. And it's much more focused on doing the best thing, the most effective thing for the customer.

Gotcha. And that's an interesting point because even in a productized service situation, which I think is very tempting to be very specific with ranges and deliverables, you're saying, look, if you're trying to move into value pricing, you have to be careful there.

Yeah, just. It's so easy to slip back into it.

I think this is a topic for maybe a future interview, but just to kind of give folks a little bit of a glimpse into. If you start transitioning through these three ideas, what, what can they look forward to? Like, can you give us kind of a general scenario? And I know you touched on this early in our conversation, but what are you moving towards?

You're moving towards higher value outcomes for your customer for which you can charge more money. And usually you can gravitate towards pieces of your work that are easy for you to deliver because they're more your smarts than your hands, more your head than your hands, more your smarts than your, your labor. And you can just start to emphasize these services as, as you become a more and more recognized expert in your area, you can do these things that are actually really easy for you to deliver quickly that have a huge bang for the buck for the customer on the other side of the equation. And if you, you know, so that's, that's huge. So if people are, feel like they're, you know, they're on this treadmill and they just can't make enough money and their only option is to work more, try and raise their rate, like the way out of that, the way off that hamster wheel is to start doing this. But really a thing that really blows people's minds is that when you do start doing fixed bids that are based on value, well, any kind of fixed bid, really, you can, you can charge 100% up front, which is what I do. So you can say, you know, I'm giving you a price. This is, this is the price you're going to get the desired outcome for this price. We've selected some things that, that along the way we can measure the progress, et cetera. And you know, to put this on my calendar, I need 100% upfront.

Tell me more about that. Because I'm, I am, I don't think I've ever seen anyone make that part of their, their payment terms. So you asked for, with every project, every client engagement, you asked for 100% upfront.

Unless it's been specifically discussed for some reason. But yeah, like 90% of the time I'll say it's just like my normal boilerplate that it goes into just about every proposal. So I say, yep, it's 100 upfront to get started. And, and once I send the, When I send a proposal, I'll usually give three options, not two like we discussed before. So there'll be three graduated options, incremental options. So the proposal have like option one is X, option two is X plus Y and option three is X plus Y plus Z. And then at the end of the proposal, I'll say X is, you know, this many dollars, Y is more and Z is more than that. You know, this is a quote, not an estimate. This is the, the final price. There'll be no nickel and diming, no such thing as a change order in my world. We're going to achieve the goal. And the. I'll work until, if, if it takes me twice as long to do that as I thought, that's my problem, not yours. So, okay, great. And then the next thing is, and it's 100% up front. So since I'm giving a price and it's the final price, I can, I can do that. If it was an hourly estimate you could maybe prepay for a block of hours, but you both people are just fooling each other with that. So when somebody comes back to me, first of all, 80% of the people just send me a check. They're like, okay, fine. And other people will sometimes push back. Oh, you know, like, like I can remember financial institutions like, oh, our accounting part department doesn't do that, that, that sort of thing. And I say, okay, well, here are your options. And then your negotiation becomes around the payment terms instead of the amount of money. I will never, I never negotiate the amount of money. And there are a million things you can do to negotiate in the payment terms that make things easier for them or, you know, whatever, or are novel. You know, I haven't done this, but I've seen people say, well, I need a new computer. Can you guys send me a new computer? And if you get me a new MacBook Pro and free membership to this site of yours, you can do all sorts of different things, I suppose. But really, for me, I've only ever had to mess with the payment terms. So you say things like, okay, they'll usually come back and say, how about 50% up front and 50% when we're done? And I'll say, yeah, we can talk about that. But I don't think that's a good deal for you. Because software projects, you know, they're like a lake freezing at some point they're solid, but you never know when it happens. So what I'd rather do is say 50% up front and 50% in 45 days. And again, I'll just keep. We don't know when the project's going to end. So, you know, we just need to keep going. And I don't want to have like some, you know, weird corner case bug come in in three months after we've, after you've already signed off on the project. And then maybe like, sorry, you already paid for it, it's going to cost you more to fix that bug. Or, you know, this, this not a bug so much as like, just like a weird case where something that only happens quarterly comes up. And they generally understand that. And, but even if they don't, if they say, well, no, we're uncomfortable with that, then I say, okay, you pick the second date. But the project's not going to end on a particular date. Like there might be a launch date or know, but the project's not done at launch.

Yeah.

So, you know, for a copywriter, this could be, you know, the website goes live and they find out that it didn't perform the way they wanted. Maybe there's some amount of tweaking that needs to happen. I'm not. I'm not exactly sure how to translate that into your world, but it's. I mean, I. I don't think I've ever lost a. A job over asking for 100% up front. I know I never have. I've never lost a job over. It's. I might not get the 100% upfront I usually do, but then it gets, you know, for the ones that I don't, we work something out and come to terms with something. But nobody has ever talked me down on price, ever. Not once.

And I'm assuming that. So that's. Once you know, that there's a fit. So obviously, if someone's really giving you a hard time, they probably weren't a fit to begin with.

Yeah, I'm. Perhaps I'm kind of good at sniffing that out or, you know, initially, before I write the proposal.

Before you get to this point. Exactly. Yeah.

Yeah. I literally try and talk customers out of hiring me because I said, well, why don't you do this? It'd be so much cheaper if you just, you know, you don't want to spend a million dollars with me. You can just go outsource this. Why not do that? Or why not just use WordPress? Or why not just get a plugin? Or. So by the time I'm off the phone with them, they have convinced me and them that I'm the only option.

Oh, I love that. You know what? And looking back, that's when I've been most effective, when I was just so slammed that I just didn't want to take them on and I'm trying to talk them out of it, and they. They're trying to talk me into it.

Yeah, it's like. It is almost like a dating dynamic. It's like that, like, hard to get kind of thing.

Yeah. Yeah. So one. One other question, then we'll. We'll wrap up. You mentioned three options, and I love that idea. When you're doing option X, X plus Y, X plus Y plus Z, what is your goal? Are you kind of thinking, you know, I'm using option two as kind of my anchor or. Meaning. Let me rephrase that. You're using option three as your anchor and hoping they go for two or what? What's your goal there?

Yeah, it's funny you asked that, because I have. I have two ways that I do it. It depends on the client, and it also Depends on which option I want to do. So if there's. It could be that. I think that this, I think that the, the project is going to be a gigantic home run for the, the customer. If I do option three, that I'm going to price it in a way that creates a, a curve that makes them look at option one and then option, the price for option two and then the price for option three. And the prices only go up a little bit. So it's like maybe option two is 50% more than option one and then option three is maybe 25% more. So they're like, well, if I'm going to do option two, I might as well do option three. It's only 25% more. And I'll do it with sort of, you know, sort of rounded curve that flattens out at the top to try and push them to the option I think they should do. And then other times I'll do what you said first, which is, you know, they've asked for something that, or they've mentioned some things I want to put in the proposal. But either I don't think they're going to be a big win or for some reason I want to push them to option two, then I'll do this sort of, you know, an ascending curve that approaches infinity. So you've got like option one is X, option two is, you know, 2.2 X. So more than slightly more than double. And then option 3 is 5x, which is drastically more than the first option. And you know, the concept being that the really high, the 50,000, the $500,000 option three is going to make the, you know, $220,000 option two look like a deal.

Yeah, but really.

And there's one last thing I should say about options, and it's just quick, is that option one always needs to be exactly what you discussed on the phone. So when you had a conversation with the customer and you come to a conceptual agreement about the outcome of the project, what's involved, the general timeline, what, all these things that you talk about. That's always option one, that's never option two. It's never option three. It's always option one. So that when they get the proposal, they are like, okay, this is the thing we discussed. The person listened to me, they heard what I said. Our communication is good. I trust them. Option two is like, here's some things that occurred to me that are just like option one, but additionally, you know, I can do like long term maintenance, you know, after the delivery, whatever.

Interesting.

It's critical.

You never allude to the fact that you're going to send them another couple of options to think through.

I might mention it if it comes up, but I don't think it's that big a deal.

Okay. I love that. Fantastic, man. Hey, this is great, Jonathan. You really got me thinking here about the different possibilities. I think most importantly, you've given us a framework for transitioning. You've given us a bridge to go from this place where it's really, like you said, the hamster wheel of either pricing things by the hour by the word or even fixed bid and kind of getting more to this other side where you're fixing, you're pricing based on the value of that deliverable or that work for the client. That's one thing we haven't addressed before because everyone who really likes the idea wants to figure out a way to implement it, but it just seems like a huge leap and these, these steps definitely make it doable.

Great.

So thank you so much. Where can listeners learn more about you? Where can I send them?

ExpensiveProblem.com is where all of my coaching stuff is. And if people want to check out a reading list, if you haven't read a business book in a few years and you're looking for something good that's in this area of thinking, just go to expensiveproblem.com reading list. And I've got my top books up there with, you know, they touch on all different parts of business, but it'll be obvious which ones are pricing based.

So excellent. We'll include links to those in the show notes. Jonathan, thanks again for coming on. This has been fantastic.

My pleasure.

Well, I hope you enjoyed that interview and I encourage you to definitely check out Jonathan's resources. He's got some great stuff out there on pricing and other similar, similar topics which are very relevant to our world as writers and copywriters. I wanted to also remind you that you can grab the till shown us for this episode@b2b launcher.com forward/episode90. I include all the links that we talked about in the show notes. And finally, if you're in the U.S. i just wanted to wish you a wonderful and safe Thanksgiving weekend. We have more much to be thankful for. And if you're outside the U.S. i still wish you a great Thanksgiving week. You know, just because it's not celebrated everywhere in the world doesn't mean that we can't take a moment to be grateful for our health, for things we have for the people in our lives and I wish everyone much happiness, good health and prosperity now and in the New Year. So that brings us to the end of the episode. Thanks so much for listening. I hope you have an awesome day. Take care.

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