What Are You Worth?

I just read something interesting that I think applies to the post I am about to write. A 10 pound note, as the story went (or in our case a $10 bill) is worthless. It is simply a piece of paper with ink with a pattern of text and colors and numbers, but with no essential value. If that piece of paper is torn in half it immediately becomes worthless, you can not use half the bill to purchase a $5 movie ticket or $5 worth of gas (not much these days). But, join the two halves together with a piece of transparent tape and suddenly, almost magically its value is restored.

But, it isn’t. It is only the thoughts and perceptions of the people surrending that bill, those in the society that have placed value on that piece of paper that have projected a value into it.

So too, your business operates on perceived value. Particularly in the service industry, particularly in a business to business service industry. Your products or services may have no “real” value, only the value you and others place on it. This topic, in particular, has been a hot debate in the web development field for which this argument comes out, a topic and debate I am familiar with.

It was one of the first things conveyed to me when starting out. Business consultants for example typically have no “real” value. At the end of their services, when they are done monitoring or evaluating a business perhaps their customer receives a few sheets of paper with carefully crafted words, where by which, if analyzed and followed a business may truly prosper, but nothing was created. There is no plastic models to be thrown up on a business trophy wall, there is no electronic device produced at the end of these services. A person or team of persons simply spent time observing, analyzing, and interpreting those observations, mixing them with experience.

The point is you do have value and so do your services, even if you are new, your services are amateurish, or you are inexeperienced. But, you must understand that it is you, as a business owner, who governs your price and that price will also help determine perceptions of you and your products or services. Even if it is only your time that is spent and nothing “tangible” is produced your products have a value. In the case of a business consultant, perhaps through creative management and accounting practices your insight is worth $1,000,000 in savings to a company over the next 3 years. What are your services worth?

In the case of pricing your own products or services think of the following:

• How much must it take to produce it (either in your time, your employees’ time, or cost of materials)
• How much does it take to sell it (marketing & sales related costs)
• How much must you make to break even and support yourself and your employees (local business environments play a big role in determining this)
• How much must you make to continue to grow (increasing the above three)
• How much do you want your business to profit from it (competitive businesses play another key role in this, all things being equal what do your competitors charge, you have an opportunity to either outprice your competition by offering more or better, or undercut your competition through fantastic people and processes)
• Finally, how much is it worth to those you are offering it to?

Additionally, understand that although sometimes uncomfortable, the discussion of money and pricing with your future clients as well as the collection of money after services are rendered, is a vital part to any business - but you and your services are worth it!