Book a call

What Makes a Price Realistic

A price should be, first and foremost, based on reality.

But does that mean it should only include direct costs?

From your side, consider:
– opportunity costs: if one job makes you 2000 USD, but also disables you from continuing your 1000 USD retainer, and the other job will make you 1500 USD while allowing you to continue the retainer, then the first job is a worse deal as it’s burdened by opportunity cost.
– social costs: paying somebody from a less stable background has a different effect on society than paying somebody from a more stable one, even if the amount is nominally the same.
– sunk costs: If you had to finish an expensive MBA to do what you do, is it ok to include it in your price, and how much per client?

From the client’s side, consider:

– Convenience: if two hairdressers charge the same, but one is a 40min drive away and the other is near, their prices to the client are not the same
– Risk: if two personal trainers charge the same, but one guarantees her result and the other one does not, it’s not the same
– Ego: if two therapists charge the same, but one of them is an ex-romantic partner of yours… yeah.

Likewise, potential, competition, and urgency are also no less part of reality, just not as easy to pinpoint. Direct costs alone should never be ignored, but by themselves, they are woefully inadequate to help you judge the value of your work.

Like this article?

Subscribe to my new newsletter and get them weekly delivered directly to your inbox, no spam whatsoever!