Perfecting Your Pricing Strategies You're no blue-light special. Throw in the extras, play to the customer's needs, and get the price you deserve.

Again and again, I've seen incompetent people earn more thancompetent people. One reason: They know how to charge. Charge $500when the customer would have paid $1,000, and you've justtossed $500 down the toilet. Charge $1,000 when the customer'spuking point is $500, and you've tossed a customer down thetoilet.

Sometimes, it's not how much you charge--it's how youask. Should you charge by the hour or a flat fee? Go for the bigsale or start 'em out with a small one? When's the righttime to spring the price on them? What if a customer tries tobargain with you? Should you offer a sliding scale and risk beingtaken advantage of by fat cats who plead poverty?

The questions all boil down to this: How can you chargeabove-average fees while leaving customers knowing they'vegotten a good deal? The following strategies have worked for myclients and for me. The 10 minutes it takes you to read throughthese strategies may yield you more money than any 10 minutesyou'll ever spend.

Make Clients Comfortable

Many customers will pay extra to reduce their risk, so considerthese options:

• Offering an all-inclusive price rather than an hourlyrate. Many people will pay extra for the peace of mind ofknowing, upfront, how much a project will cost. A side benefit of aflat fee: You needn't make explicit your hourly rate, a numberthat often raises eyebrows.

Of course, when determining a flat fee, build in 25 percent to50 percent more for the extra time you'll inevitably need.There's only one way a task can take no longer than it'ssupposed to-if everything goes right. Obviously, there'san infinite number of ways that the task can take extra time.

• Selling a low-priced service or product first. Manycustomers are understandably reluctant to spend big in their firstencounter with a business. So, especially if you're sensingreluctance, offer a low-cost initial purchase. For example, if youbuild Web sites, instead of expecting the customer to hire youoff-the-bat to develop their site, say, "Let's take it astep at a time so you can feel comfortable with my work. For now,why don't you just hire me to develop a blueprint for yoursite? If you're satisfied with that, we can go further. Makesense?"

Don't offer to do initial work for free by, say, offering acomplimentary hour of consultation. Too many customers will takethe freebie and walk. Besides, offering to work for free can makeyou look desperate.

• Offering a guarantee. A money-back guarantee providespeace of mind for the customer yet is unlikely to cost youanything. If your product or service is any good at all, very few,if any, customers will ask for their money back.

• Accepting non-cash payment. A cash-poor customer may bewilling to offer you a great deal if you're willing to acceptnon-cash payment. For example, an accountant did a small projectfor a playground equipment manufacturer. He got paid with a swingset, sliding pond, and play structure, delivered and set up in hisback yard. Leading Silicon Valley law firms such as Wilson, Soncinisometimes do legal work for cash-poor start-up companies inexchange for equity in the company. Wilson ends up making moremoney than if it had charged its regular hourly rate. This tool canbe just as effective for home based BIZ Experiencess.

Why You Can't Compete on Price

Many BIZ Experiencess, especially newbies, compete on price. Badidea. Here's why:

• Few small businesses, even low-overhead ones, can hope to earna middle-class living unless their bids are based on an hourly rateof at least $75 an hour. Your fee must figure in the followingcosts: taxes (usually 50 to 60 percent if you count federal, state,FICA, disability, etc.), liability insurance, cost of setting upand maintaining your office, travel time to clients' locations,equipment, materials, books, accounting fees, marketing costs,business license fees, training costs, vacations, sick leave,health insurance, retirement.

And don't forget that you probably can't bill 40 hours aweek. Most small-business owners must spend considerable time onnonbillable activities: marketing, doing administrative work,acquiring new skills, etc. The average one-person business billsonly for 10 to 15 days a month. You only want customers that allowyou to earn at least a middle-class income.

• You'll attract difficult customers. Customers who insistyou work for sub-middle-class income are likely to be difficult todeal with in all matters. Even if you've given them arock-bottom price, they're more likely than others to nitpickyour project so they can get a price concession or more work out ofyou for free.

• If you develop a reputation as a low-cost provider, yourperceived value will be low. People believe you get what you payfor. Sometimes, the easiest way to appear more competent is toraise your prices. Crazy, but true.

• It's rarely necessary to be the low-price leader. Simplymarket well-then once customers call, all you have to do islisten to their needs, professionally propose a service or product,and offer a price that's within reason. Often enough,they'll say yes.

Discussing & Negotiating Your Prices

Often the customer will ask for the price within seconds afteryou've said hello. Usually it's wise to defer the answer.For example, you might respond, "Before I can give you anaccurate price, I need to know a little more about your needs. Tellme about your situation."

In every conversation, there's at least one good moment tostate the price. It almost always occurs after listening to thecustomer's situation, asking a question or two, and thensummarizing their needs; for example, "So it sounds like yourbusiness needs X, Y, and Z. Am I reading you right?" If he orshe agrees, matter-of-factly say, "Here's what it willcost you."

A particularly good time to state the price is just after youand the customer have had a good laugh or if the customer has justsaid something positive about what you're offering. Whateveryou do, when you state your price, sound upbeat, not sheepish.

One more note: Time is money, so consider charging extra forrush jobs is an absolute must. Many customers will pay extra to gettheir job done pronto. That's easy money for you and a realbenefit to a desperate client. Don't be shy to charge 25 to 50percent more for rush jobs.

Don't Let 'Em Negotiate You Down

If a client is urging you to lower your price, try one of theseresponses:

• "I can understand why you'd feel it was expensive.Might you want to consider, though, (insert a key benefit of yourservice that they'd especially appreciate)?"
• "I'd be happy to refer you to a lower-costprovider." If the customer was serious to begin with,he'll usually say, "That's okay. I'd rather dealwith you." Not sounding desperate for the sale often motivatesthe buyer to say yes.
• "I offer the lowest price for quality, so although theprice may sound a little high, you're actually gettingexcellent value."
• "I price my services as fairly as possible so you can geta good price without us having to play games."

If you sense the customer needs to feel he or she is getting aspecial deal, rather than discount the price, throw in something.For example, if you run a home inspection service and the customerbalks at the price, say something like, "Well, if you'reready to make a deal, what the heck! I'll include an inspectionof the garage at no additional cost. Fair enough?"

Not Ready For Prime Time?

If you like these pricing strategies but don't feel you canimplement them smoothly, role-play them with a friend. But if thatfriend is someone you plan to eventually buy something from,don't be surprised if you find yourself paying more.

Marty Nemko is an Oakland, California-based SOHO and careerconsultant, He hosts Work with Marty Nemko on a NationalPublic Radio affiliate in San Francisco. His column appears on thefront page of the employment section of the Sunday Los AngelesTimes and San Francisco Examiner/Chronicle. His latestbook is Cool Careers for Dummies. Reach him at mnemko@well.com.