Why to Include Skill Level In Your Pricing

Posted on: 07/08/19

Written by: Frank Stasiowski, FAIA

Topics: Financial Management, Value Pricing

Other professions vary their prices depending upon skill level, why don't architecture and engineering firms?

Why do we use standard billing rates when we design projects that use differing levels of professional skill?

Shouldn’t we vary our pricing based on the skills required for a particular project?

Doctors charge a higher rate for surgery than for an office visit. Lawyers charge more (a higher hourly rate) for difficult litigation than for a routine real estate sale.

Other professions and service businesses also base their prices on the skills used. Even the local beauty salon sets prices based on the type of service performed, not on how long it takes to do the job.

A/E projects also require varying skill levels. The added-value of “special” services will differ with each discipline, but there will always be a range of potential services.

When you initially discuss a project with your client (or review the RFP), you must determine the skill level that the client wants in the project, and prepare your proposal accordingly.

The client’s needs may not be totally defined at this point, but if you have prepared your definitions of service skill levels, the appropriate level for that project should be fairly clear.

This approach is helpful in negotiating the contract. If your client wants a lower fee, you can point to the skill level required and offer to drop the complex features for more routine ones in order to lower the fee.

About the Author: In his 40+ years leading PSMJ, Frank Stasiowski, FAIA has authored dozens of books and manuals serving the business needs of the A/E industry, including eight best sellers on management. In addition to being the Founder and CEO of PSMJ, he is a frequent speaker at numerous prestigious A/E industry events on matters such as project management, marketing and business development, strategic planning, and more. This article is an excerpt from The Value Pricing Imperative for D esign Firms. This book provides practical advice on managing cost, contract types, pricing change orders, cost accounting techniques, negotiating methods, liability considerations, bidding approaches and much more.