Pricing services in the design and construction industry isn't easy. Business moves fast, uncertainty and complexity abound, and competition can be fierce—and stupid.
Still, clients typically want projects done right, quickly, and cheap.What's an industry professional to do? Here are five ideas to consider before you price your next project:
The essence of strategy is choosing what not to do (Michael Porter, Harvard Business). In truth, most A/E/C firms aren't so much strategic as they are opportunistic, responding quickly to new projects as they develop. This approach leads to business complexity—and commodity pricing. Stop working on everything, and get much better at some of them.
Be a category of one. If you're the only firm offering a highly unique solution, approach, or expertise —then you set your price (and you'll never respond to RFPs). Pay attention to whom you compare to —and whom you are compared.
Price on value, manage on cost. Faced with pricing a project, we begin with a cost estimate, and the level of effort needed. That’s OK, but pricing the job slightly above this is not. Disconnecting your fees from the cost of your effort is the single best way to improve firm profitability.
Never change your price without a change in scope. All A/E/C professionals must adjust prices from time to time to meet client expectations, fit into project budgets, or win competitive work. Still, when you give on price without adjusting scope, you look like a cheater. Tie a reduction in price to a change in scope and both you and the client will be happier.
If you never ask for it ... you’ll never get it. Keep pushing up your fees until you lose some work; otherwise you'll never know what you're worth, and what you're missing. And keep in mind that your fee is usually much smaller than the value delivered to the client's organization.
Want to earn higher fees, more money, and greater profits in your business? Take courage, be better, and ask for the price. After all, you are worth it, aren't you?
Other strategic planning related blog posts:
8 Tips For Making Your Strategic Planning Meeting A Success