The Rate Card in Your Head

I'm still not sure I ever made the mental shift from pricing my time to pricing my value.

It isn't something you learn once and carry forward. I've had to relearn it three times.

When I left Wall Street for a consulting role at PwC, pricing wasn't something I had to work out. PwC had already set the rate. My only decision was whether to accept it. I did.

When I left InfoManage and tried consulting on my own, that safety net was gone. I had to price my services myself, hourly and by project, and I found out I didn't really know what I was worth. There was no rate card handed to me this time.

Years later, when I left Freshworks and started consulting again, I assumed the second time would be easier. It wasn't. I still had to decide between hourly, retainer, or project. I landed on a retainer that looked a lot like an hourly rate. Same result, different name.

Three opportunities, three attempts at the same problem, and the only one that felt easy was the one where someone else set the number for me.

The PwC rate was never really about my value. It was permission, borrowed from someone else's structure, so I never had to trust my own read on it. Take away the structure, and the certainty goes with it, even though nothing about my skills changed.

Where The Number Used To Come From

For most of the last century, pricing had something to hold onto. A seat. An hour. A unit produced. Something you could point to and say: that's what you're paying for.

Software sold per seat because you could count seats. Now it's paying for usage, and usage is heading toward getting automated out from under the pricing model too. The thing being measured keeps dissolving.

Entertainment has the same problem from a different angle. If a movie or a song can be generated at scale, what exactly is scarce anymore? I think that's part of why live performance keeps holding its value even as everything else gets cheaper to produce. The room. The night. The fact that it only happens once. That's the part that can't be reproduced.

The unit that used to justify the price is disappearing. In many areas, nobody has replaced it with anything as countable.

Access, Not Ownership

We stopped buying the disc, or even the download, a while back. Streaming a movie, streaming a song, running a lawnmower on software that phones home to a company that could switch it off — none of that requires convincing anymore. We pay for access, not ownership, and it barely registers as a decision at this point.

Which makes the resistance to paying someone for their judgment a little strange. It isn't that buyers can't handle paying for something intangible. They do it constantly, from music to the machine that cuts the grass. A song comes wrapped in a subscription price someone else already set. What's in a person's head doesn't come wrapped in anything. The buyer has to decide, alone, what it's worth.

The Vendor’s Version

A software company moving from per-seat to consumption pricing is doing exactly what I was doing after InfoManage and after Freshworks. Looking for something outside itself to point to and say: this is why the number is what it is.

The vendor's version usually shows up as a new pricing tier, a new billing model, a new metric to anchor on. Mine was a rate card at PwC, then a retainer that pretty much did the same job later. Different mechanism, same purpose: find an external reference point so the number doesn't have to stand on its own.

I've long believed you shouldn't sell features and functions, you should sell outcomes. The problem is that outcomes are harder to price than features ever were. A feature is countable. An outcome has to be valued, and then, separately, measured. Neither is obvious.

A number that has to justify itself on its own is exposed in a way the old anchors never were.

What the Number Actually Comes From

If the old anchors are dissolving — seats, hours, rate cards — the number has to come from somewhere else. Maybe it comes from whether you can describe the outcome you're actually delivering, specifically enough that the price follows from it.

That's a harder thing to build than a rate card. A rate card is something someone hands you once. Your value only makes sense in relation to the outcome it helps someone else achieve, which means you're never really describing yourself. You're describing what happens to them because of you. And that changes for every person you say it to.

Two People, Two Prices

Here's the harder version of the question. Two people can say the same sentence. Both can describe what they do clearly. And the market still pays one of them $25 an hour and the other $150.

If it's not the skill set, what is it?

Maybe the market isn't really pricing the skill. Maybe it's pricing the absence of surprise.

The cheaper hire might be just as capable in a vacuum. But capability in a vacuum isn't what a buyer is purchasing. They're purchasing the difference between someone who's seeing a problem for the first time and someone who's already watched it go wrong three times somewhere else, who can see around corners and knows which turn not to take. Fewer expensive mistakes on your dime while they figure it out.

That's experience.

Berkson's Bits

I think best when I write it down, and it helps in collaboration. And yes, it's scary. Putting something in writing opens you up for criticism. But if you have the courage, it also opens you up for insights.

What I'm Listening To...

Blackbird by The Beatles is one of my favorite songs. It is also one of the most covered songs and I have collected quite a few of them. This a cappella version by the New York Vocal Collective is truly special. Enjoy!

A rate card, a certification, any borrowed structure, can't manufacture that premium, no matter how official it looks. Does a certification prove you know more than the textbook approach? Experience is what tells you when the textbook approach won't work, and what to do instead. A buyer paying for the second thing isn't being irrational when they pass on the first.

There isn't a clean formula for converting experience into a rate card. Three jobs, three pricing decisions, and I still don't know if I got it right.

Looking forward to continuing the conversation...

Alan