You are the owner or manager of a software development company.
You are not sure the prices you are charging to customers are optimal.
Or, worse, you need to increase prices because of higher costs and inflation, but don’t know by how much.
And you are afraid clients will not accept to pay more.
These are the steps to a better pricing.
Day 1
Start with your business objective for the next 9 to 12 months.
What are you looking to improve? Revenues, profits or sales volume (measured in billable man-days)?
Pick the ICP (Ideal Customer Profile) that is most likely to help you achieve your objectives.
Make sure it’s as narrow as possible.
If your total market is bigger than 2.000 companies worldwide, your ICP is not narrow enough.
Day 2
Competition research: who else is selling to the companies you are targeting?
Make a list of at least 15 direct competitors, meaning they offer a similar level of quality and solve the same general problem.
Try to find information about their prices.
Day 3
Document value: what are you offering to these customers?
Define the level of quality.
Document special skills or capabilities you have.
Gather all past projects, case studies and testimonials that are relevant for the chosen ICP.
Day 4
Quantify value for customers.
How are you helping them make more money?
How much?
Day 5
Choose:
- the pricing strategy
- the contract type, based on the level of risk you are willing to take
- the pricing metric(s)
Day 6
Build your pricing intervals.
Minimum and maximum levels for your
- Costs (with and without cost of sales, including profit margins)
- Direct competitors
- Value for customers
Day 7
Read everything you have documented so far.
And again.
Day 8
Set your rate card as intervals.
Decide on a range for your prices.
Day 9
Create a dynamic pricing calculator, to set the rate for each project proposal.
Day 10
Communicate your new pricing to everyone in the team that will talk to customers: sales, marketing, delivery, …
WHAT THIS MEANS FOR YOU
Days as described in this plan are not necessarily consecutive.
But they could be, if you want to.
Which means that in 2 weeks from now, at the latest, you can have an improved pricing model.
If you start today.