Customer-Centric Costing
How do people cost their projects or services?
Experience
Experience and expertise in a given field can jack up or drive down prices. If you’re alone in an industry where there are a few experts - like a COBOL mainframe programmer, you can expect high rates for your skills to maintain legacy applications. Now contrast this to the army of Java programmers that colleges churn out. With the latter, you’d have to be very good or very experienced at the field to justify a premium.
Supply and Demand
However, the economic law of Supply and Demand can easily overrule such principle. For instance, you might be the only QBasic programmer in town where the demand for such services is nil. In this case, don’t expect the local market to pay you well. There is simply no demand for the QBasic service that you are supplying.
Values
Would you pay Steve, your shoe-shine guy, $1000 per year for polishing your shoe? Would you pay a gold miner $100 per trip to bring up rock from the ground? How about CEOs? How many CEOs can live well with a four-digit annual salary? Simply put, some jobs like Steve are valued differently in the economic food web. Some jobs can easily command a higher salary than the others - regardless of one’s investment in time, skills and effort - just because society thinks and values that it should.
Customer-Centric Costing
This afternoon, I got invited for a second interview for a project that my colleagues and I were vying for. During the first round, there were several bidders. Though our skills netted thrice the quality of our competition, our bid was twice as expensive as the competition - which didn’t really spell good for us. Unfortunately, price was one of the constraints for the project and we were advised of such project limitations.
So, my partners and I took away all of Rambo’s extra guns and ammo, leaving only the essentials: an Armalite, a jungle knife and a clip for a reload. This resulted in a costing that was as affordable as the competition while still meeting the minimum requirements. The client seems to be pleased and we’re off for a second round of negotiations.
Sometimes, landing projects is all about wanting to do what you do. If excess money will be the only obstacle between me and a project, by all means, let’s take it away. After all, I love what I do. That’s what I meant with this post I made a few months ago. From the movie Jerry Maguire:
Here’s why you don’t have your ten million dollars yet.
You are a paycheck player.
You play with your head. Not your heart.
In your personal life? … Heart.
But when you get on the field — you’re a businessman.
Do you love what you do? Because until you love what you do, customers won’t love what you do.