One of the classic questions that I am often asked as a business coach is how much should people charge for their services.

I am a trained economist by profession. So I dutifully profer advice about the level of the direct costs, including raw materials. Then there are overheads, such as rent. And ignore at your peril financial charges, including loans to be repaid.

Of course, there may be local factors to consider. This is not just a case a looking at the state of the competition. For example, many of my clients are based in Jerusalem, where there are two predominant population groups that force prices downwards.

However, beyond these issues is a factor that many buyers will gleefully encourage you to ignore. And this is where you, as the seller of your product or service, stand to lose big time. Let me illustrate what I mean with a fable that my wife sent me. (I assume that it is taken from somewhere on the internet).

A ship engine failed. No one could fix it. They brought in a man with 40 years. on the job. He inspected the engine carefully, top to bottom. After looking things over, the guy reached into his bag and pulled out a small hammer. He gently tapped something. Instantly, the engine lurched into life. The engine was fixed! 7 Days later the owners received his bill for 10k. ‘What?!’ the owners said ‘You hardly did anything. Send us an itemized bill. ” The two-line reply simply stated …..A) Tapping with a hammer – $2 B) Knowing where to tap – $9,998

Don’t Ever Underestimate Experience!

From a slightly different angle, I will illustrate this point with a true story. A client of mine was recently asked to quote for a contract, a piece of work which he would really enjoy to secure for a multitude of reasons. How should he present his position and win through, I was asked? So I created the following exercise.

Step 1: Think of a high price you would like to charge.

Step 2: Think of a low price that would almost definitely secure the contract.

Step 3: Consider in specific detail the time to be spent in direct meetings, travel time and preparation time. Do not try to minimize these items, because that is rarely a realistic approach!

Step 4: Internalise how your efforts will make a significant difference to the commercial life of the potential client.

Step 5: What is the true value to you of that time?

Step 6: Be honest…………is the answer to Step 5 closer to Step 1 or to Step 2?

Again, never underestimate the value of your experience. And that is expressed in the amount of time you invest, whether it is two minutes or two months.