October 25, 2014

Jordan Furlong: The Best Pricing Advice Ever

So it was the summer of 1983 and I had reached that particular stage of adolescence when your parents have finally managed, after a long succession of hints, to get across the idea that this would be a good time to secure gainful summer employment.

Off I went to the local employment office to check out the job board. It turned out that when you’re 15 years old,  there’s not a whole lot you’re qualified to do (which always comes as a mild surprise to the burgeoning teenage ego). However, for people of my age and utter lack of qualifications, there was the “Odd Job Squad,” which allowed you to paint fences or rake leaves or do some other task where you couldn’t break anything that couldn’t be inexpensively replaced. In my case, that turned out to be mowing lawns.

So I signed up and was sent out to my first client: an aging couple living in a tidy bungalow that was probably once at the edge of town, but was now thoroughly suburban.

The couple had one of those push mowers that ran solely on the user’s effort. After a solid 45 minutes of serious labor (during which I mistakenly ripped out and threw away what I later realized was a series of tulip bulbs), I knocked on the door to receive payment.

The older gentleman at the door asked me, “How much is that?” and I realized with a sudden shock of apprehension that I had no idea. No one at the employment office had suggested rates or fees, and what did I know about the market for mowing lawns?

So I replied, “I don’t know … how much do you think it should be?”

He fixed me with a look that can only be delivered down a two-generation staircase and said, “I can’t be buyer and seller both.”

I don’t think I’ve ever received better advice about pricing than that. The seller’s job is to know how much his or her services are worth, and the buyer’s job is to decide, after as much or as little negotiation as desired, whether that price matches the value of the service to the buyer.

I’ve used that approach during job interviews, when the interviewer asks the inevitable cap-the-compensation question, “What kind of salary range are you looking for?” I’ve replied, “I’m looking to earn as much the job is worth, and only you know how much that is,” which is a nicer way of saying, “You’re the seller and I’m the buyer, and I’m not about to set your price for you.”

I’ve used that approach when setting professional fees, too, where I’m the seller and the potential client is the buyer, when they ask, “What do you charge for a speaking engagement?” I say that price is what I set after finding out every last detail of what the engagement would require, and if that price is too high, then we can negotiate some of the details. But I know what my work is worth. So what I don’t do is quote a price and then say, “Is that Okay?” because then I’m letting the buyer help determine the price, and that’s not going to end well for me.

Know what your time and effort and experience and ingenuity are worth before you think about setting price. If you want to negotiate that price up or down depending on the conversation with the buyer, that’s fine, because price is ultimately a conversation about value and opportunity between buyer and seller and it rarely ends up at the same destination twice.

But remember that you enter that conversation with a responsibility to know what you’re worth. If you let the buyer decide that, you will always end up underselling your services. Or almost always.

“Five dollars?” I hazarded, and he opened his wallet, pulled out a five and thanked me for my work. If I could go back and find him now, I’d thank him for giving me far more that day than I returned in kind. Not just for the advice, but also because I really wasn’t very good at mowing lawns, and five bucks was generous.

As a partner with Edge International, Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America. He also helps law firms that want a stronger online presence through blogs and social media with content, messaging and strategy as a Senior Consultant with Stem Legal. He writes the award-winning blog Law21: Dispatches from a Legal Profession on the Brink and can be reached at jordan@law21.ca. Jordan also contributes to the Attorney at Work blog, where this post originally appeared on August 22, 2011.