the price is right

The other day, while out on a long roller blade, I happened to be listening to a podcast by Tim Farris. (You need a long outing on the blades to consume one of his recordings.) He was referencing pricing, startups, and a statement that Marc Andressen’s made. Marc indicated that the No. 1 theme that their investment companies have when they are really struggling is that they are not charging enough for their product. And this reminded me of a key startup rule of thumb. If your customers have not complained, every now and then, that your prices are too high, then you have not priced your product or service high enough.

Price objections are part of the sales game. But if you are dialed in to your target customer, their needs, etc. and are making some sales, and if you have never gotten push back on price, it is highly likely that you are leaving money on the table. Lots of it.

Think about the power and dynamics of increasing the price of your product. If you have a given level of deal flow, are closing a fixed amount of deals per month, and you can increase your price – say 2 times, you just doubled your revenues without working any harder!

Now, you may not just want to arbitrarily increase your price two times. Test the water first. Check your value with your existing customers.  To do this, go back to some of your earlier customers and ask them about your products value. Ask them about the type of savings it is providing them, and whether or not they would have paid more for the product now that they are using it. If you are selling an enterprise level product, you will likely learn that your product is providing greater savings and value then you thought, and this is not reflected in your price.

Corollary to the pricing rule: You can increase overall revenues without any extra investment in people and process just by increasing your price.