 In this episode, you're going to learn how to get paid the right amount for the value you create as a service designer. Here's the guests for this episode. Let the show begin. Hi, I'm Dan Maul. This is the service design show episode 107. Hi, I'm Mark and welcome to the service design show. On this show, we want to empower you with the most effective skills and strategies so you can design services to win the hearts of people and business. And the guest in this episode is Dan Maul. Dan is a great guy who runs an agency called Super Friendly in Philadelphia. He knows everything about design systems and he's written a book called Pricing Design. And that's the main topic for this episode. We're going to talk about money, value and pricing. So at the end of this episode, you'll know why charging an hourly rate isn't good for you and your clients. You'll know how to actually understand the value that you're creating as a service designer and you'll know better how to have a conversation about money without it becoming awkward. If you're new to this channel, welcome and I hope you'll enjoy the chat here with Dan. Make sure you subscribe to the channel because we bring a new video that helps to level up your service design skills at least once a week. And while you're at it, make sure to click that bell icon to get a notification if anybody actually uses them, but click it anyway. That's all for the intro and now let's jump straight into the chat with Dan Maul. Welcome to the show Dan. Thanks, thanks for having me. Then it's so nice to have you on because I didn't know about you until I heard your voice on a different podcast. And the interesting thing here is that you're not per se a service designer, you'll tell something hopefully about your background in a second, but what I like about having guests who aren't that familiar with service design is that the most interesting conversations are usually with people who are sort of on the fringes or on the edges of our field. So I'm hoping for a very interesting chat, but for the people who don't know who you are who haven't Googled you yet, could you give a brief intro? Yeah, sure. My name is Dan Maul. I live in Philadelphia. I run an agency called Super Friendly. I've been married for 12 years. My wife and I have two daughters, eight and six. I'm not a service designer. I only heard about service design, I don't know, a year or two, maybe a few years ago now. And I consider myself a designer and all the things that I know about service design, I sort of lump into design because when I started doing design, it was all design. You know, it was all called design. It wasn't segmented as much. And so I love the idea of service design. It's a new one to me, but it also feels very familiar to stuff that I've been designing for many, many years. I think a lot of people sort of have that feeling. And so many people on the show have said, you know, at some point, I discovered the term service design and it was actually the thing I've been doing for all those years. So we're not going to debate semantics or what it is and what it is in today. We have a much more important topic to discuss. But first, we have a 60 second rapid fire question round and I haven't prepared you for this. So yeah, just respond as quickly as possible. Are you ready? Okay, I'm ready. Okay, what is always in your fridge? Ooh, strawberries. What books are you reading? I just finished Shark Tales, which is from Barbara Corcoran, who's one of the sharks on the US Shark Tank. All right. What superpower would you like to have? Oh, I would love to be able to fly. And what did you want to become when you were a kid? A comic book artist. A final question, which you already sort of prompted. When was the first time you actually heard about service design? Do you remember? I do remember. It was at the UIE conference that Jared Spool runs and I saw Mark Stickdorn there and he was presenting on service design and that was the first time I ever heard about that, even that phrase. Mark is a great evangelist of the show, episode one. There was episode one and he's still one of the best watched episodes. So it's up to you to beat Mark in this episode. Oh gosh, that's a tall order. Then what you didn't say is that your agency is super, super friendly. I was going to say super fly, I'm not sure why, but super friendly is all about design systems. That's what you're into. But that's not the topic for today, right? We're going to explore a different topic and that's the topic about value, value of design, pricing design, right? Absolutely, that's a thing. I wrote a book about that called Pricing Design. It's a short book, it's about 50 pages, it's 10 bucks because I find that a lot of freelancers and agency owners, they got into the business because they wanted to do the design part or the development part, not the business part. And so I wrote a book from all the stuff that I had learned freelancing and running an agency and being part of agencies for years to help people do better at that because people don't know how to do it well and it really makes them suffer to not know how to do this well. So I figured the stuff that I had learned about it, maybe I could share that with others. Let's rewind a little bit. There must have been a moment in your life where you thought I need to learn something about value, about pricing myself. Do you remember what triggered you, what got you interested in this topic in first place? Yeah, so a couple of things. One thing is that I started my career as a developer actually and I quickly realized as a developer, I wasn't part of the conversations that I wanted to be part of. So by the time the project got to me, it was like, hey, kid, just build this. And I was like, well, but I have ideas though. And as a no, no, no, that time for ideas is over. It's just time to build this stuff. So I revamped my whole career and decided to be a designer because I wanted to be farther up in the process. So I became a designer. And even then I realized, well, some decisions are already made by the time it gets to me as a designer. And so, okay, I thought, oh, maybe I could be a strategist or an information architect. And I just started to work my way up the waterfall chain until I got to sales. And I realized, oh, sales is where projects are defined. At least from an agency perspective and a client service perspective, sales is really where you agree with the client as to what you're gonna do for them and then you put it in a contract and then you go and do those things. So I realized that the sales process is where projects are shaped. And so I started to learn all about the sales process, like how do you price a project affects how it's shaped, how you talk about the project, what deliverables you scope. Like all of that stuff determines how a project is shaped. So that was one thing where just moving up the chain and going like development to design to strategy to UX and IA to all the way to sales is one thing. And then the second thing was I had always freelanced even though I'd worked for agencies for many years, I'd always freelanced on the side. And so it allowed me to experiment with things like, well, how much can I charge a client? How much are they willing to pay? And so I started the way that most people start, which is like I had an hourly rate. I think I started charging 25 bucks an hour until that just felt weird to me or not worth it. And then I doubled my rate and then I doubled my rate. And then I started experimenting with, well, what if I did fixed fees instead and what are the downsides and the upsides of that? And then what if I charge a different way? What if I charge commission or what about equity? And that whole study led me to all these different pricing methodologies. And the one that I use today most commonly is value pricing. So that whole journey has kind of led me to value pricing as a really helpful way to talk to clients about price and also to make good money for all the parties involved. So it's basically, yeah, like you said, two things. One, you had ideas that people didn't want to listen to and you wanted to maybe share your creativity more and two, it was about not feeling valued for the value that you create something. Is that how you would summarize it? I think that's right. Cause at every point where I changed my rate, it was always because it was no longer worth it for me. So like when I started as a designer, a young designer, a new designer, 25 bucks an hour, I'm doing four hours of work or eight hours of work, like that was great until I got a bigger apartment and then I needed more money to cover my rent or until, you know, and like that happens at every person's stage of life where well then when I got married and then we moved into a house instead of an apartment, like all of those things meant I couldn't keep charging what I was charging cause I was no longer making enough to be able to do that. And also I was better in, you know, 10 years later than I was 10 years before that. And so to charge the same amount also felt odd. So all of that comes down to once I no longer felt like the work I was doing was valued appropriately. Well, then I had to change it. And so I figured, well, what is a way that I don't have to keep changing my rates every time I feel undervalued, is there a better way to do this? I can imagine that you said in the beginning that many designers aren't that interested in the conversation about business, sales, value. Even though they, I think a lot of people relate to the pains that you just described. What do you think is the thing that is holding most people back? Why sort of, why did you end up in this alley and why are still a lot of designers feeling this pain but not doing anything actively around it? I think a couple of things. One thing is that there's this stigma around business that it's like, oh, it's dark. You know, like I do the good thing, right? I design for customers and for, you know, clients and I do something that's helpful and positive, but business is shady. Business is something where I'm taking advantage of someone so that they don't take advantage of me. So I think the first thing is just in our world, business has that stigma and it's not always false either. You know, it's based on truth. So I think that's one thing is that a lot of people think like, well, I want to stay away from the dark side of this stuff. I want to stay on the light side of it. And I think that one of the things I found is you can apply the same kind of design process and design thinking to pricing, to shaping engagements, to shaping work, then you can, in the same way that you could to, you know, a deliverable or a comp or a wireframe or, you know, or anything like that. It's the same process. And so you can think of it as a design exercise as opposed to like a weird business thing that business people do. Yeah, so it's a mindset thing and we've been conditioned and shaped with regards to sales from many different, well, from many bad examples, I guess, from many examples from the past. And I agree with you that it's definitely a mindset shift. Now, if we sort of transition into how your mindset changed around sales, what were some of the significant things that you had to, how did you overcome that stigma and what is your idea about sales and business today? Yeah, so I can mention two things. One is when I was a new freelancer and a new designer. I used a pricing methodology that I call object value pricing where I would, because money is so abstract, like, you know, what is worth $10,000 or $1,000 or five? Like it's, that is such an abstract concept. So it's hard for me to think like, is this worth a thousand bucks or 2,000 bucks or 10,000, like I don't know. But what I could relate it to is like, is this worth a pizza? Well, yeah, this, you know, this project is worth 10 pizzas at least. Is this project worth a new camera? And that's how I used to price is I used to go like, all right, well, I'm gonna do this freelance project because I want a new camera or I want a new TV or I want a PlayStation or I want to go on vacation. And so, like, I used to do that and that helped me kind of understand what value I could trade for because some things were just not valuable where if a client said to me, hey, can you build a website for us and I'll buy you a pizza for that? I'd be like, no, I don't know. It's worth more than a pizza. I would rather just buy my own pizza and have my time rather than giving you my time for a pizza. But if you're talking about 10 pizzas, if you're talking about 100 pizzas, you know, 100 pizzas worth, or, you know, if a client would said like, we would buy you a camera, a new camera in order to do this project with us. I'd be like, yeah, that sounds good. Or like, yeah, that doesn't really sound good. So early on, I had this way of relating things to concrete value that I understood as opposed to abstract value like money. So that was one thing that kind of led me to this. Like, I'm always evaluating, well, what's the project worth to me? Would I give up my weekend or would I rather just sit around and play video games? And the dollar amount changes that. If somebody's like, give you 100 bucks to give up your weekend, I'm like, no. But if somebody's like, I'll give you 1,000 bucks to give up your weekend. Okay, that's more compelling now. So it gave me a more concrete way to understand value as a relative thing. So that's definitely one thing. And then the other thing that happened later on in my career is I was booked up and I was working at an agency. I had a good job at an agency. I was well paid. And so I didn't have to take freelance gigs on for cash. So I would take them on just for fun if they were fun things. And I was actually booked up freelance wise, like moonlighting for six months. And a client said, well, I want to book you. And I was like, well, I don't want to book out six months because like, what if you flake in five months, right? What if I tell all the other clients to go away? And then, you know, five months later, you're like, oh no, I don't want to do this project anymore. Well, then I'm screwed. And so I was like, well, in order to get that client to go away, I said to them like, well, I mean, you have to give me an extra $10,000, not as a deposit, but as a reservation fee. And that is a non-refundable fee. And because that way, if you go away, it's like insurance for me. And I didn't hear back from them at all. But then a week later, I got a check in my mailbox for $10,000. And it was a thing that I used to get them to go away because I was like, there's no way they would pay this. Who would pay this? And then they paid it and it made me realize when people really want something, they're willing to pay a lot. When people don't want something, when they really don't want something, they're not willing to pay a lot. And that's the basis of value pricing is what is worth it for them? Not just you, what's worth it on both ends so that they go, yeah, we're willing to pay a lot for this. And then it made me think, well, why are they willing to pay a lot for this? Because they feel like they get a lot. And what is it that they get? That's what the sales conversation is for me now, is I'm focused on, well, what do you get? What do you get if you do this? What do you get if you don't do this? What are you missing if you don't do this? And that is how you determine a price. And that's the basis of value pricing. A lot to unpack already. I like the two sides of thinking about value, making the abstract numbers more tangible and concrete, like the object-based pricing and the value pricing, like what is it worth to them? Maybe one thing we need to address before we continue the conversation, like it's important to talk about value and to think about value and to think about pricing because if you don't, you're not only, I guess you not only get frustrated at some point with your work, but you probably feel less motivated, don't get the best work out of your hands, right? I'm just trying to imagine like how can we convince the people who are listening or watching that thinking about value or pricing is actually beneficial to us. And not only beneficial, but it's a core skill, I don't know how we should call it. Yeah, sure, I mean, I use it a lot, I use value a lot when I'm working with my teams because when you're working on a project, you get lost in the weeds, right? Like you're in there writing code for this API or you're designing this really detailed interaction and sometimes you just lose track of why you're doing it, right? And so whenever I see teams get frustrated or whenever my teams get like really in the weeds and like don't know what they're doing and are directionless, I have a friend who says you always gotta zoom out one level. And so when you zoom out one level, what is at the top, at the very top when you zoom all the way out is why are we doing this project in the first place? And sometimes we don't know that, especially if you're billing hourly or if you're billing for time, the answer is opaque. The answer is like, we're doing this because the client's paying us, I guess. But again, that's abstract. Instead, it's much easier to say, we're doing this because we're gonna help customers pay their water bill faster. Like, and then that creates alignment. That creates alignment for teams to go, like am I interested in that or am I not interested in that goal? And if I'm not interested in that goal, probably not gonna do a good job in the project. Probably shouldn't take the project in the first place. But if you're really excited about that goal, sometimes that centering allows you to go, oh right, this is why I'm doing this. This is why in hard times and difficult times on projects, you can zoom out and go, yeah, I still believe in the goal of helping people pay their water bill. So I know it's tough. I know I gotta put in long hours today. I know I gotta stay up late. I know I gotta just push through this thing. But that thing is worth it for me. And so that's why we're gonna do it. So value isn't just a way to determine price, even though it is. It's also a way to remind people why they're doing the work that they're doing and why it's important for them. Yeah, and it's also, it helps you to filter the types of engagements you wanna engage in that are important to your client and that are important to you. Because if you start working deeply passionate about a challenge that isn't that important to your client, you'll at some point burn out or bad things will happen. And the other way around as well, like if your client finds something super important and you're not excited about that, then bad things will happen. So I think this value conversation, this pricing conversation just helps to better align the work you're doing. Yes, exactly. I had a great conversation with one of my, one of our super friends yesterday, and she doesn't have any work right now. So I was like, well, we have a bunch of pro bono stuff that we're doing. We don't really have any paid projects that need help right now. And she said to me, and I love this, she said to me, I'll do pro bono work if it's around poverty or if it's around education for kids. And I was like, well, we don't have that. We actually have this other thing. And she's like, cool, I'm not really interested in those. And I love that because it creates that alignment to go, here's the stuff that I'm willing to do because it's important to me and I'm willing to do it for not a lot of money on my end, but anything else, gotta pay me a lot for because I'm less interested in that. And that's where the work comes. You get paid for the work, the work that is hard, that's what you get paid for. That's why clients pay us is because the work is sometimes too hard for them, whether they're not available enough to do it or they just don't know how to do it, that's what clients pay for. They pay for work, they outsource the hard stuff to us, to people like us. And so that's where you get paid. Can you take us back to a project, a story, a client where you struggled sort of in this sales conversation, in this value conversation and what were some of the challenges there? Maybe in your early days, like... Yeah, this one story, I don't know if I'll ever forget this one, but we were talking to a prospective client and they are a big nonprofit. They're like one of the nonprofits that like everyone in the world has heard of. And so we were super duper excited to do work with them. And in the first conversation, I asked the head of product there who was gonna be our main product sponsor. I asked him, tell me about your annual donation amount. And he said, well, no, no, this is a website redesign that we want. Like, why do I have to tell you about our donation amount? I said, well, because if you wanna change that, if you wanna increase that or decrease that or reach a new audience, we need to have some benchmarks as to where are you now so that we know what to measure for later. And he said, well, that's really none of your business. And I said, thank you for your time. I don't think that we're gonna be a good fit because the way that he believed it was that like just do the website stuff, we'll worry about the business stuff. And it's that separation that I talked about earlier that that's dangerous because it didn't allow us to be able to create value for the client. The client said like basically, this is gonna be off limits to you. And so we are already limited in the amount of value that we can create. And so that already started us off on the wrong foot. And I basically said like, if you want somebody to just build the website, there's probably a lots of companies that will do that for you. We are interested in how much value we can create for you and for your customers and your donors and your constituency. And if we don't really have access to that, we're not gonna be able to do a good job. And you aren't gonna like the stuff that we're doing. So it just, it exposed that misalignment right out of the gate. And there are two things here. One is you sort of have to have the confidence and know that this is important to you to have this conversation because a lot of people will think just about the craft like we do website. And the other thing is like, okay, so how do you change that image that clients have of hiring people like us and they don't expect us to bring up topics like strategy, business, growth, numbers. That can be challenging, I guess. It's very challenging. In fact, there's a book called The Challenger Sale that I'm real fond of. And The Challenger Sale is about the idea that clients don't know how to be clients, right? They know how to do their business, right? That's what they do. Nobody taught them how to be a client, how to procure vendors, how to hire freelancers, how to do any of that stuff. So you have to teach them how to interact with you. And some clients are receptive to it and some clients are not. So we're not in the business of trying to change anyone's mind who is not willing for their mind to be changed. But if somebody wants to work with us, we have things to bring to the table in the same way that they do. So the premise behind The Challenger Sale, that idea is that every vendor should have the ability to teach their client something. If you can't teach your client something, if they know all the stuff that you know, you probably aren't in a good position to be a good vendor to them. And so one of the things that we think about a lot is, what is it that we can teach the client? That's a way to add value to them. And so what we try to do is, from the earliest conversation, the first phone call or email, we try to create value. Not specific value, it doesn't have to be specific value for them. It's not doing any work. But for example, if a client comes to us and let's say it's a nonprofit and they come to us and they say, we would like you to help us to do this. If in that first phone call, we could say to them, here's how we helped other nonprofits, like yours do the same thing. And also here's something about your industry that we know from working on hundreds of these projects and you're only one nonprofit, you may not know that. That's a way that we've created value already to say, like there's something that we bring to the table, we didn't even charge for that. All we did was have a conversation about it. Imagine what would happen if you paid us now. Imagine what would happen if we were on the clock to be able to do work for you, doing research, doing customer interviews, doing stakeholder research, all of that stuff. We would even bring even more value to the table. But right out of the gate, we wanna establish that there is something that we do. And one of the things that I talked to our teams about is if we don't have anything to offer, we should turn that project down. Like if we don't have a good idea as to what we could do for the client very early on, if we can't have a vision for where we can take their work, we have no business doing business with them. Because if we don't bring anything to the table, how will we get paid well? And how will each person feel valued on the project too? So value goes all the way down from the top. What value can we create for the client? And then once we can create value for them, we can start to capture some of that back by the, in the way of price. If we make a million dollars for this client, it's easy for us to say, you know, could we get a hundred thousand of that back? Because we created a million for you. That's a pretty good investment for a client. It's a pretty good ROI. So the, the challenge yourself, I've had Chris though a few times on the show. He's a big fan of this, this method. Then I really liked the idea of actually also taking your own stance on what is it that we, where do we see this project going? And is this something that fits our skills, our culture, our capabilities? Now, the question that came to my mind where, while you were saying this, is like, okay, if we at some point need to bring it down to price. I've been in a lot of projects where the people I'm talking to, I talked to didn't have a clue about their own KPIs, didn't have measures like benchmarking. They were just happy that they got the budget to do something, you know. How do you handle those situations? Have you, have you been in those situations as well? All the time, right? That's most clients. Most clients, like I said, they don't know how to be clients. And most clients know their business or know how to do the specific part of their business that they do. But most companies suck at defining KPIs and OKRs and you know, all that kind of stuff. It's hard, you know. So like, let's give them some forgiveness and some grace about that. You know, one of the things that I believe is that we as experts should help them with that. You know, so for example, Super Friendly does design system work. We work with lots of clients that say, we actually don't even have KPIs for our design system. And we say, that's okay, we'll give you the ones that we've seen before. Like, why don't we start there? You know, and again, that's a way to add value. We don't know if those are great KPIs for them specifically quite yet. We'll find that out later. But as a baseline, hey, check, look into how many GitHub issues you have before and after. Look at, you know, how many bugs you have. Look at this, look at that. Like, we have all of that as experts. We can give that to the client. We can say, if you don't have that, we can give that to you. You know, that can come from us. That doesn't have to come from you. And that actually opens the door for even a better opportunity on pricing is, your client is basically saying, we don't even know what this is worth to us. And we get the ability to say, let us tell you what it's worth to you. Because we know that. And we're not trying to fool them. We're not trying to, you know, to hustle them or anything like that. We're able to say, here is the truth. Here's an honest truth that we've seen by working with dozens or hundreds of clients like this. You know, here's what we've seen it make change for them. So maybe we could use that as a starting point for your benchmarks. And you may discover that's not exactly right. It's too high or too low for your organization. But we'll give you a starting point for you to go and research now internally. I read somewhere, somebody said, it's like prototyping with numbers. It's making estimated guesses. And this is the area where a lot of designers, creatives feel very uncomfortable with because we sort of, yeah, but these are just assumptions and what if it's wrong? Like if you make a prototype, you don't have that conversation with yourself. You just, this is like based on past experience. We're going to, this isn't just a wild guess. It's coming from somewhere. So, and I still feel that getting over this uncomfortable feeling, like estimating with numbers, that's, yeah, that's challenging again. Totally, and that has nothing to do with pricing. Like you're saying that has all to do with just confidence, right? Cause that happens in all the fields, the design, development, engineering, like all that stuff. People are uncomfortable giving estimates because they don't want to be wrong. And I think that says something, that says more about the culture of our industry than it does for, you know, about pricing or about engineering or about design, is that like we don't have cultures, we don't have companies that allow us to be wrong. There's always penalty. If you're wrong, you get fired. If you're wrong, you get demoted. If you're wrong, you know, you get moved to another project and we need to create better cultures of safety. We need to create better cultures where it's like it's fine to have a conversation and go, I don't know, I think this, this is a hunch or I believe confidently in this because I have a lot of data that supports it. I think one thing that we don't take advantage of a lot as an industry is that one form of data is experience, right? It's not just quantitative. It's not just like, well, I went out there and I did this research and I collected these answers from this survey and now I believe this or market data. Like that stuff is useful for sure. What's also useful is saying, look, I've worked on a hundred of these. Like I know how it goes. That is data. Like that is, you know, my experience, my hunch is the team's hunch is like, we can use that as a starting point in the conversation. I mean, like every tech company, it's the whole lean startup thing. Build, measure, learn. That's how you do it. You know, and the same thing can be applied to pricing. Build, measure, learn. We go to clients all the time and we say, we think we can get you about an extra million to $2 million this year if you do that. What investment would you be willing to put into that if we were able to get that? Like would you put 10% of investment into that for that return? And that is a negotiation. That's not a like, oh, 10% is the right number. Some clients can do it and some clients cannot. What we bring to the table is the ability to say to them, we think we know what's profitable for you. We think we know what is a good investment for companies like yours. And then that's the starting point of the conversation. We build, we measure, and then we learn from there. We allow the client to say, well, I mean, we can't really afford 10% this year because, you know, our fiscal year and our budgets and whatever, all right, cool. We can negotiate there on that and we can negotiate on scope. We can negotiate on price. Like all of those things are on the table. It's just that people are so hesitant to even just put the first thing on the table. You know, they're so hesitant to like, you know, the first thing has to be wrong, has to hit the bull's eye, otherwise we lose the account or otherwise, you know, that's the end of the conversation. And that's just not true. We are just all so fearful that that is the case. And I think we also fade a question when we put a number on the table, the client will say, can you guarantee this? Like, how will I know that if I pay you 10% 100K, you'll actually return that million? And I think that's where we get really scared. And because we have to be honest, we don't know. We have to try. And it's a risk mitigation thing. Like, how much are you willing to invest to figure out if this is actually going to happen? You might lose it all, but it might also turn out to be the right thing to do. So, yeah. All of the people who talk about value pricing, you know, there's this idea of always presenting options, right? There's not one solution to every problem, you know? And so what we do is, you know, we give two or three or five options sometimes to clients to go like, here are different ways we can create value. Small, medium, large is one way to do it. You know, different areas of the organization is a different way to do it. You know, when a client says to me, can you guarantee this return? I go, no, no way, absolutely not. You know, like, and that's an honest answer because, and what I tell clients a lot is, right now, I can give you so many answers with very little confidence. As we learn more, I can give you a lot more answers with higher confidence. But right now, we're just talking. Like, you didn't pay me for this conversation. I'm volunteering this for you, you know? And so, a lot of times when clients say, can you guarantee this? I go, not for that price. For a different price, sure. If you want me to try it, it'll be 10% ROI. If you want me to guarantee it, it'll be 50%, and I have to have more control over your business. Which one of those do you want to do? I've always offered guarantees to clients. No client has ever taken us up on it. Never, never, because it's too much. If you want me to guarantee a return, where in the world can you get a guaranteed return? The stock market, I don't think so. You want me to guarantee a return? Okay, I need a lot more in order to be able to do that. It's a different project altogether for me to guarantee a return for you. If you want me to try, though, I'm really good at trying. In a conversation where a client sort of doesn't know maybe quantify or qualify the value that they're getting. Like, we're doing this project as an exploration, and we just wanna figure, try something. We don't have a concrete number or a concrete outcome. There isn't a sales target or customer satisfaction score that we per se need to improve. How do you then turn it back around and justify the price that you're charging? We're going all the way, again, back to pricing because I think that's the thing that people sort of struggle the most with, but the underlying structure is value. How do you sort of justify the value that you're getting out of it versus the value that you're creating? Yeah, totally. So two things on that. The first is if a client says like, this is like an experiment for us. We're just gonna try a thing we wanna do. And we go, all right, that's cool. What that says two things. One is that there may not be a lot of value to be had here. And I think that's the thing that is a fundamental tenet of value pricing is sometimes that's the truth. Sometimes the truth is there's not a lot of value here. And are you willing to still do the project if you know that there's not a lot of value? Then the second part is your client may think that there's not a lot of value, but you as an expert, a lot of this is about your expertise. That's what you price. That's what you can price the most effectively. The thing that you are really, really good at and experienced at. So you as an expert will likely be able to educate your client and say, actually there's a couple of things that you're missing. And you might be able to tell them that stuff. My favorite go-to on that is I always look for the break even price. Like how do you know if you broke even? So if a client says, we have this like experimental website we wanna build and we have like $10,000 in our budget. We probably can't spend anything more than that. I go, all right, well what, how do you break even on $10,000? Like how many users do you need to get? How many stakeholders need to thumbs up this thing? Like, you know, and it could be all of those very soft metrics. And again, those are just indicators. You know, those are not hard and fast. Like we have to meet this, otherwise the projects fail. For a project like that, you know, where clients are like, well, we wanna try a thing. I think those are great projects. You know, and then it's just, you have to acknowledge that there's not a lot of value to be created there potentially. Or, you know, the break even price might be actually a lot smaller than you think. Or, you know, well, if we get 10 users on this, that would be really good. All right, well, what would those 10 users actually pay? Well, if they pay 100 bucks, you know, a month. So, okay, well, then the value there to be created is, you know, for 100 users at 100 bucks a month, the value there to be created is what? 10,000 dollars a month? Like that's as much as you can get. So all right, pay us, you know, would you pay us two grand a month to work on this if you think that you'll be able to get that amount of users? Like that feels like a good price, a good investment in that. And then my job now as a service provider, what I've done is I've articulated the value. Now I go back and go, can I do this project for that amount of value? Because, and the answer to that might be, no, it might be, we might be too expensive, our rates might be too high, or you know, the people that we need to hire for it might be too expensive to be able to do that. And so that, like those two things are separate parts of that, of the pricing conversation is, what is the value created? That's the price. And then you go back and you go, can we be profitable within that price? If not, we have to find some way to cut our costs, or we have to find some way to create more value, right? Those are the ways to change price. You can't do it any other way. Is this, these conversations of course happen before the actual labor, the actual craft starts. At which point do you start charging a client? Which, because there is a lot of research in this, you know, we might need to dig into data to actually find good numbers. We might need to do some interviews with stakeholders. At which point do you say, okay, this is like an open conversation. And at this point, this is where my work starts. Yeah, that's a very subjective question, because it's subjective to the agency or the freelancer or the person pricing. It really depends on your tolerance, right? So like, if you need the job right now, you are incentivized to start charging them as soon as possible. So you tend to shortcut the like, well, let's not do research, like let's do a paid discovery, right? Like that's always a go-to because a lot of people don't want to invest in a long sales process because you're not getting paid to do it. That's up to the agency. What our policy on that is we invest a lot in the sales process to understand the client and then part of the price should be recouping that, right? And that is a risk on our perspective. We've lent, you know, last year we landed a $2 million job, but the sales process was a year long. It's not short, you know, and it makes sense to land $2 million, you think you'll do that in one conversation is unlikely, you know? So we had to have lots of conversations with the client. We would fly out to them on our own dime to be able to talk to them and their stakeholders. This is all unpaid. This is all investment that we've made in the project. And yes, it is risky that if we don't land the project, all that money goes down the drain for the investment that we put in. But one of the tenants, especially of value pricing and just pricing in general, and I think just value in general, is that profit comes from risk. So the more risk you incur, the higher potential for profit. If you don't want to incur risk, your profit potential is capped. Exactly, exactly. Yeah, yeah, I couldn't agree more. So it's, you use the word investment and I like that word a lot. We experimented at some stage with, it's just saying to our client, listen, the value conversation, we need to figure that out first before we can actually create a good project for you. But we're not going to do that for free. This is just, we're going to do, I don't know, a few workshops together. We're going to do some interviews. This is a fixed amount. And then after that, I can give you an honest price. So even the sales process can be part of your service. Absolutely, yes, for sure. Yeah, you don't have to take on all the risk. For people who are listening and watching right now, what would be like your tip if they want to improve this on a daily basis? Like, is there a mantra? Is there a thing that you can do each morning or in each conversation? It's a little bit tough because you may not be having sales conversations every morning, right? So like, so rather than like a thing that you could do every day, here's the thing that you can do every time you talk to a client and you're trying to figure out what they're asking for and how to price it. Every time you talk to a client, ask why, right? Just keep asking why in a non-annoying way, right? Not like the way that a three-year-old would do it, but in a way that you are curious about why they want to do what they want to do. When a client comes to us and says, it's like, we need a new website. And we go, cool, great. Why do you want a new website? Well, because our current website sucks. Oh, what sucks about it? Well, it's just not making the type of conversions that we needed to. Well, what kind of conversions do you need it to make, right? So like, you're just digging in further and further to understand why do they actually want this? Eventually you get to a point where they go, we just don't like how it looks, right? Ah, okay, that's, there you go. You don't like it. You just don't feel good. Okay, so this is a feelings project. This is a project to make you feel better, which I think is a legit project. Other times it's like, well, it's just not making enough money for us. Oh, well, how much money do you need it to make? Well, every month we lose $10,000 because we have more inventory than we can sell. Cool, so it's an inventory problem. So, and like, that's the tip, is just keep asking why until you get to like, oh, that's the project. There it is. Like, it's because it's usually buried under that because a client doesn't know how to articulate that. They only know that this is the thing that they want, but they're not really sure. You know, that's the hunch that they have. And your job as the expert is to like, just dig and dig and dig until you find that. And then that's the thing that you price. So, you know, do it in a polite way. Do it in a non-annoying way. Do it in a curious way. You know, clients like when you are interested in them, generally. And the clients that don't, you should probably run away from them as quickly as you can. So, you know, in every sales conversation you have, you know, ask why, keep asking why until you find out that's the project. And then that's the thing that I can give to them. Like, that's the thing that if they get this, then their problem will be solved. Yeah, I would say the moment you know that you're starting to ask why often enough is when you start to feel uncomfortable like you have to dig deeper and maybe even your client needs to be uncomfortable but you need to get to the core of what's in it for them. Again, the word why, why are they doing it? Like, what's the value? What is it that they are missing? You have to, you cannot shy away from that. If you do, then you're just creating less value for yourself and for your clients. Totally. Yeah, to sort of try to wrap up, if you had to summarize your journey around value and value pricing, like what would be the moral, the moral? Is it the moral or is the moral? The moral, I think. The moral. So what's the moral of this story? The moral of the story is look for win-wins. Pricing is generally win-lose. That's what the world thinks about it. I get a high price because you have lost by giving me all of your money. And it's not that. The best pricing happens when we get what we want and you get what you want. That's the thing that you should look for. The moral of the story is we don't spend enough time looking for that. We don't spend enough time trying to achieve that. This is why I don't like hourly billing or time-based billing because it basically says, I need to win and it doesn't matter if you lose or not. If you can't afford that, well, my rates are my rates. So I charge 100 bucks an hour and the client goes, well, but we only have $10,000. Well, you only get this many hours for me. But what if that didn't solve their problem? It's so one-sided. And so I think the problem is that business and pricing tends to be one-sided and people who do value pricing generally are encouraged to look at both sides and start with your customer side. And this is where it ties into the service design again. It's like look for what your customer wants and then if you can help them achieve that, then you should get rich doing that too. So I think that's the moral of the story is look for the win-win, look for how it benefits both parties involved and that will likely be a better project for both of you. Any recommended resources if people wanna dig into this topic to where maybe you have a book to recommend? I do, I do. Coincidentally, I do, thank you. I wrote a book called Pricing Design. It's 50 pages, you can read it on a particularly vigorous restroom trip if you'd like. I'm not the first person to talk about value pricing. I didn't invent the idea, lots of good resources. Great Book is Implementing Value Pricing by Ron Baker. Blair Ends has written a great book called Pricing Creativity. Lots of really great resources. Those are the two that I would start with but there are like many, many books. Jonathan Stark has an excellent newsletter and podcast series and e-book called Hourly Billing is Nuts. So all of those things, all of those are really, really great resources and Jonathan Stark also has a community and a coaching program where he works with people to help them specifically engineers. So lots of good resources I would start with those two or three. I'll make sure to link all of them in the show notes. Finally, if people wanna get in touch with you to continue this conversation, what's the best way to do that? The best way is on Twitter, I'm Dan Maul on Twitter. My DMs are open, DM me. That's usually the best way to get hold of me. All right. Then thanks for sharing this with the community. I feel that's a topic that we definitely need to discuss more and more and more. So thanks for sharing what's on your mind about this. And my pleasure. I strongly agree. Thank you for having me, Mike. What's the biggest lesson you've learned about pricing design? 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