I have been trying to put a "dollar value" to my day. This is part of my personal goal of setting up my own shop - an advisory shop for small to mid-sized entrepreneurs in Singapore and in other countries in Southeast Asia on how to break-through their respective markets and create compelling stories for investors.
For the past several days, I have been looking at different ways of doing this. I first looked at the idea of "direct salary costs" + "overhead/capitalization" + "preset profit margins". But quickly, I saw the weakness in such an attempt. My salary - or at least, my former company's salary - could not be a benchmark, because that is not necessarily the value that I can bring to the table.
I tried a different approach - benchmarking. I started calling friends who have been in the business of consultancies (the closest I could get to "advisory") - and started to rack my brains in search of memories that could lead me to a number. I then compared my credentials with their own credentials, their clients with my target clients... But then again, I realized,well, mine is an entirely niche target altogether. My credentials - or anybody else's credentials - are not a sure-fire way to measure value. And besides, how does one quantify the value of one's credentials - and those non-dollarizable values?
Then I recalled I had this book called "The Business of Consulting". I started to look at the advice the author gave - and devised my own way of looking at how I should be charging - or perhaps, 'dollarize' my time.
1. Start treating yourself as a company. So list down all your possible expenses - knowing full well that you now are a company, not just an employee.
2. Determine how many days in a year will you be working to create noticeable value. This may or may not be 8hour days. There is no "number of hours" involved - the ultimate goal is "noticeable value-creation" for clients.
3. I had to be realistic - this would be a stressful endeavor. So I figured there should be days wherein I will do nothing BUT nothing. There will also be days when I will need to catch up on readings and learn new things. And there will be days when I will have to market the company - well, that's also creating value, but not to the clients that I will be serving.
4. Only then did I arrive at a number. It seemed high - at first.
5. I immediately tried it out with a trusted business partner - and told him what my rates are going to look like for the projects that I will be doing for his team. Of course, I had to show him the value of the projects that I will be working with him on - and how these could potentially lead to better processes, better returns, better people. He said yes.
So - value proposition versus pricing proposition? I think looking at 'dollarization' from both angles is perhaps necessary. "Pricing" however, tends to undervalue the "real value" - because "we have to be competitive, we have to get more sales volume, we have to get more pick-ups and empty the shelves, we have to have more sales units sold!"
So I am going to say, it's all about dolarization should never be driven by what's cheap, what's in the market, what the rest are doing, and what we think would make people buy ("People love cheap prices!" - to which I say, "Not really...")
And funnily enough, Seth Godin in his latest blog talks of this thing. He says -
Your sales force and your customers may scream that you need to lower your price.
It's not true.
You need to increase your value. If people don't want to pay, it's because you're not delivering enough value for the money you're charging.
You're not selling a commodity unless you want to.
Coincidences. How I love them.
(I would like to say "great minds think alike..." but then again, I don't think I can compare with THE Seth Godin...! Haha!)