Pricing your product? Don’t be afraid to ask for a *lot* of money

Edited excerpt from My Startups’s Dead! 5 Things I Learned by Judah Gabriel Himango:

When I acquired my first client, I had no idea how much to charge. For me, there were a few hours of work involved. I dared to ask for the hefty sum of $75, which seemed totally reasonable for forking a codebase and tweaking some CSS. After all, it’s not that much work.

What I didn’t understand was, you charge not for how much work it is for you. You charge how much the service is worth. A custom Pandora-like radio station, with thumb-up and –down functionality, song requests, user registration, playing native web audio with fallbacks to Flash for old browsers – creating a community around a niche genre of music – that’s what you charge for. That’s the value being created here. The client doesn’t care if it’s just forking a codebase and tweaking CSS – to him, it’s a brand new piece of software with his branding and content. All he knows is he’s getting a custom piece of software doing exactly what he wants. And that’s worth a lot more than $75.

It took me several clients to figure this out. My next client, I tried charging $100. He went for it. The next client $250. The next client $500. Then $1000. I kept charging more and more until finally 3 clients all turned down my $2000 fee. So I lowered the price back to $1000.

Money is just business. It’s not insulting to ask for a lot of money. Charge as much as you can.

Notes:
(1) Thank you Autopsy.io for the link.
(2) Compare the way Judah experimented with raising prices to Jason Fried’s advice for How to set the price for your product.

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