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.

(1) Thank you 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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