Scope Last

How and why to flip the script in sales interviews.

Show Notes

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Do you have questions about how to improve your business?

Things like:

• Value pricing your work instead of billing for your time?
• Positioning yourself as the go-to person in your space?
• Productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal?

Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes to get ready for work in the morning.

Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call, you don't feel like it was worth it, just say the word, and I'll refund your purchase in full.

To book your one-on-one coaching call, go to:

https://jonathanstark.com/call

I hope to see you there!

Creators and Guests

Host

Jonathan Stark

The Ditching Hourly Guy • For freelancers, consultants, and other experts who want to make more and work less w/o hiring

What is Ditching Hourly?

For solo professionals who want to make more and work less without hiring.

Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I want to talk about a concept that cuts right to the core of value-based pricing. And I call it scope last. You'll want to scope last when you're putting together a project proposal. I know this is completely backwards from what you would normally do, so let's walk through how engagements usually start off and then how you would go into them. Usually what happens is someone reaches out to you, you find this email in your inbox that says something like, hey, we're looking for a developer. Alice said you were good. Could we jump on a phone call? And you perhaps jump straight on a phone call with them. And back in the day, when I used to do this by the hour, when I used to do development by the hour, or whatever you do by the hour, back then I used to spend the entire sales interview when I first met the client trying to get out of them all of the scope. You know, try and figure out how many database tables there were going to be, and how many screens, and how many portals on each screen, and how many scripts, and how complicated was the business logic, and all of these things about scope. Because I knew that my next step would be to estimate my level of effort, how many hours I thought it would take to execute all of that scope. And then I'd multiply it by my hourly rate and give them an estimate. So here's your estimate for how much all that scope is going to cost you. This is how much the project is going to be, I think. You know, so it would be an estimate. The problem with that is that you definitely didn't come up with everything in that one little session. Maybe even if you had multiple sessions, you're probably not going to be able to come up with all of the scope-y types of things that are going to transpire through the course of a non-trivial project, maybe 3, 6, 12 months long of a project. So right out of the gate, you've probably underestimated it just because you couldn't do enough discovery to really know everything. The other problem is that you spent all your time talking about what activities you were going to be needing to do, what they wanted you to do, or what you thought you needed to do, and you spent probably no time talking about what they wanted out of it. So you talked about features, or you talked about deliverables, or you talked about pages or words or hours or these things that were inputs, and you didn't talk about how their business would be transformed after you were done. What is the thing that's broken that they want to fix? Or what is the opportunity that they see that they haven't been able to capture on their own? What is their current state and what is their desired future state, and how do they see you contributing to that transformation? If you don't talk about any of that, there's nothing to base a value price on, certainly, and you really are kind of driving blind because, yes, they told you all of these things to do, but they didn't tell you everything you need to do because they couldn't. And they probably, it's possible that they told you some wrong things to do, things that are going to drive them in the wrong direction, take the project someplace where they don't actually want to go because nobody talked about where they actually want to go. So you're going to make some assumptions about best practices or whatever, and you're going to drive that car. You know, they'll say, turn left, you turn left. They'll say, turn right, you'll turn right. They'll say, step on the gas, you step on the gas. So the wrong person is kind of driving the car if nobody knows what the goal is or what the destination is or maybe they know it but they didn't share it with you. It makes it really hard to end up in the right place. So if you change everything around, so instead of scoping first like that in the sales interview where you try and figure out the scope first and then create an estimate based on that, scope last. So in the sales interview, you spend all of your time figuring out where the client wants to go. They might say, we want this many screens and this many portals and this many pages and all of these things. You say, okay, that's great. I got that, I got that, I got that. That all sounds reasonable. But let's back up and tell me why you would do any of this at all. What are you hoping to get out of this? What's the bigger business context? What's wrong right now? This project is probably going to be expensive. It's going to be time consuming. You're going to have to be, you know, you or your employees are going to be having extra work to collaborate with me on this project. Why bother? And figure out what the underlying motivation is. What transformation are they trying to make? How do they see you contributing to that? Spend all of your time using the why conversation to uncover that information. It's in there somewhere. You just have to help them uncover it. And then once you have that goal or once you have that transformation or once you have that success understood, you can get a sense from them. It's more art than science, but you can get a sense from them what that transformation would be worth. You know, especially if you're way upstream, you do branding or you do some kind of marketing thing and it's not directly tied to sales. You could say, you know, you'll say something like, well, why would you hire a branding person to make this transformation for you?

why not just do it yourself? Why not move forward without an expensive branding person helping you? Or why not build the house without blueprints? Why spend a ton of money on an architect? And you get them to articulate in their own words why they need someone way upstream like you to do this. Why do they believe that they need someone's assistance way upstream and what are they going to get out of it downstream? So they basically have to tell you or you have to extrapolate from their words what this project or this engagement is probably worth to them. Once you have that, you're going to have something to base a value price on. And if you're going to do a project, I would recommend doing value pricing. So if you've got this number in mind where, okay, I think this is probably worth $100,000 to them, even the first year alone. And you say, okay, if it's worth $100,000 to them and they think I can contribute, I have to be able to contribute. And I also believe that I can contribute. It has to be worth at least 10% of that. Like my contribution has to be worth at least 10% of that in their minds. Otherwise they wouldn't even be talking to me. Why would they spend their time talking to someone who they thought could barely contribute to this outcome? So you just set a price. So okay, the price, I'm going to set a price at $10,000, which is 10% of what you guesstimated is the worth of the project, the value of the project to the buyer. So $10,000. And then I'm just going to multiply that by 2.2 and have a $22,000 price. And then I'm going to multiply the $10,000 price by five and come up with a $50,000 price. So like, okay, I've got three prices that are all less than what it's probably worth to the buyer. Now I can start thinking about scope last. So you say to yourself, what could I do for $10,000 to help this client move toward this transformation that they want? How can I contribute in a way that's profitable to me and is going to move the needle somewhat for the client? So you kind of reverse engineer a scope based on the price that you've already set. And then you do the same thing at $22,000. What could I do for $22,000 to help this client get closer to their goal? And what could I do for $50,000 if I was really going to go crazy and I was really going to do everything I possibly could to help this client transform? What could I do for $50,000? Then you put that together into a proposal where you've got these three options. And doing that, I've talked about before, doing that gives them a choice of, you know, how do we want to work with you versus should we work with you? If you just give them one price, then it's like an ultimatum and they have nothing to compare it to. So they're kind of forced to go outside and get other proposals to kind of compare, feel like they're comparing apples to apples. But if you give them three different prices and they have big jumps between these prices, you know, more than double in the first step and five times the first step for the higher one. So there's a lot of range here. It's going to give the client pause and they're going to think, well, okay, like what's the difference between one and two? Or what's the difference between two and three? What do we get for three? You know, what's going to be worth $28,000 or whatever the delta is there. Is that really worth the difference? So they're thinking about how should we work with you more than should we work with you. Here's what's interesting about this. The scope, since it's sort of reverse engineered from the price, and you would pick a price that, you would pick a scope for $10,000 that you would be super happy to do this scope of work for $10,000. So, you know, to you, it's totally worth $10,000 to do this scope. So let's say you feel like, eh, I would walk away from this at $5,000, but $10,000, that's a home run for me. That'd be great if I just did, I don't know, an innovation workshop or design meeting or some kind of strategy session. $10,000 is totally worth it to me. Then even if the scope creeps a little bit or whatever the case may be underneath that option, once they pick it and you move forward, it's not going to matter to you that much. You're just going to make sure that you move the needle on whatever it is that they want changed to the extent that you can promise it or you're confident promising it. So for each one of these options, so the $10,000, the $22,000, and the $50,000 options, you'd say, I'm going to do this and I'm going to do that and I'm going to do the other. And these are the benefits that you're going to get out of it. So at each level, at each pricing tier, the client is going to understand the benefits to the business, business benefits from each of the options. So it's not about achieving the final end goal of the project, whatever it might be, increased sales or whatever. You can't do that. You're not in control of that, but you are in control of your contribution and you can state the benefits of your contribution at each of these levels. So for if your option one is like a one-day strategy workshop, there'll be benefits that come out of that. You'll know how to spend your marketing dollars or you'll know how to spend your development dollars. You won't be wondering which...

you'll have all of this knowledge, dear client, and having that knowledge decreases your risk of the project going off the rails when you do go to get it built by someone else. It's kind of like, what's the benefit of having a blueprint for a house before you start building? Well, the house is probably going to work a lot better and look a lot better and be more comfortable if it's planned out first and not just, you know, people just start pounding nails. So there is a value to the blueprint itself. There's a value to the strategy itself. It's a reassurance that the money on the build is not going to be wasted or the build isn't going to take twice as long as expected. It's basically an insurance policy. And so, you know, that's just an example of some of the benefits that you might list out for an option one kind of proposal. And then you just move up. So what can you do for $22,000? And, you know, pick a scope that you would do for, say, $10,000 or $11,000. But you're like, eh, it's kind of getting down to my walkaway price. I wouldn't do it for $9,000, but I'd do it for $10,000 or $11,000. And I'd be like, eh, it'd be okay. So if that's the scope you pick, then you've got a lot of profit there. You've got basically, you know, 100% leeway on the $22,000 price. So even if this, again, if the scope creeps a little bit, it's no big deal because you factored that in when you decided on the scope of work. And in the proposal, same thing. You do, I'm going to do, you know, this includes everything from option one, plus I will do this, do that, do the other. It's a short paragraph. And then the benefits of option two are X, Y, and Z. Business benefits. More assurance of customer alignment or employee alignment or increased morale or decreased costs and operations or whatever the benefits are of your option two. And so on and so forth for option three. So when the client gets it, it's this choice between, you know, well, which one of these things do we want? You know, instead of like, okay, let's put this out to bid and get a bunch of other competitive quotes so that we've got something to compare this single price to. So this isn't really an episode about offering three options. I've talked about that plenty of times before. What I really want to hammer into your mind is this concept of scope last. Do the scope last, not first. It's a really hard habit to break. It took me a long, long time to break the habit. And even sometimes now I'll slip into it. But it's really not that important at this phase. You do the scope last, set the prices, and then come up with a scope that's really profitable to you at that price. And then as you're going through the project, you've got the business outcome as your guiding light. So that's how you would control scope creep. But anyway, the idea is scope last, not first. And that is what's going to allow you to set prices based on value. And then you just reverse engineer the pricing and then the scope, which is your cost. Okay, hope that helped. I'm Jonathan Stark, and this is Ditching Hourly. See you next time. Hey, Jonathan here again. Do you have questions about how to improve your business? Things like value pricing your work instead of billing for your time. Or positioning yourself as the go-to person in your space. Or maybe productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal. Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes you to get ready for work in the morning. Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call you don't feel like it was worth it, just say the word and I'll refund your purchase in full. To book your one-on-one coaching call, go to jonathanstark.com slash call. C-A-L-L. That URL again is jonathanstark.com slash call. Hey, Jonathan again. Do you have questions about how to improve your business? Things like value pricing your work instead of billing for your time. Or positioning yourself as the go-to person in your space. Or maybe productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal. Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes you to get ready for work in the morning. Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call you don't feel like it was worth it, just say the word and I'll refund your purchase in full. To book your one-on-one coaching call, go to jonathanstark.com slash call. C-A-L-L. That URL again is jonathanstark.com slash call. Hope to see you there.