Concept
Value-based pricing
Value-based pricing sets the price on what the outcome is worth to the customer, not on your hours or your costs, and checks it against cost afterwards. A price that covers your hours but not your life is a job, not a business.
Almost every first-time owner prices the same way: cost plus something, then a discount out of nerves. Guillebeau's founders asked instead what the result was worth to the person buying it, a contract back by Monday to a client who would otherwise lose the deal, a back that stops hurting, a Saturday loaf the family expects, and priced against that. Two practical consequences follow. Set the price before calculating cost, then check it, not the other way round. And sell a package, a course or a result rather than an hour, because outcomes are easier to price on value than time is. Michalowicz adds the floor: if the price does not leave profit after the owner's pay, the business is subsidising the customer.
A real-life example
A translator costs her service at her old hourly rate, gets a number that feels too high, and lowers it. Then she asks what a signed contract by Monday is worth to a client who would otherwise lose the deal, and sets a fixed fee two-thirds higher. Four of ten clients book in the first week.
How to use it
- 1Write the outcome the customer gets and what it is worth to them before you look at costs.
- 2Sell a result, a package or a course, not an hour.
- 3Check the price leaves profit after your own pay; if not, the price is wrong, not the profit.