How To Assess Value For Your Startup

Tackling the money making marketing “P” — Price

The Skinny

In the world of startups, it is hard to know the value of your product or service. You entered your industry because you are passionate about it (if you aren’t, don’t worry, you won’t be in that industry much longer) and because you believe in your company’s mission. But being financially responsible in your valuing and conveying that to your customers is difficult at whatever price you choose.

If you over price, you won’t get any business, or you will get angry customers.

But, you should never under-price yourself and your time, either. You are doing a disservice to yourself and your clients in the long run.

Neither of those is a great option. If there is one thing to know about customer-business relationships, it’s this:

Always under promise and over deliver.

The Fat

Valuing Products

Physical products are sometimes the easiest to calculate the value because they utilize the cost of the materials and time it took to produce to determine a base value. Then, some margin is added to ensure the company can keep innovating and growing, and to pay administrative costs that aren’t realized in production. In this way, keeping prices down by covering these things can be done to keep you and your customers happy. Keep in mind that for every person who thinks your product is fairly priced, there are twice as many who probably think it’s over or under-priced. The market is the market, and with product sales, or a lack thereof, it can be easier to see how much consumers value your widget.

Valuing Services

Services are another ballpark to play in, though the rules of the game are similar. You still have the value of the time you put into providing the product. Plus, there are some expenses that get divided over the amount of time you put into the work. However, the value of the service is much more subjective. It comes from how much a consumer values it. In other words, you must ask, how much does the service really helps the consumer achieve their goals?

This is where it gets tricky to come up with a monetary value for your service. It helps to look at industry standards to provide a baseline for where to start, but then think about how close your business to the industry standard. To make matters even more complicated, drawing attention to yourself and your business requires you to be unique and stand out from the industry norms. That means leaving the beaten path of the current market to provide more value to people in some way or another.

Now What?

How do you value your startup? Is it a better product or service because it is more efficient and should be cheaper than the industry standard? Or is it a better product or service because it provides more value and should be more expensive than the industry standard?

I hate to say it but there is no easy answers or a clear rule that will work for every business. To say one thing of value, be prepared to under-price, over-price, and be spot-on for different customers. Its a balance that will be achieved only after many iterations, and by working with folks who trust you and can attest to the value of your product or service.

Believe in what you are doing and how it helps your customers. The cliche phrase in the startup community is, “everyone is trying to make the world a better place”, but this doesn’t mean the search to do so isn’t true. Provide value for your customers, and be at their service in a long-term relationship, and you will find the sweet spot to value your startup.

P.S. Go here for another great article on pricing for design and freelancers.