One of my favorite interactions to have with coworking inquiries is about our business model at Indy Hall.
My answer is always the same.
We make more money than we spend.
The answer is usually met with either confused silence, or laughter. But I’m dead serious. Our business model isn’t clever. It’s simple and sustainable. We make more money than we spend.
When we make more money, we have more money to spend. When we need money, we look for ways to earn more of it. But the business model remains simple.
Oh, you mean PRICING!?
Pricing is another story. Pricing isn’t your business model, though it can be an element of it. Pricing, unlike the simplicity of our totally un-clever business model, can be quite tricky. Pricing is your opportunity to get clever, if you’re so inclined. But the methods for getting to your pricing aren’t rewarded by their cleverness, they’re rewarded by getting it right.
Jessica Hische’s article on “The Dark Art of Pricing” does a nice job explaining the litmus test for checking your pricing:
IF THE CLIENT WRITES BACK IMMEDIATELY and says “These numbers look great! We’ll send along a contract for you to go over in a few days!” It probably means your prices are too low. If they write back and try to negotiate you down a little bit, you were probably pretty spot on, and if they write back and say that this is well beyond their budget, you get to decide whether or not you want to figure out a way to work within their budget or whether you want to walk away and take one for the team.
If you’re obsessed with being clever, come up with creative ways to determine these reactions by interacting with actual customers in your market before you have a product. Prices are an attribute of your market and their value of your offering, not the other way around.
And if your pricing precludes you from being able to make more money than you spend – no matter how “right” you got your pricing, your business model is still broken.