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  • Writer's pictureJoel White

100 Thoughts on Pricing: #16

When benchmarking services pricing, break down the components as much as possible (personnel rates, level of effort assumptions, unit quantities, resourcing, etc.), so that you'll target the appropriate remedial actions.

If you determine your pricing for a certain service is below market, and you simply increase personnel rates when the real reason is you underestimate unit quantities (leading to change orders or write-offs down the road), you've remedied in the wrong direction. By contrast, if you're overpriced for a certain service and you cut your level of effort assumptions when it's your personnel rates that are the issue, you're pressuring your operations team with unrealistic expectations. Both scenarios lead to profit margin misses.

It's good to know where your pricing sits compared to market; it's even better to know exactly how to correct your outliers.



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