What’s a product worth example

In “Determining what a product or service is worth“, we eluded to an Excel tool that would automatically calculate what you should charge for your product or service. Of course we also gave the caveat to not blindly use the numbers provided - they are for reference only and the tool’s main goal is to make you think through each layer in your prospect’s company to figure out where you stand.

Well, here’s an example analysis - please leave a comment if you want the actual Excel file behind this post, I’ll shoot it right over your way.

Let’s suppose that you’ve spent several months selling an engineer on your gizmo, and you put together a $25,000 proposal and send it off in the mail to her. Then you sit back and cross your fingers. Your spirits are high because through hard work you know that the engineer values your product at $25,000 and that’s exactly what you charged – so it’s a no-brainer.

But what’s actually happening on the other end with your proposal?

The following table shows how your gizmo is valued by the various stakeholders and their respective pulling weight.

Plugging these values into the Perceived Value Equation yields a PV of $17,950. You’re $25,000 proposal suddenly looks 39% overpriced! Chances are that your proposed solution may solve the engineer’s problem, but the rest of the team has a smaller need and your gizmo is overkill. Your sale is in major trouble.

The following screenshot shows what this analysis might look like in the accompanying Excel file (again, leave a comment asking for the file if you want it).