To Get Paid What You're Worth, Know Your Disruptive Skills

To Get Paid What You're Worth, Know Your Disruptive Skills

"I'm not paid what I'm worth."

Who hasn't said this at least once?

I certainly have.

But if we subscribe to classical economics — which says that the price paid for any given service is the price at which the quantity supplied equals the quantity demanded — aren't we paid precisely what we're worth? And if we still believe we're trading at a discount to our intrinsic value, is it possible to change the market's mind?

In a recent conversation with a colleague of mine about our respective strengths, he identified as one of my strong points an ability to connect the dots between people and ideas, where others see no possible connection. Developmental psychologist Howard Gardner would describe this assearchlight intelligence, an intelligence that readily discerns connections across spheres and sees opportunities to cross-pollinate. My colleague then surprised me by wondering aloud, "I don't understand why you don't value what is such an apparent strength."

I do value my ability to think across silos, I countered, but it's true that I value my skill of building a financial model more, because it was so painstaking to acquire.

A tendency to obfuscate our strengths should not be surprising. If we've really applied ourselves to achieving competency, we are justifiably proud. Yet we often overlook our best skills — our innate talents — simply because we perform them without even thinking. As publisher Malcolm Forbes put it, "Too many people overvalue what they are not and undervalue what they are."

As we look to close the gap between what we're paid and what we're worth, there is a lesson to be learned from the stock market. In my experience, the stocks that trade at fair value or even a premium to their peers are those that know what kind of stock they are, and then deliver, whether "disruptive innovation — emerging growth," "sustaining innovation — best-of-breed," or "being-disrupted — but dividend-paying."

Not surprisingly, the stocks that lead with their unique or disruptive capabilities command the highest absolute multiples. The market historically rewards "disruptive innovation — emerging growth" stocks with multiples of 30x or more. The market pays top dollar, applying a premium multiple to disruptive innovations, because the odds for disruptors are much better — 6x greater in terms of success, 20x greater in terms of revenue opportunity, as Clayton M. Christensen wrote inThe Innovator's Dilemma.

Translating this to our careers, when we proffer to the marketplace a disruptive skill set, focusing on our distinctive innate talents rather than 'me-too' skills, we are more likely to achieve success and increase what we earn. For example, consider the outcomes for two presidential candidates: on the one hand, Mitt Romney, who highlighted his political views rather than his business acumen; on the other, Bill Clinton, who understood that, as smart as the former Rhodes scholar is, his real skill was interpersonal intelligence. In my own case, I may not get paid top dollar if I'm hired to sequester myself every day, constructing financial models: I build models well, but not remarkably so. But if I lead with my unique skill set of searchlight intelligence, following with "can build a model/value a company," the calculus changes dramatically.

We all want to get paid what we believe we are worth, which may be even more than what we currently estimate. The trick then is to lead with unique or disruptive skills, offering the hard-won skills as a kicker. When you know exactly what your value proposition is, rather than perpetually trading at a discount, you'll command the premium you deserve.

Know Your Worth: Pricing Strategies

Know Your Worth: Pricing Strategies

Setting an appropriate price for your product or service is both one of the hardest and most important aspects of running a business.  Most entrepreneurs don’t have any idea what they should be charging.  As strange as it may sound, they are probably more likely to undercharge for their services.  Apparently, they are either passive negotiators or don’t know how much they are really worth.

There are a number of pricing strategies that I learned in my MBA program, but I found them too archaic to be useful.  Instead, I think the following feedback will serve most entrepreneurs better.

Price is something you need to address from the very beginning.  There are a few reasons why selling too low will end up costing you in the long run:

• Obviously, you can make less in sales (although not always, as you may sell in larger volume)
• You operate on a minimal profit margin and incremental expense increases can ruin you
• You establish yourself as inferior company with an inferior product

Throughout the recession, many companies have tried to compete by cutting their prices.  As their competitors responded, they cut them further.  Their profit strategy turned into a survival strategy, which eventually turned into their Chapter 7 bankruptcy application.

Following competitors’ movements is one of the biggest ways to lose your own identity.  If you are charging more than your competitors, you can simply convince your customers that you are worth more.  Isn’t that what you want to be doing anyways?  Convincing your customers that you have a better product but are selling it for less is likely to give them mixed messages.

Pricing strategies should never be based on competitors.  They are supposed to be based on your customers and what they are willing to pay.  Granted, your competitors fit into the equation, but only because they influence your customers.  You simply need to put in a little more effort to influence them as well.

You also need to think about how you engage and negotiate with your clients.  This involves how you structure your sales program and negotiate with your clients.  If all sales go through a form on your website and your customers are not purchasing anything, the problem may not your price.  You may need to change your sales process so that your customers can engage with you and you can justify your prices.  If necessary, you can leave room for negotiation in case the price really doesn’t work.

One of the biggest mistakes I have made is letting customers drag me into the “I’m thinking of a number game.”  They ask me to propose a quote and I have often wondered what they were thinking of.  I didn’t realize that I was undercharging myself until one client said that she usually paid a little less than what I suggested.  This was not a problem, because the price she proposed was still fair.

Then I started thinking about all of the clients who never complained.  They probably had a number in their head for the very beginning and were waiting for me to bid lower.  It was a win-win for them.  If I bid too high, they could simply assert their terms.  On the other hand, if I bid too low my modesty was a few more dollars in their bank account.

After this epiphany, I asked them up front what they were willing to pay.  If I thought a price was unfair, I would state my mind and what I felt my services were worth.  I would not be offended if they didn’t agree.  Rather, I would politely decline and say I hoped there were no hard feelings.  Negotiating is really a game of poker.  You need to be careful when you show your hand.

Choosing the wrong pricing strategy can ruin your business.  It pays to be one of the few entrepreneurs who can get it right.