I guess you could also call this the “hourly pay fallacy,” but I saw this story recently, and think it has some good lessons to teach businesses. Primarily, how to price oneself so that you don’t feel taken advantage of or commoditized. The story I’m referring to goes like this:
The huge printing presses of a major Chicago newspaper began malfunctioning on the Saturday before Christmas, putting all the revenue for advertising that was to appear in the Sunday paper in jeopardy. None of the technicians could track down the problem. Finally, a frantic call was made to the retired printer who had worked with these presses for over 40 years. “We’ll pay anything; just come in and fix them,” he was told.
When he arrived, he walked around for a few minutes, surveying the presses; then he approached one of the control panels and opened it. He removed a dime from his pocket, turned a screw 1/4 of a turn, and said, “The presses will now work correctly.” After being profusely thanked, he was told to submit a bill for his work.
The bill arrived a few days later, for $10,000.00! Not wanting to pay such a huge amount for so little work, the printer was told to please itemize his charges, with the hope that he would reduce the amount once he had to identify his services. The revised bill arrived: $1.00 for turning the screw; $9,999.00 for knowing which screw to turn.
Some may see this as bad business. Why is it that someone could take so little time to do something, but be able to claim that that little bit of time was worth so much? It comes down to technical knowledge, in this case. A lesser mechanic may very well have spent $10,000 worth of parts trying to fix this machine, wasting the company’s time and very possibly causing them to blow their deadline. The mechanic who fixed this machine probably knew as much, and probably knew that this particular press needed the machines up and running as quickly as possible. Indeed, he may have even known that, without his timely help, the company could stand to lose far more than $10,000.
If you are an expert in your field, and you enthusiastically keep up on your field, then there is a good chance that you are able to create value for those whom you serve. Consider that when you review your prices. Do your prices reflect the time you have spent mastering your field? If so, don’t commoditize your business by pricing yourself amongst less talented businesses. If you know which screw to turn, and they don’t, then you can stand to charge the higher price, because you have created value in terms of saving time and materials for your client.