A client of mine, let’s call him Jim, recently was put on the spot by a customer for whom Jim had offered a contract price for a sizable project. I should mention that, after my assistance in analyzing his company’s historical profitability, Jim has made a commitment to increasing his prices. This job was the first he’d priced since changing his pricing strategy, and he was feeling somewhat insecure about defending the result. Confusing the situation further, the customer had initially worked with a designer who had provided some tentative budget figures. The customer was clinging to those original price suggestions, even though he’d made significant changes to the original plan.
The customer demanded to know Jim’s markup. When you’re confronted with a similar demand, bear in mind the following as you prepare your response.