The fixed price is set by your worst job, not your average one

Most service firms that productise price off average delivery cost, then watch the margin disappear into a tail they never had to own before.

By Steve 5 min read
Abstract bridge artwork for The fixed price is set by your worst job, not your average one

A service business decides to stop selling hours. It pulls two years of jobs, finds that the typical engagement takes around 70 hours, sets a fixed fee at a comfortable margin over that, and launches. A year later the offer is selling well and the margin has gone. None of the arithmetic was wrong. It was answering the wrong question. A fixed price does not ask what a job costs on average. It asks what happens when a job runs long: how often that occurs, how far it runs, and…

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