Never Lower Your Price

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In a nutshell: If you want to make money, you must value your services or products. And, that means you should never lower your price; merely offer less for less. When your customer wants something at a lesser price, reduce your offering to match the price, and don’t lower the price for a greater-valued service or product. In doing so, your value stays consistent, you will attract the right customers (and conversely, repel the wrong customers) for you, and you will make more profit over the long-term. Never Lower Your Price - Web and Beyond Blog

“Create different levels of service. Some people only buy the most expensive item. Avoid losing sales: offer a stripped down version of your product or service.” ~Beth Silver (in “107 Ways to Leverage Your Small Business Through Marketing & Public Relations”)

Small Business owners early on in their business’ lives find themselves with a particular dilemma. When you are starting your business you consider that any new customer is good for business! So, when they negotiate you down a third of your billable rate or 40% off your retail pricing, you accept with gleeful resignation. You have hopes that business will be different once you have a steady stream of customers. Why? After you have all these customers, you’ll have the bargaining power to raise your rates and really start to turn a profit, right? Sadly, this logic doesn’t hold muster for several reasons: you eat away at your passion by not valuing your most important asset (i.e., you), you attract the wrong customers which develops bigger problems down the road, and you create more financial problems than you solve by operating unprofitably early on in the business.

Consistent Value Is Getting Paid What You’re Worth; Ergo, Never Lower Your Price

Starting a Small Business is no joke, eh? It’s long hours, stressful, energy-consuming, and it can also be genuinely rewarding when you focus on your passion and skills, or your desire to overcome a challenge. You started your business to provide for your family, build a product or service that you can sell with the business and turn a profit, give back to your community, to fill in a gap for your retirement needs, or whatever other reason you had. In order to get up every day and do this, you need to be providing value to your customers but your motivation won’t stay very high if you’re not getting paid what you’re worth. I always tell my clients to price themselves so they are motivated to do the work. Who wants to get subpar work from you because you don’t feel like doing the work for the pay you’re receiving? This does a disservice to your new customers and to you.

The Ones Who Matter Won’t Mind and Those Who Mind Aren’t Worth the Worry

There’s a trick I learned in my teens. You take your 10 closest friends and add up their salaries, then divide by 10; this usually works out to be your salary. It’s remarkable how this works within a small margin of error for most people who earnestly do it. You are similar to the company you keep. And, that means that when you bring in customers who are all discount seekers and not best-value-seeking customers, you build up referrals to other discount seekers. Over the months and years, your business’ value gets eroded as you accumulate customers willing to keep driving down your price, not valuing you, and telling their friends and colleagues that they too can get low prices out of you. This hardly sounds like the best value for your time and effort.

Mo’ Money, Mo’ Problems…Uhm, No. Less Problems, Mo’ Money

For many years, I ran a commodity business. I was constantly pressured to lower prices and deliver the same great service. There were market and regulatory forces in play here that were beyond our control and so I grinned and beared it. Learn from my early mistakes in the business. Don’t lower your price unreasonably to save your business as it won’t actually save your business. I see this often now in coaching and consulting Small Business owners in this downward spiral, before I set them straight. Here’s what happens:
  1. You lose your passion and start cutting corners.
  2. You start to lose your best-paying customers who start to see the lower quality of your work.
  3. The decrease in good business makes you desperate to (a) bring in more underpaying and delinquent paying customers, and (b) not paying yourself and your own bills.
This cycle of lowering prices leads to lost passion, lost productivity, and lost good customers. The gains unfortunately are in greater customer service complaints, attracting worse customers, and more pressure on you to take on anything that comes your way. You’re worth every dollar you’re reasonably charging, so don’t let others tell you otherwise. You should get paid well to do your best work, and nothing less. And, you should work with good people who will refer you to good people, especially those that will pay their bills on time. Anything short of this and your business fundamentals are lacking. So, if you’re currently thinking of starting a business, or if you’re currently struggling, I hope this compels you to never lower your price.

TELL ME NOT…

The Worst Hard Time by Timothy EganThe economy is going up – except when it is going down. Are we in for another recession, a depression, or a boom? The political campaigns are in the negative, all attack mode and making many people more fearful.

But today came and you need to make a living, build your business, and grow.

Maybe you are fearful. You are swamped with so many ‘to do’ things. The things you know you need to get done. Those you keep meaning to do. And all the plans and goals you say you must define. If you could find the top of your desk or the bottom of your email inbox, you’d be delighted – for a day, maybe.

If customers are too demanding, you feel pressured by those expectations and wonder if you can sustain the demands and grow. If you do not have too many demanding customers, you feel pressured by the need to find more.

Right now a lot of folks wonder whether they can sustain their business dreams and goals. Many entrepreneurs and managers are hunkering down instead of inspiring and leading people.

And I am remembering a Wadsworth poem:
“ Tell me not, in mournful numbers
Life is but a dreary dream…”
It is from “A Psalm of Life” and very 19th century in tone but real too – you can find it here: http://bartelby.org/102/55.html

Do you know that there are studies which show that connecting to others, even electronically, raises levels of a brain chemical involved in feeling good? Just think, a nice cold lemonade with a business colleague could make both of you feel better! And if you used it to do some brainstorming about your business issues, so much the better. A series of notes to your connections to learn more about potential opportunity — and you are feeling better able to cope.

Organize. Whether you end the day by planning for the next or start the new day with 10 minutes to organize and plan, a small effort each day becomes a big goal achieved. Give yourself 10 – 15 minutes each day to move forward on one small step to a larger goal and see for yourself.

Need help? Bet you know someone else who does also and you can become peer coaches. Or you can hire a coach. Or an expert in a field you need to learn.  Or talk to the Alexandria SBDC.  Or undertake some online research to create your next step.

Buy someone you admire lunch and get a little mentoring on how they did whatever you admire them for. Or if you need a good swift kick, go read The Worst Hard Time by Timothy Egan.  And I thought I had had some bad times to overcome!

You can create the future you want. And help the economy we all are a part of too. Are you in?