In the twenty-plus years I’ve worked with small business owners I’ve found that there are 3 business killers they have in common when it comes to pricing their products and services.
1. They undervalue their worth.
My client Morgan was an extremely talented web designer who when I met her was only charging $65.00 per billable hour. There were two problems with her rate. One, it required that she work seventy plus hours a week to make a very small profit and two, her rate was in line with her competitors.
If your rate is in line, around the same as your competitors, it says to your potential customers that you and your competitor are both average. And by choosing to work with anyone who does what you do they are going to get the same product or service.
I challenged Morgan to immediately increase her hourly rate. And like most business owners she refused. I was baffled. Why wouldn’t she take advantage of the opportunity to make more money in the same amount of time? As we began to peel back the layers, we discovered first that she didn’t value her worth. Morgan shared with me over and over again that she didn’t really even know why people paid her to do what she did. She said, “it was so easy, anyone could do it.”
And I bet you’ve said those words or something similar to yourself. The truth is that it is easy for you because you are the expert. You are the master of your craft. You have something to offer that others cannot accomplish on their own.
Let’s face it. If your customers could do or create what you do, they wouldn’t need you, your products or services.
2. They are fearful of rejection.
“Crystel I don’t want to upset my clients. They’ve been so loyal to me.”
There’s a reason your customers are loyal to you. You bring value to their business or life! Why do we think that by charging more our clients will think less of or be upset with us?
Rob’s coffee shop was a quaint coffee shop on Main Street in a quiet community. It was where friends, families, and business acquaintances gathered to share conversations, ideas, and time over a hot cup of freshly brewed coffee.
Rob’s was a staple in the community. Their customer base had grown to over 200 loyal customers who visited daily. Yet over the last 5 years Rob’s business had gone from making a profit to barely breaking even.
The problem? Rob had not increased his prices in 5 years. I couldn’t believe it! The cost of coffee, cups, cream, stirrers, labor, rent – the cost of everything had increased over the last five years. Everything except the price of a cup of coffee at Rob’s.
Rob, we need to adjust your pricing.
Adjust my pricing?
Yep, we have to increase prices.
Oh no. I couldn’t do that to my customers. They are so loyal to me. They’re the reason I’m still in business after all these years.
Yes, and you’ll be the reason you’re not in business if we don’t increase your prices.
Rob was so fearful that his loyal customer would reject the new price or even complain he put a cup of change on the front counter for anyone who complained about the price increase. (They could take change from the cup to pay for the increase in price.) Do you know how many people complained or took money from the cup? Zero.
Stop letting fear get in the way of your success!
3. They worry about the potential loss of clients
Chris, a local custom home builder, reached out for my help with his business. Chris built some of the highest quality and beautiful homes I’ve ever seen. One would think that someone who builds high-end homes would make a great profit. Some do. Chris was not one of them. Chris found himself constantly in the red, searching for the next deposit or high-interest rate loan that would allow him to stay in business. The problem? It was his pricing. (I’ll go into more detail about pricing to include overhead in another chapter.)
After we spent hours calculating his cost and overhead we found that Chris was losing 19% on every home he built! Can you imagine losing money on every product or service you offer? You might just be and Chris certainly was. Chris and I got to work using my Job Cost Estimator and realized that he needed to increase his prices by 40% to make even a small profit. His immediate reaction was “I’ll lose half my clients if I raise my prices that much”
“Good! Lose every single loss-making client! You could do one profitable build a year and make more money than you’re making now doing 20 builds a year!”
Chris reluctantly increased his prices on his next bid. I was excited to meet with him the next week to hear what the client’s response was. This was a pivotal moment in his business.
I didn’t have to wait until our next meeting. Chris called me and before I could answer with a hello he began yelling “ You are never going to believe this! They didn’t even bat an eye! They just asked when I could get started!”
And Crystel! I increased my price by 50%!
Increase your prices today:
✔ Increase your income
✔ Work fewer hours for more money
✔ Give your business the income in needs to grow