Should you compete on price?
Too many small businesses think they have to compete on price in order to get customers.
Unless you are producing products where competitive pricing is the norm this is not a good idea!
Almost every client I start working with is undercharging.
When they are eventually persuaded to put up their prices they’re astonished that their customers don’t mind.
We always work out that if they lose a couple of customers, the increase in prices for those that remain make up for it, so they end up working less for more money.
I’ve lost track of the number of times this has happened and it has never resulted in a client being worse off.
Undercharging has severe effects on your ability to grow your business
If you price your products or services at a level that just pays your wages you’re on a treadmill going no-where.
Pricing a product or service has NOTHING to do with what you feel you deserve, what people think you’re worth or your value as a person.
It has everything to do with how your customers value what you provide them with, the value it adds to their life, the problems it solves or the delight it brings them. (See “How much would you pay for an ice-cube?”)
Making a profit that you can re-invest in your business allows you to take decisions about how you want it to grow.
If your aim is to grow a business rather than create a job for yourself, here are the top tips to make it work:
- Get enough capital before you start. Working just to cover your own wages is not a business.
- Estimate what you need and how long it will take to turn a profit – and then double the time you’ll allow.
- Find a way to survive for that amount of time without taking every penny out of your business.
- Don’t do any job that you can hire someone else to do better or quicker.
- Understand the finances of how a business works. It’s the most important job.
- Invest in processes so that no one person is irreplaceable – especially you.
If you are frustrated because your business isn’t growing as you’d like it to, lets have a chat. Sometimes a fresh perspective finds simple solutions that you are too close to see.