Charging what you’re worth
Charging what you’re worth
I’m going to introduce you to Masonomics 101, which is my approach to the art of pricing and science of charging your worth in business.
Never discount
Let me start with the most important message when it comes to pricing your services: “Never discount. Never discount. One more time, never discount.” The increase in the volume of sales you’d have to generate to cover the loss of margins – even with a 1% discount – is huge. Any instances where you offer a special price should be part of your strategic sales plan. These may include a product launch or excess stock. Because these are time-dependent. But when it comes to your core product, simply don't do it.
Quoting with a clench
In the wonderful world of personal services and fee for services industries, most people have difficulty charging their worth. Victor Dawson, a former boss who retrenched me in December 1991, and is still a good friend today, taught me the lesson of the ‘clench’. (If you ever see me in person, ask me about the other phrase I use for this. It’s funny and far more accurate, but not fit for print!) The ‘clench’ is the litmus test when you’re quoting for a project. If you’re not clenching (your bottom) so hard that you’re almost tearing up, then you're not charging enough.
If your first thought is “No one's going to pay me that amount of money”, then it’s time to double your fees! You’ll be surprised how often the right customers will pay your new price because they understand your value. And, in turn, anyone they refer to you will also be someone who respects your worth. There are a variety of factors that affect the ‘tearing up’ threshold. Ultimately, you have to look at the opportunity and adjust your pricing relevant to your current earning experience and sales volume overheads.
Lose a few to excel with the many
I've been a Business Chamber President and sat on many boards and member-based organisations. Although most are concerned that they’re charging too much for membership, one of the first things I do is significantly increase membership fees. This is because most groups are underappreciated and don’t have enough funds to cover the cost of providing excellent services to their ideal customers. In any business, the people who don’t recognise the true value of what you offer are the price focused ones. Following the 80/20 rule, we know 80% of the problems come from this category of clients. By doubling your fees, you’ll certainly get rid of those clients and possibly lose 10-20% of your database. But you’ll end up making enough money from your remaining members to service them with excellence.
Increase your prices every year
Every year, as we're preparing our annual contracts, I raise our consulting fees. This isn’t a surprise for my clients because at the bottom of every previous contract, I included the stipulation that our prices will increase in the next cycle. This approach ensures we cover overheads and unforeseen costs, while remaining viable and achieving our desired gross margin. Some people will treat you as a commodity and shop around for the cheapest offer. They’re not your ideal clients and will always be one dollar away from changing to a cheaper supplier. The key is to spend your time and energy building relationships with those who know they’re paying for your years of experience and knowledge, not just the hour or two that it takes to complete a job. These are the ideal clients who will become advocates for your business.
In the few instances when someone asks us for a price reduction, instead of discounting (which we don’t do, ever) we explore how we can modify our offering to bring it within their budget. It’s about tailoring our services to ensure the best outcome for both parties, while never losing sight of the value we offer.
So, get ready to clench as you can own your value and charge your worth.