I attended a birthday party for an old friend the other night. There I met a young entrepreneur who has been in business for maybe 3 1/2 years but wondered why she's not realizing her dream. She told me how passionate she is, loves working from home considering the responsibility of a small family and she is flush with work. What could she be doing wrong?
Essentially she wondered why she's not making the dollars she anticipated.
Her husband was standing nearby listening. He is a union guy making good union wages working in a factory setting. He mentions that she makes a pretty good rate for the amount of experience she has.
That got me to asking what she charged for her services and specifically what hourly rate she based her services on. Her answer was an eye opener. Only 20 bucks an hour. While on a shop floor this may seem pretty good, in the professional world it's a problem. Her time calculations were an assumption as she doesn't use a timer to track jobs so she can't accurately know what her profit OR loss might actually be. A passionate professional shouldn't rely on their memory to calculate time. As she stands today, her market is project based and as such, the existing rate was worth less and less as the hours mounted on a fixed project price. In many cases, her end hourly rate was less than minimum wage.
My advice to her was to stand back and take a hard look at her brand. At that moment in time her brand stood for cheap - plain and simple. The customers she has, loves her because they get good work - cheap. This is the kind of customer her brand attracts. If she wishes to grow she will have to strengthen her brand and that means drastically increasing her rates. I mentioned that when she does this one of the reasons she will get more business is simply because she is proud of the price she commands. She must believe in her brand FIRST before great customers are attracted to her.
I didn't recommend the highest fees in the industry, just something that will allow her to grow and make the income she deserves. With her productivity, her customers will still be getting great value, quality and service. Her biggest hindrance to her own brand succeeding was her self-esteem. She lacked the confidence to see her true value. I did my honest best to pump her up and get her re-aligned. Her end comment was, "Yes Ed, I should do this!" to which I replied, "NO, not should - you either do it or don't do it, there is no should."
They say, we are our own worst enemy. All I can add is next time you are having challenges in your business share you concerns with others. There may be a solution in your next conversation. One of her comments spoke to the fact that she didn't know there was anyone she could talk to about it. Opening up is the first step to strengthening your brand, listening is second.
4 comments:
Great post Ed. The value of your own brand is something I had to grasp quickly when I started my business. Making sure you charge the right fees and then keeping time sheets of projects to check you're quoting correctly at the outset.
If you are cheap, you attract cheap. Charge the right fees and you will attract the right sort of client. Naturally you have to balance bringing in the cash and setting a benchmark to prospective clients but in time I've learned to manage this gaining respect for my work in the process.
A very important step for any new business.
Absolutely right Richard. If we don't respect ourselves what value can we be to others?
Thanks for your input.
Ed, great advice with a great example.
For some businesses, building your business with cheap fees may be beneficial in the sense that it may POSSIBLY provide experience, testimonials, clientele, customer loyalty, and brand image more easily than with a initially expensive fees.
Having a high cost (high value) strategy during the business launch MAY not be the most effective. Certainly consider which strategy will help provide your business with a long-term strategic competitive advantage by building the above mentioned strengths.
Take a good look at your product and see how it fits in the current market and potential customers perception. If it provides great value, then yes immediately a higher price is justified. If it is perceived as providing low to medium value compared with the competition a lower price may attract customers which will then improve the perception of the brand and ultimately justify a price increase.
Andrew, I think you hit the nail on the head when you recommend looking at your marketplace. The worst thing about starting too low, is it is very difficult to move up plus the perception of value is terrible. When I started out I found the more I charged for (logos) for instance the more business I got.
I'm sure part of that equation was also an increased confidence, which helped in my selling.
Thanks for your opinion.
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