How much should I charge for my service, product or solution?
It takes a thorough understanding of your environment to understand how much you can and should charge to remain competitive in your ecosystem. There’s no magic formula, really. It takes good old-fashioned trial-and-error to get it right. You can, however, shorten this phase in your business journey by shortening the learning curve–but you will still have to figure it out.
Number crunching excites very few people. To date, I have never met an exciting accountant. I’m sure that they are some out there; and my apologies if I have offended anyone. Nevertheless, a solid finance guy or gal is integral to the functioning of every enterprise. I’ve always seen them as the beavers–the engineers of the finance world. They are the ones who engineer the business so that the financial pulse of an enterprise stays happy and healthy.
Without them, we simply cannot build–let alone sustain–that amazing dream lodge that every business owner dreams of.
I’ve invested and worked in numerous businesses across a spectrum of industries. But even with that much experience under my belt, I still mess up from time to time. And no, I never learn to stop making mistakes. I still walk into investments with a blindfold on because my heart dictates that I take the risk and jump. No matter how much my mind weighs all the probabilities and all the disasters that might eventuate as a result of my recklessness, I simply must be a part of a business that I believe in.
Plain and simple.
And so I walk in, with that blindfold on, feeling my way in the dark and hoping that one day real soon I’ll see the light.
I can’t say I haven’t messed up. I’ve made some terrible blunders, bad financial decisions and even hurt many people along the way. But the business world is a battlefield, not a trip to Willy Wonka’s Chocolate Factory. If you can’t accept and deal with pain and loss and make a comeback, it’ll be game over before you even get started.
There are many ways to remove the blindfold that’s covering your eyes. The important thing here is to know and realise that you actually do have a blindfold on when you walk into something new–regardless of how experienced you are in another field. Once you know that you don’t know, you can figure out how to pump up your knowledge and experience base so that with time, you’ll make more advantageous decisions.
What does the client want?
This is a big one. If you’re running a service business, it is important to know what you offer and to whom. Many service providers I know get caught up in the habit of trying to please their customers, when really, they should be focusing on the customer who actually needs–or at least wants–the service that they’re providing.
Do your clients come in looking for a long-term solution or an experience? Are they going to spend an hour with you or is the commitment an ongoing one? If a long-term commitment is at stake–mastering the first impression isn’t going to cut it if you intend to keep the client for the long run. If they’re just in your store for 20 minutes to purchase an item, then yes–by all means, master the art of the first impression.
If you are in a service business, then you’re most likely expecting to create a long-term relationship with a particular client. In this scenario, it actually takes time to understand what your client needed when they first walked through the door as well as how their needs evolved as the business relationship grew.
Our understanding of our needs are rooted in a particular moment in time. Once a particular need has been met, our needs do change. If the needs of your customer have changed, ask yourself if you’ll realistically be able to continue meeting that need moving forward.
No fancy sales pitch can ever sell a long-term commitment. It can, at best, get a short-term fling.
As the guy in charge of the finances, nothing drives me more nuts than ‘You didn’t read the fine print’. That’s really great, thank you for pointing it out.
In contract law, there is something called meeting of the minds. It is used to describe the intentions of the parties forming the contract. In particular, it refers to a situation where there is a common understanding in the formation of the contract.
Many sales contracts and pricing quotes are simply not transparent. On some level, it almost appears that the business world thrives off of hidden charges and unclear pricing strategies. I feel that this ultimately destroys the trust between the two parties who have been initiated into the contract. Salespeople are not the only guilty party–as customers, too, can try and get more out of businesses without paying. I’ve been in numerous situations where clients continue talking well after their hour is up and then are shocked to receive yet another big bill at the very end.
The trend these days is to standardise rates around three tiers. As for how these tiers are priced, it is best to take the needs of both the business and the customer into account. Sliding scale pricing refers to the differential pricing of products or services based on the consumer’s ability to pay as well as a business’ ability to meet that customer’s needs.
One caveat here–some customers are big spenders in the early days and then disappear off the radar. Other customers may begin by making a small purchase before upgrading to a different tier. In my experience, there isn’t a particularly strong relationship between income level and what customers are willing to pay. I’ve known lots of rich people who are super stingy and lots of working professionals who will gladly fork out more. The right salesperson will take the time to suss out and actually engage the client, instead of up-selling.
When the customer wants to buy, the customer will buy.
A personal story, a boss of mine was always rather slow when it came to making purchasing decisions. Always started small, sussed things out properly before making a big investment. If you ever tried to rush her into making a sale, she would get really anxious and bolt for the door.
I don’t know anyone who likes to get pressured into spending money–regardless of how much is sitting in the bank. The other tactic that salespeople apply is to sweet talk others into spending money–which is even more of a dead end if you’re not into sweets.
So if you’re the one making the sale, price it right based on the customers needs as well as what the business needs to stay afloat.
And that’s all, folks.