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ONLINE BUSINESS HELP

Want to Make More Money? Fish in a Bigger Pond!
By: Developer Shed
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    2004-03-12

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    Want to Make More Money? Fish in a Bigger Pond!
    by Kimberly Stevens

    Setting prices is a dilemma most service business owners
    encounter at one time or another. This week, it was Susan's
    turn. "When I first started my business, I felt uncomfortable
    charging for my services. Since I was doing it to make a living,
    I finally just picked a price I thought wouldn't scare too many
    people away. Now, based on my available work hours, I can't
    really take on more clients but at the rate I'm charging them,
    I'm not going to make enough money to keep the business alive.
    How do I raise my prices without losing my clients?" she wanted
    to know.

    For whatever reason, it is uncomfortable for many of us to look
    a person in the face and state our hourly rate or the cost of a
    project they want us to complete for them. This is usually
    rooted in our fear of rejection. We think, 'What if the prospect
    gasps and falls out of his chair convulsing on the floor?' or
    'What if he snorts with disdain or launches into uncontrollable
    laughter?' At the beginning, we really need the work and
    generally decide we'd rather start getting some clients to build
    our reputation and skills, thinking we'll charge a rate we know
    they'll accept. Besides, we can always raise our prices later.
    Well, now is "later", so it's time to bite the bullet.

    First, understand you aren't asking for their firstborn child --
    you are asking for money in exchange for the service you are
    offering. Shakti Gawain, author of "Creating True Prosperity",
    introduced me to the concept of thinking about money as just
    another form of energy. Just as you put energy into the service
    you provide, the client puts energy into their field of interest
    in order to make money to pay you for your service.

    On the business-to-business side of things, the client's
    business has clearly made the decision to outsource the service
    they are discussing with you. They have decided to use their
    internal staff's energy to focus on their core business while
    outsourcing those things they don't have the skills or time to
    do. The same is true of individuals - they could paint their
    house, but they're calling you. Clearly, they don't want to do
    it and know it's going to cost money to get someone else to do
    it. Either way, they are going to hire someone to do it, so why
    not you?

    That said, it's time to raise your prices. You've got two sets
    of people to deal with here -- your current clients and your
    future clients. Future clients are easy - simply start quoting
    the higher hourly rate or basing your flat rate proposals on the
    new hourly rate with no mention of a recent price increase. Your
    fear that you will lose out on some bids WILL come true. You've
    been fishing in the pond that attracts the lower-end clients, so
    you will probably have to start marketing to and networking with
    prospects on the next higher rung. But, so what? It's still your
    choice - you can stick with the low-end guys and struggle to
    make your business profitable or you can start charging a
    respectable rate for the skills and professionalism you bring to
    the table to create a prosperous business. It's up to you.

    Now, the current clients are the ones you are likely most afraid
    of. What will they say? Will they never want to work with you
    again? The best time to raise prices is at the beginning of the
    year, either calendar or fiscal, or at the beginning of a new
    contract with an existing client. Never try to negotiate a price
    increase in the middle of a project. If a project is taking
    significantly more hours than you quoted for a reason out of
    your control or it's directly within the client's control, you
    can consider discussing it with them. However, if you want to be
    sure to maintain positive client relationships, you may choose
    to learn your lesson from this one and protect yourself with a
    contract that outlines contingencies such as that going forward.
    But, in most cases, never try to increase your hourly rate on a
    client in the middle of a project. This sends a message that
    will likely get you the response you most fear - that you are a
    money-hungry so-and-so who only cares about him or her self.

    Instead, wait until a natural beginning, ending, or transition
    period to communicate your price increase. One way to do it is
    to send your client a beginning of the year letter that
    expresses your appreciation of their business in the prior year,
    outlines any policy changes you've made for the coming year,
    communicates your price increase, and states your anticipated
    pleasure of working with them in the coming year. If you are
    raising prices at the end of one project and are about to bid on
    another project with the same client, during your discussions
    tell them you have raised your hourly or project rate and hope
    they still find it to be competitive and will continue to work
    with you since you've really enjoyed collaborating with them.

    Notice you did not hear me guarantee you will keep every single
    one of your current clients. Like you, your clients make
    purchasing decisions based on a variety of factors, each person
    weighing each of the factors differently. If you've been the
    lowest price available in your field, you've no doubt attracted
    clients who make decisions based mainly on price. Increasing
    your price so you are no longer "the low-price guy", may send
    them packing. So be it. Once you raise your prices to a
    respectable rate you can profit from, that's competitive and
    fair, you will begin to attract clients who will pay it. It's
    all about positioning. You can position your company as the
    low-price guy, the top-of-the-line guy, or the value guy (middle
    of the road price with a quality service).

    The lesson here ... it's your business and your revenues are
    what you make them.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    Kimberly Stevens is a business coach who works with business
    owners who want it all - a joyful personal life and a meaningful
    and profitable business. Her web site
    http://www.askthebizcoach.com offers weekly TeleTalks on
    business topics, a discussion board, business assessments tools,
    and an ezine addressing business challenges from a more personal
    angle.

    About the author:
    Kimberly Stevens is a business coach who works with business
    owners who want it all - a joyful personal life and a meaningful
    and profitable business. Her web site
    http://www.askthebizcoach.com offers weekly TeleTalks on
    business topics, a discussion board, business assessments tools,
    and an ezine addressing business challenges from a more personal
    angle.
    DISCLAIMER: The content provided in this article is not warranted or guaranteed by Developer Shed, Inc. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials. If this is a hardware review, it is not recommended to open and/or modify your hardware.

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