“The cheapest trainer in the world is too expensive if the client isn’t yet sold on your value” – Jon Goodman, Ignite the Fire.
While it’s specific to personal training, the above quote illustrates a truth that pervades all business matters. And let’s be honest: things can get messy when you’re talking about money. Sometimes we don’t account for the illogical reactions people can have when we bring up financial matters. If you’re a small business owner just starting out, you might be scared of overpricing yourself against the competition but simultaneously worried about undervaluing your worth too – how do you know what’s the right price to set? Well, here’s what you need to do to avoid underselling yourself:
1 – Know your numbers
Do you know much you actually need to break even, to make a profit? A lot of first time business owners or contractors don’t understand how they are tracking financially, where leakages are occurring or if they are making a profit then how much. Maybe you fell into business organically, your client base and service offerings expanded and five years down the line you never took the time out to ask yourself whether you should re-consider your pricing or processes. The first step is figuring that out and working backwards from there.
If you’re a WorkflowMax user, you’re in luck! It’s super easy to do this with the software’s powerful reporting features. You can generate custom reports and easily understand what the data is telling you. Who are your most profitable employees? (If you don’t have access to that kind of information, it might be worthwhile considering an online time tracking tool). How much money do you make per employee? What about the profitability across your different categories of clients?
Remember, when you’re digging through the data, you should try to conduct an honest and frank analysis that will give you a realistic idea of your current state of business. Getting an accountant/bookkeeper to help is a great idea. For WorkflowMax users, there is also plenty of support offered to help you maximise the software. Our self-paced education courses will give you an in-depth view of financial and invoicing and you can also get a localWorkflowMax certified advisor to help with the more detailed aspects and give you advice.
2 – Understand your industry
Copying your competitors isn’t the answer but it is important to know where you’re placed against them. Some industries are pretty standard across the board (for example fitness, where the average hourly rate is $60 NZD) but others fluctuate greatly. If you’re in New Zealand, the IRD provides some useful information on industry benchmarks. For freelancers and contractors get an indication of charge-out rates on Seek.co.nz.
3 – Demonstrate your value
It’s easy to think potential clients will be able to tell how great you are – either by the reputation you think you have or by a single face-to-face meeting or even by the work displayed on your website. But don’t take anything for granted. If you want to really emphasise the value you bring to a project or relationship, you will need to sell yourself and make potential clients see it! This involves phrasing your value proposition succinctly and effectively, presenting your product/services in a stunning way, and accurately communicating your point of difference.
- Start with your website. This will often be the first point of contact for a lot of potential clients. Is it SEO optimised? (Useful reading: 5 common SEO mistakes that IT companies make). If people are looking for the answer to a problem, will they find your services listed or be directed to your website when they hit “enter”? Do you have a stellar portfolio with awesome photography or video case studies? (We wrote some tips onkeeping your portfolio up to date over here!). Do you have engaging copy throughout your site? A one-off investment in a copywriter to edit/optimise your copy can be worthwhile to really make those critical pages sing.
- Practice your elevator pitch. The written word is one thing, but you need to be ready to communicate your value at every given opportunity – you never know when you might encounter a potential client! Practice your pitch every day, perfect it and even “role play” with friends or family to work out the kinks.
4 – Make them see the value in it for them
It’s easy to talk about what you offer but harder to turn the angle around so that potential customers can see the value in it for them.
- Make your communication benefit focused. What are they gaining by working with you? Customers don’t necessarily want a relationship with you – they want you to make their life easier!
- Take them on a journey of possibility – ask them to indulge you for a minute while you paint a picture of what the solution could look like.
- Use case studies, reviews and testimonials as proof points.
- Speak their language. Language is an ever-changing beast. I mean, the Oxford dictionary 2015 word of the year was the ‘Face with Tears of Joy’ emoji. So, who is your audience and how can you tailor the comms appropriately? What kind of information do they need to indicate you’re an expert/authority in the area? For example, some clients may be more ROI driven, in which case you’ll need to communicate the measurable, quantifiable difference you made to your clients’ projects. What metrics and benchmarks were used for success?
5 – Re-examine your pricing strategy
After all the analysis you’ve done, if you’ve decided to change your rates after all, how to tell your clients is incredibly important! A personal trainer I worked with for a little while increased her prices but sent out an impersonal group email to all her clients with a lame excuse regarding the cost of rent, expecting us to sympathise. With less than 15 clients she handled it pretty poorly in my opinion – and needless to say I never went back there.
To really maximize your success, you need to “dig deep into the psychological reasons why clients do or don’t decide to use your services”.
- Consider different package options so potential clients have options to choose from. Being believe they’re in control when they have options to decide between, rather than a standard one size fits all – buying psychology, less skeptical, and most people tend to hone in for the middle package?
- Referral bonuses can also be a great incentive smaller businesses or startups may like to consider.
- Consider offering a guarantee for your service.
6 – Don’t answer the “How much….?” question
This isn’t about money, it’s about value (see above). You should never lead a conversation with pricing. It instantly turns people off and makes them guarded. You want them to trust and like you!
7 – Stay in the power position
Unfortunately too many people get flustered when money matters come up. Try not to give up control. Body language and non-verbal communication plays a big part here. Check out this really great TED talk on power posing and how you can use it to affect your confidence and other people’s perception of you.
8 – Future-focused
Are you thinking big enough? If you stay within the same mindframe that your competitors are, you won’t be able to offer a premium for your service. Some of my favourite places to start when you want to know what’s going to be big and exciting in your industry: Nextness, Prote.in, PSFK, Future Labs, Fast Company. Read voraciously, and keep an open mind, informing your clients that by working with you, you will be able to future-proof them!