...If you sell on value, not on price
By David Nelson
This article has been created from our January Advice Clinic “Have Your Cake and eat it!” and we have pulled out the best bits for you, the hardworking business owner, the sole trader the SME. The full time mum, part time freelance interpreter or the student entrepreneur from the comfort of their own bedroom. We all share the same passion and desire to pave our own destiny, and we all need a little extra help on that journey from time to time.
Some say that when you work for yourself you get the boss you truly deserve. For good, or bad.
How many employees can and do, blame the marketing department for not building enough awareness? The operations department for not delivering the service the customer should receive? The accounting department if people haven’t been paid on time?
As a business owner we have no one to blame, everything is either to our credit or our fault.
I always believe that we would manage our businesses much better if we could manage ourselves as we would an employee. If we gave ourselves the time we need to be objective regarding our priorities – we would certainly be a lot more efficient and fit in some of that much deserved work life balance we all strive to achieve.
So, do you feel that your business is being run by your customers? Your bank account? Your suppliers? Everyone but you? Well let’s try and address the balance.
It all starts with this... Sell on value, not on price!
The saying goes that “If a man can write a better book, preach a better sermon, or make a better mouse-trap, than his neighbour, though he builds his house in the woods, the world will make a beaten path to his door.” —Emerson
Unfortunately it doesn’t take much in today’s world to become a busy fool. And there is just as much of an issue with giving too much value as there is giving too little. Our customers buy our products and services because of the results that they deliver not because of the product itself.
The price we put on the value that we deliver shouldn’t be compared in isolation. The world’s cheapest parachute will not be the best selling and would not be the one I‘d pick. But if the perception is that that both the cheapest and the best will do the same job then why wouldn’t the customer go with the cheapest.
There are 3 rules to remember:
1. Don’t sell on price alone – aka if you are selling to be the cheapest option, there will always be someone to come along and undercut you who has less overheads or someone looking to buy work... Why try and compete with that? You may as well stop now and get a job. Also, as far as client retention and loyalty is concerned the client that you have won on price alone will be loyal, right up to the second that they are offered a better price elsewhere!
2. Know the right customer to buy your product/service – aka stop trying to sell you product/service to people who have no need/use or desire for it. You will find it much harder to sell a 4x4 to someone who is looking for a city car – and they aren’t going to be happy with it for long either so it could well damage your reputation.
3. If you do not appreciate the value your service/product who will? – aka don’t use your own values as a glass ceiling. You need to be able to appreciate the value of your offering because of the time spent learning, developing and perfecting it. Just because you find it easy doesn’t mean other people see it that way, to someone who needs your services you are worth every penny!
Know what makes you money...
Getting your price right is probably the most important recipe you will need and it is very important to go through the process of knowing your costs and measuring your margins to ensure you are charging the right price.
Having worked with people in the past to support them in identifying their true costings and the results have sometimes been less than idealistic. A job that has not been costed out properly can hide the fact that who you consider to be your best customer is actually at a cost to you and your business.
Your accountant can help you know exactly how your year has completed, but try and make the changes required to give you the kind of year end that you want.
Know your products and service, know the margins and which from a strategic point of view are key to achieving your end goal. If you do have a loss leader for strategic purposes, know your self-imposed limits for the use of such a strategy.
This should not just be about what services/products make you money but know what activities in your business are producing income and by how much.
Earlier I said it would be good if all business owners could split their personality. Well if you are managing you, and only have 40 hours for them to work this week, and you are paying them what you are taking as a wage, what would you have them doing each day? Each hour?
Thinking that way can help reduce distractions, help us to prioritise and stop us from inadvertently wasting our own time, as they say time is money.