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Wednesday, February 18, 2009

Your start-up pricing challenge

If you are fortunate to be expanding your business during a recession, you have some real advantages. Prices are lower, and many talented people are looking for work. The same advantages apply if you are establishing a new business. In fact, you may be starting a business now because you have lost your job and think you can do things better than your former employer. Many truly successful businesses are established during hard times (many also fail, of course).

Your real test in this environment is whether you can find and retain profitable clients. With many people out of work, some small start-ups price their services far lower than they should to remain viable. And some clients take advantage of these low prices, only often to find to their regret they've paid for more than they expect with incomplete jobs, sloppy workmanship, and perhaps unexpected liabilities.

On the other hand, many new business people are like I was at the start of my self-employment. I didn't know or appreciate how to price my services and worked far too hard for far too little money -- but still provided a really good service. The only problem is, as originally designed, the business could never grow because (outside of working 80 hours a week for something like $35,000 a year in income), I didn't have enough profits (retained earnings) to fund the hiring of competent people for reasonable wages.

Your best pricing challenge solution is to learn how to market and sell your services effectively. You need to know how to find the right clients willing to pay you enough for your work.

Do you know how to network effectively, how to advertise, and how to discover hidden clues within public leads and data to lead to hidden (private) opportunities? Some time spent developing these skills will yield profitable results and help you go beyond the treadmill of starvation-level wages.

2 comments:

Chris Gerald said...

I wonder how many times I will have to defend my pricing in light of the HRTC implementation this year.

The amount of postings, (including editorials from the Globe and Mail and CBC), that say, and I quote "it's an equally sure thing contractors, painters and roofers will jack up their estimates accordingly, to claim a piece of the tax break for themselves"...is a bit alarming.

This sort of thinking presumes that contractors believe their clients to be idiots.

Will clients try to find bargains and hold desperate workers hostage to the economy, or will contractors jack prices up 15% because they think they can get away with it?

Somewhere between the two lies the truth. And I think it's closer to the first scenario.

Mark Buckshon said...

Some clients will undoubtedly try to push for the savings -- I think few contractors will actually raise their price (though they might fight to get a bit more to restore some margins if they had been cutting to the bone).
the answer is for the contractor to clearly show the value at a fair price to the homeowner, and this is going to be based on reputation, references, referrals and solid marketing. It's always been that way.