What Are You Worth? Do You Charge Enough For Your Services?
“I always seem to get customer complaints about how much I charge them for the work I do. My vendors say they are giving me the best pricing levels that they can and I’ve cut my labor pricing to the bone. I’m driving older trucks as are my employees, I’m not paying the top pay scales that some of my competitors are paying as they often steal my workers. Any suggestions of where I can cut to be more competitive and still make a living?”
Several years ago I was elected to a board of directors for a local community college. My first board meeting ended with me wondering what I got into. The college had no reserve funds, were getting evicted from their rental space for classes and had a President that lived 250 miles away from the facilities. They maintained the lowest per hour charges for tuition and provided books to their students at cost. They used adjunct professors that were paid very poorly and many were volunteers as they felt charitable to the community and the colleges mission. They served non-traditional students who were working and attend evening classes to get trained for career advancement. I was asked to serve on the board to provide some business perspective to the mostly academic board. They had enough cash to last another 60 days and served about 350 students.
I asked if they had considered raising prices to cover their operating costs and they said they were concerned that they would lose enrollment. My next statement was “if you don’t raise your tuition rates, get some involvement from the business community they were training the students for, and find some permanent quarters, the tuition issue wouldn’t matter as you will be out of business”. The room went completely silent. They asked me for a plan to accomplish the issues I raised. Here’s what I proposed. Raise tuition rates to the levels that were competitive with other colleges in the area. It’s pretty easy to find out what your competition charges. The next was to find housing for the college so I went to the business community the college trained future employees for and asked for help in finding housing as well as financial support for the colleges efforts to provide them with a trained workforce.
Guess what? The college didn’t lose any students and in fact gained another 150 students. Some of the lessons learned here can be applied to any business and specifically yours. All of us, including you, want the best deal we can possibly get, but if you only concentrate on getting the cheapest price for your supplies and forget about the revenue side you will eventually become the low-cost provider and in doing so will provide a lower level of service to make ends meet. Here’s my point. You take your significant other out to dinner. Do you ever rave about how cheap the meal was or do you complain what the meal wasn’t up to what you thought the standards should be? When you look at business reviews, do you see anyone writing a great review based on how cheap it was? Do you ever see reviews about poor quality but they were still happy because they got served at a much lower cost than the other price levels quoted?
When your customers ask for the best pricing, that isn’t a signal for you to drop your pricing levels. They are looking for assurances from you that you are providing the best service at the best pricing you can. If you discount your work every time someone asks for a price break eventually you will become the low-cost provider who doesn’t make any money. And when you cut corners to try to stay the low-cost provider means you attract the lower quality workforce, doing lower quality work, and will eventually be remembered for the poor quality work you provided long after the cheaper price you gave.
Connect