If you are a small business owner, truer words have never been spoken.
When I first began giving seminars to the public, I wanted to undercut my competition and give my audience more content. So I did. Big mistake.
What I didn’t factor in was the cost of the details. We all know that’s where the devil is. It was the little things that added up that consumed my profit margin to the bone.
The cost of the table cloths, name tags, balloons for the outdoor signs, refreshments, security, parking, and the list went on. I had figured in the cost of the room, the advertising, the marketing materials, my staff, but it was the cost of the details that sunk the ship.
Live and learn. If I hadn’t regrouped quickly and done my homework, I would not have survived the year. Adapt or die. That is the mantra of the new business person.
Pricing is a tricky thing. You must consider all the angles associated with the total cost of your product or service as it goes to market. That, my friends, includes everything that goes in to making, marketing, distributing, selling and closing the deal. This rule of thumb goes for a consultant like myself as well as the person who sells widgets.
I often run into budding entrepreneurs that price themselves solely based on the price point of their competitors. Few roads lead to ruin faster than that logic. Don’t get me wrong, you should always keep your eye on the competition, but just like driving a car, if you spend too much time looking in the rear view mirror, it’s more than probable you won’t make it to your destination in one piece.
Pricing is not simply a cost consideration. It is a market consideration. If the market doesn’t bear your established unit pricing, your business will not survive. And when establishing the pricing for your goods and services, consider your profit as a cost item. After all, you’re not in business to break even, you’re there to make a profit.
I am a writer. In my industry, content is king. In the industry of small business, the customer’s perception of value is king. Separate yourself from your competition by adding extra value for their dollar. Creative marketing will get you far. Give something to them at a discounted price while you sell them your primary product at full price. Bundle your services so that you can maintain a fair market value for your product, while providing that little something extra. Everyone loves a deal.
Understanding your customer base is hugely important. What do they want and need and what will they pay for it? When you solve a problem in an affordable way, it generally leads to profits and a budding client list.
I am a firm believer that competition is good. It creates a buzz. A need. Take a look at McDonalds and Burger King. They both sell burgers at nearly the same price point. McDonalds spends millions a year scouting locations for their stores. You know what Burger king does? They follow their competition and pitch their tents across the street. Burger King capitalizes on what is different. They let you “have it your way”. And it works. Don’t be afraid of your competitor. Use them as a bench mark of what works, what doesn’t and what you can do better for more profit.
Get a handle on what it takes to keep your product or service ahead of the curve. Create special promotions, introduce new product offerings, videos, classes, introductions, seminars. You’ve already done the hard work by obtaining the client. Now, the challenge is keeping them.
A client of mine had a small restaurant. It wasn’t doing well despite the fact that her food was out of this world. When she began to offer affordable cooking lessons, she saw her bottom line rise substantially within 7 months time. Pricing has everything to do with innovative thinking and service.
Remember, that what you offer, how you offer it and what package deals you present to sweeten the deal means everything. Capitalize on your uniqueness. Be different. Be daring. Be your competition’s worst nightmare.
Just remember, the devil is in the details!