One of the biggest hurdles any small business owner faces, is the question of, “How much should I charge?” It is a question filled with questions; What if it is too much? What if I can’t make any profit at this rate? What are my competitors charging? Do I have a better product or service and thus should be able to charge more? I am new in the market, so maybe I should charge as much? This list of questions will be spun forward and backwards and then forward again, until finally the charge rate is set (although likely with a disclaimer that discounts maybe provided at the owner’s discretion….just in case).
Often times, when we start working with a small business owner, we find that they aren’t charging appropriately for their services. They don’t charge because they are afraid to lose their existing customers or clients, but because they don’t charge, generally they don’t have the money to do things like; pay themselves appropriately (and in some cases at all), invest in growing their business, hire staff, offload some of their workload, etc.
Inevitably as we start the discussion around increasing rates, we get back all the reasons why this isn’t possible. Most times there is a lot of push back, although we know that part of growing a business and paying yourself well, is about getting pushed in how you think about your business.
I also believe part of the push back comes because there are times when each of us thinks in the extremes especially when we get pushed in an idea. You know…..the all or nothing arguments; “If I raise my prices….all of my customers will go to my competitor.” Of course, if you raise your prices you could lose a couple of customers, however customers generally come to your business because of much more than your price. We also like to look at each product and service to see where an increase might fit best.
Let’s bring this into a real example. One of our clients, cuts hair as part of her business. Her rate was $35.00/hour and we encouraged her to increase that rate to $37.00. At first, she didn’t believe she could do this, but with a little push she finally agreed. She currently works 30 hours a week and by making this little change, she was able to increase her bottom line by almost 6%. This meant that she was able to take home an extra $3,120 per year, without changing anything else in her business. She was concerned that she would lose customers and six months later, in fact the opposite had happened.
Whether you are a small business owner or a leader, recognize that small changes can have a huge impact on performance as long as you stay open to making the change. We tell our clients over and over again, that how you are operating and approaching the world today, is reflected in the results you are achieving. If you want to achieve something different, it is going to require you to do something different.