Don’t Undersell Your Worth, Advice For Contractors
By Gery L. Deer
GLD Enterprises Commercial Writing
For freelance and contract workers, professional services and trade companies there are typically three kinds of customers: price shoppers, value shoppers and those for whom price is no object. For the moment, we’re going to ignore that last group and take a look at the differences between the first two categories and how business owners can shore up their revenue by recognizing which is which.
Recently, I ran across an online dictionary definition of the term value which included the words “cost” and “price” as synonyms. It thoroughly left me scratching my head in disbelief. How could this be more inaccurate?
The best definitions of the word “value” in regard to commerce are as follows: 1) An amount, as of goods, services, or money, considered to be a fair and suitable equivalent for something else; 2) Monetary or material worth; 3) Worth in usefulness or importance to the possessor; utility or merit: the value of an education (and finally); 4) A principle, standard, or quality considered worthwhile or desirable. While monetary expense is associated with value, the word is by no means synonymous with “price.”
Sometimes one of the most difficult tasks facing a small business owner is establishing a competitive price, particularly for a unique product or service with few obvious competitors. When first starting out, most small businesses tend to make the mistake of setting prices far lower than industry norms in order to lure customers.
Generally, offering a significantly lower price or drastic discount can backfire, making people think the product or service is substandard or the company is too new or not as professional as its competition. Additionally, deep discounts only attract one kind of buyer to your door – the “price shopper.” Price shoppers are those who base buying decisions on price alone, rarely taking value into account. These individuals are more concerned with the best deal than with high quality, better workmanship or superior service.
When establishing fee rates, consider the following …
- Consider the Value You Offer over the Competition
- Price Competitively – Review Market
- Say No To Doing Free Work
- Raise Fees Annually