I
had lunch with a client a couple of weeks ago. We were discussing how
to recharge his business after having to take some time off recovering
from an illness.
We talked a bit about the importance of raising his fees. Predictably
he balked. The fear, of course, is that raising prices will send
customers fleeing. While that can happen, many small businesses have
raised prices and lived to tell about it. It is important that we pass
on to our customers the value we provide. I call it what’s in it for
them.
Reuben Schwartz of Upstream Commerce writes in his blog:
Service still counts, and it's still one of the ways to distinguish yourself from the competition.
Price isn't the only factor. Don't compete for those customers who don't care about service. Someone can always offer “something cheaper. Always use competitor “price monitoring” to know where your pricing stands in relation to your competitors at any given time. That means you have to set higher prices in line with what the customer was willing to pay.
It’s hard to be passionate about working for or buying from a company whose only goal is to provide the cheapest thing.
Nellie Alkap in her blog writes:
Price
is not usually the most important factor in why people decide to buy
from you (and many research studies have shown this). There are
multitudes of complex factors that go into every customer’s buying
decision, including convenience, value-added service, customer reviews
and recommendations, prestige, the overall customer experience and the
way your business makes customers feel about themselves. Think about
your own life as a consumer: how often do you go into a store determined
to buy only the lowest-cost options? When you’re hiring a contractor to
work on your house, or hiring professional service providers for your
business, how often do you hire the lowest bidders? If price were the
most important factor, we would all buy only store-brand and generic
products, and private colleges would go out of business because everyone
would go to community colleges and state schools. Of course, this
hasn’t happened – because lots of people are willing to pay more for
higher-priced products and services, for a variety of complicated
reasons.
Huge
companies like Walmart can compete on price because they have massive
buying power and sell a massive volume – enabling them to be profitable
even with razor-thin margins. But most of us are not Walmart, and are
never going to be (and don’t want to be). And even Walmart has had
trouble competing on price in recent years – when price is the only
reason for people to buy from you, you will lose your customer loyalty
and find yourself constantly fighting for scraps. Discount retailers
like Walmart are serving a certain segment of the market, but not
everyone wants to compete (or needs to compete) in that same space. Many
customers don’t want the “big chain store experience” of understaffed
stores, overworked employees, crowded aisles and drab surroundings. If
your small business can give customers a better experience and better
value for the money, they will gladly pay more than they would pay at
the “Walmarts” of your industry (whichever industry that might be).
Setting
prices is not just about maintaining profit margins, it’s about sending
a message to your customers. Higher prices often are a “signal” of
higher quality in your market. Do you want to be a “cut-rate” option, or
a “premium” option? Do you want to be a fast food place, or a gourmet
restaurant? Do you want to be a “base model” car or a Lexus or BMW?
There are customers who want to know that they’re buying the “right”
product or hiring the “right” service provider – and paying a higher
price is a way to signal to these customers that you are one of the best
options on the market. Another reason not to cut your prices is that
you’re surrendering your profit margins even when people might have
willingly paid more – cutting your prices might result in leaving money
on the table!
Show
your customers the value that you provide. Overwhelm them with
fantastic customer service. Help them understand why your business is
the right choice to help them with their needs. When customers love your
business and appreciate the value that you deliver for them, they won’t
feel the need to haggle over price.
Want more customers? Raise your prices.
The IRS has been much in the news lately.
I sure your have heard about the “extra scrutiny” IRS has given
certain nonprofit 501 C 4 organizations. Although the IRS principally
focused on “tea party” and other conservative name sounding
organizations, other nonprofits, including liberal leaning ones, were
also subject further scrutiny. Somehow, someone (everyone in charge
whether it is the White House or the IRS right now seems to be in the I
don’t know who or how this happened mode) decided that using the name of
the organization or its policy position as a basis for them to be
targeted have led to where we are today.
The
Obama administration isn’t the first administration to face criticism
for using the very considerable power of the IRS against their political
enemies. Presidents Calvin Coolidge, Franklin Delano Roosevelt, John F
Kennedy and of course Richard Nixon have all been implicated in one way
or another directing the IRS to use its powers against so called
political enemies.
We
deal mainly with the worker bees IRS employees. And I can tell you
that our discussion about the IRS nonprofit scrutiny are extremely
skeptical about the Cincinnati office, which handles the nonprofit
certification process, acted without some sort of direction from the
leadership in Washington.
Finally
I have to pass on this one quote from a front page article in the
Sunday, May 19, 2013 New York Times, “The I.R.S. is pretty
dysfunctional to begin with, and this case brought all those
dysfunctions to their worst,” said Paul Streckfus, a former I.R.S.
employee who runs a newsletter devoted to tax-exempt organizations.
“People were coming and going, asking for advice and not getting it, and
sometimes forgetting the cases existed.”
I
think when the dust is settled the reason for the delays and scrutiny
will be more the cause of ineptness and less of political conspiracy.
After much delay, two years in fact, our new small business website thesmallbizwiz.com appears to finally ready to debut.
What has been holding us up has been the harder than expected to put
together podcast show. We anticipate a beta version being up and
running mid June. We will keep you posted.
Help us do a better job. If you receive a notice from the government please forward it to us as soon as you receive it.
Speaking
of raising your prices, last year after much deliberation and thought
we decided not to pass on the fee increase from our Paycyle payroll
service provider.
However, after announcing yet another fee increase we have decided
that we will pass on the small increase to our clients. You will notice
a small increase in the monthly debit from your account next month.
Laurie
Elzerman I will be out of the office May 31- June 10 taking a well
deserved vacation. I will be out of the office June 12-17 for my son’s
wedding.
The
demand for our services drops dramatically after April 15th. We are
open from 9 to 3 Monday through Friday and at any time you call and make
an appointment.
