May 28, 2013 Client Newsletter

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.