Most entrepreneurs are more terrified of pricing than they are of Freddie, Jason, Chucky, Norman Bates or Honey BooBoo. When asked, ‘How much?’, they squirm in their socks and twist their intestines into embarrassed loops. Then they apologise and offer a discount, without having been asked for one.
What they don’t realize is that their value is perceived in relation to their fee. Low fee, low value.
A great many entrepreneurs actually undercharge. Position yourself as the cheap alternative, and, ironically, you might find yourself doing less business. People largely judge value and quality based on price, which, in turn, is why Mercedes-Benz hasn’t gone broke, in spite of its premium pricing. It’s part of the reason Apple rules the world.
Your starting point is to show pride in what you do. Your business is your baby, after all. You spend a significant percentage of your life growing and cultivating it. Don’t disrespect it with miniscule profit margins. Practice healthy profit margins that recognize and reflect your input and expertise, and then have the sense of self-worth to charge correctly with confidence.
Of Course, You Have to Be Worth It
Pricing and positioning are art forms. The danger is that you are simply seen to be overcharging for an inferior product. Not only is that unethical, but it only takes two or three clients getting burned before the word gets out and your business falters.
No, you have to actually be the quality for which you charge. But if you are the Mercedes-Benz of your industry, you are entitled to charge a premium. And your market will expect it and pay it.
It’s an interesting psychological game: The more you put your price up, the more you will be seen as a quality offering. The higher the quality of your offering, the more you can put your price up.
So if you’ve hit a ceiling of income-to-capacity in your business, and want to earn more, consider whether you are simply too cheap.
Here are four suggestions on how to go about raising your price:
1. Start by firing your low-paying, high-input clients
They are a drain on your time, they are not worth the financial reward, and perhaps most importantly, their high visibility in your own consciousness will keep you believing that you operate at that level. After all, if you see them often, they are your norm.
Give them up to the entry-level operators. Choose instead to own the top end of the market.
If you’re having difficulty with this idea, think about it this way: Doing one job for 30 coins is worth more than doing three jobs for 10 coins. How do I reach this seeming mathematical impossibility? Consider: Each job implies a certain amount of cost.
If you do one job for 30 coins, you will incur one cost. If you do three jobs for the same amount of money, you will be down by three instances of cost. Doing less work for more money is exponentially more lucrative.
2. Dump the bricks and carry gold
What do you offer that is high-input on your part, but low yield in remuneration? Are you scrambling to sustain the small profit margin part of your business? Perhaps it’s time to dump it and focus on the high-yield stuff. You don’t have to be all things to all people. Rather be the thing that generates high income.
3. Research your competitors
Find out what the top-level operators in your industry are charging. Try to position yourself in the middle-to-upper cost range of your industry. Never position yourself in the lower cost range. If you do, you become a commodity, which means that you are interchangeable. That’s not clever positioning. Also, it will become remarkably difficult for you to raise your value later on.
However, don’t be the most expensive option until you know you are worth it. Keep it as a goal and work toward it.
4. Put the word out
Knowledge alone will not cause your market to see you as the leading name. Nor will mere competence. These qualities are important, but in isolation they do not create a valuable reputation. Add publicity to the mix and suddenly your knowledge and competence become renowned. Keep publicizing yourself, and you may ultimately become iconic.
Experts and iconic names are able to charge more, because the business comes to them. They are desired and sought out as unique and valuable. Price becomes a secondary concern in acquiring their services. In fact, sometimes a high price even means bragging rights for the buyer.
I advocate finding forums in order to achieve high-level status by design. Appear on radio talk-shows with interesting messages pertaining to what you do. Appear on TV. Get into newspapers and magazines. Speak in public as often as possible. Create and publicize new ways of doing what you do. Be unique. Be the best, and let the world know about it.
The next time you have to state your fee, state it with confidence. Don’t cringe. Don’t blink. Don’t rush to offer discounts. You are building a business, growing a brand. You are on an upward trajectory, and pricing is an important tool in your propulsion. Don’t be afraid to use it.
What’s The Worst That Can Happen With A Disgruntled Silent Shareholder?
Whether a shareholder brings capital to the business, experience or connections, you need to ensure everyone has the same vision and values.
While we often hear that it can be bad to have a silent shareholder that does not want to play ball, it is not often that we make enquiries about how the governance of a company can be hindered by a disgruntled shareholder.
Most of us assume that as long as they own more than 50% of their own company, they are entirely in control of all aspects of the company and how it is governed. This is not true: Even if you are a majority shareholder, holding less than 75% of all the shares in your company can still result in headaches if a minority shareholder, holding at least 25% of the company, becomes disgruntled and neither participates in the decisions of the company, nor consents to the decisions being made.
What is set out below highlights, among others, why it is so important to give shares in a company to prospective shareholders over a period of time, rather than from the outset. This allows for shareholders to prove their worth without you potentially placing your company in a position where it could be held at ransom for many years.
The illusion of holding more than 50% of the shareholding in a company
- Many people assume that by holding more than 50% of the shares in a company they are free to do with the business as they please. This generally only holds true for basic decisions of the shareholders, such as the removal and appointment of directors. The most important decisions of a company are based on special resolutions. A special resolution requires that shareholders, either individually or collectively, holding at least 75% of all the shares in a company, vote in favour of a specific decision.
- Examples of decisions that require a special resolution include:
- Amending a company’s Memorandum of Incorporation
- Approving the issuing of shares or granting of other similar rights
- Authorising the basis for determining directors’ salaries
- Disposing of company assets
- Mergers and acquisitions.
So, what does this mean for you and your company?
- If you are a start-up looking to raise funds, apart from some exceptions, you will not be able to issue further shares to new shareholders or anyone other than existing shareholders if there is a shareholder that is effectively dead weight.
- Should you manage to vote a new director to the board, you will not be able to determine the basis on which they are compensated (their salary) without a special resolution.
- If you intend to merge with another company, you will not be able to pursue this without a special resolution.
- If you plan to raise money by disposing of or selling most of the assets of your company you will, once again, be prevented from doing so.
Accordingly, it is always best when starting a venture to vest your shares over a period of time. This means that, for example, shareholders are only entitled to have their shares allocated to them after a certain period of time to avoid a situation where you have a dead-weight equity shareholder hindering the governing of your company, and requiring possible litigation to remove them.
There’s More To Team Management Than Leadership
When you’re running a business you need to ensure that your employees are on your side, helping you to make profits. Giving them job security, taking them seriously and treating them with respect, will go a long way in enhancing loyalty and productivity.
The staff that work for you determine:
- How happy your customers are with your business
- The quality of the things that you sell
- The costs that you incur to sell your products and services
- Your risks – the things that can go wrong and how much it costs you
All of these things determine your profitability and how competitive your business becomes. How do you ensure that everyone is on the same side and helping you to make profits?
At work everyone believes that they are getting something (such as money) and are giving something in return (such as time and effort). They are weighing up in their mind “how much am I giving, how much am I getting in return and is this fair?” If they believe that they are:
- Giving too much or
- Getting too little
- Then this is unfair, and they won’t work well (poor productivity – how much they produce).
The manager needs to:
- Know what people are thinking about what they are giving and getting and
- Manage the giving or getting side
- So that people become more productive
In a smaller business you sometimes cannot afford to pay more or provide the sort of benefits (pensions, medical aid, bursaries etc.) that larger firms can and so the staff may be unhappy, not be productive and be on the look-out for something better.
How do you increase happiness without money?
- Job security – knowing that you will still have a job next year – and that you will get paid on time.
- Contributing to the success of the business. If you train staff to have the knowledge and skills to do a better job and you then encourage and support them to do this then they are happier, and you increase profits. If you then share some of these profits with the staff that helped you to make them then everyone wins!
- To be taken seriously and treated with respect. If you do this then staff are happier, and they will also treat your customers with respect.
- To be part of the team. You can often do this by having a regular briefing on what your plans are and discussing ideas. Because staff are doing the actual work they will often have good ideas and then will be motivated to implement them – it was their idea after all!
Staff leaving you all the time is a can destroy significant value. If you implement the strategy above, you will have happier staff that are more productive and a more profitable business.
Jeff Bezos Reveals 3 Strategies for Amazon’s Success
One of the richest men in the world shared his leadership tips for running a company.
“It remains Day 1.” That’s how Jeff Bezos, founder and CEO of Amazon, signed off in his 2018 letter to shareholders. He’s been propagating the “day 1” mantra for decades, and it’s meant as a reminder that Amazon should never stop acting like a start-up – even though the company now boasts more than 560,000 employees and more than 100 million members of Amazon Prime, the company’s paid service for free shipping on select items.
Here are some of the most useful nuggets of wisdom Bezos shared in his letter and during a recent onstage interview:
1. Standards are contagious
Bezos says he believes high standards are teachable rather than intrinsic. “Bring a new person onto a high standards team, and they’ll quickly adapt,” he writes. “The opposite is also true.”
If a company or team operates with low standards, a new employee will often – perhaps even unwittingly – adjust their work ethic accordingly.
He also says that high standards in one area don’t automatically translate to high standards in another – it’s important for people to discover their “blind spots.”
Try making a list of your duties, then ask trusted colleagues to tell you which responsibilities are your greatest strengths. If certain things from the list don’t come up during the conversation, it might be useful to think about how you can up your personal standards in those areas.
2. Set clear, realistic expectations
If you’re looking to raise your standards in a particular area, the first course of action is to outline what quality looks like in that area. The second is to set realistic expectations for yourself – or for your team – regarding how much work it will take to achieve that level of quality.
Exhibit A: You won’t find a single PowerPoint presentation at an Amazon company meeting. Instead, teams write six-page narrative memos to prepare everyone else for the meeting.
Bezos says the quality of the memos vary greatly because writers don’t always recognise the scope of the work required to reach high standards.
“They mistakenly believe a high-standards, six-page memo can be written in one or two days or even a few hours, when really it might take a week or more!” Bezos writes.
3. Stay involved with the people you’re serving
Whether you’re selling a product or service, it’s a good idea to make sure you never lose touch when it comes to the people you’re serving – no matter how high up the ladder you climb.
Bezos says he still reads emails from his public inbox (firstname.lastname@example.org) as a way to keep his finger on the pulse of what’s happening with Amazon customers.
He says he believes focusing on what customers are saying is much more important for success than focusing on what competitors are doing, and he often compares customer feedback to company data to see where they misalign.
“When the anecdotes and the data disagree,” Bezos said at a recent leadership forum at the George W. Bush Presidential Center, “the anecdotes are usually right.”
This article was originally posted here on Entrepreneur.com.
Business Ideas Directory1 week ago
20 Innovative Business Ideas Doing Well Overseas (That Could Make You Money In SA)
Business Advice for Women Entrepreneurs2 weeks ago
How I Run An International Business From A Remote Beach Town In The Eastern Cape
Entrepreneur Profiles2 weeks ago
30 Top Influential SA Business Leaders
Women Entrepreneur Successes1 day ago
Alphabet Soup Founder Nikki Lewin Discusses How They Compete With The Big Boys
Entrepreneur Profiles2 weeks ago
Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)
Women Entrepreneur Successes1 day ago
Erna Basson Of Erabella Hair Extensions On Acting The Part And Finding The Gap
Entrepreneur Today1 week ago
Nedbank Brings Silicon Valley’s Plug And Play To Africa In Disruption First For The Continent
Lessons Learnt2 weeks ago
6 Habits Long-Time Millionaires Rely On To Stay Rich