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Strategy

“No Thanks – You’re too Cheap”

The secret to asking more for your goods and services instead of less.

Douglas Kruger

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Too-Cheap

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.

Douglas Kruger is the only speaker in Africa to have won the Southern African Championships for Public Speaking a record five times. He is the author of ‘50 Ways to Become a Better Speaker,’ published in South Africa and Nigeria, ‘50 Ways to Position Yourself as an Expert,’ and co-author of ‘So You’re in Charge. Now What? 52 Ways to Become a Better Leader.’ See Douglas in action, or read his articles, at www.douglaskruger.co.za. Email him at Kruger@compute.co.za, or connect with him on Linked In or Twitter: @DouglasKruger

Strategy

You Are Your Own Client

Before you can build a start-up that takes over your industry, you need to treat yourself as your own best client.

Allon Raiz

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client-service

In business, when you have a client, the relationship is formalised into a structured one where there are defined expectations and regular meetings. For example, if you are a consultancy and have a one-year contract to deliver services to a client, the relationship will be formalised, structured and possibly include monthly status meetings. Some may be report-back meetings while others may be briefing meetings.

Your client will receive a monthly invoice and there may be quarterly reviews of the work you have done. Your general mindset is one of service to the client because they are important and worthy of the effort. Crudely speaking, most service-provider arrangements work in a similar way because the structured model works.

In contrast, as entrepreneurs, our relationship with our own business is often far more chaotic or ‘organic’ than formal. My contention is that it is also much less effective. When I work with SMEs, one of the first things I do is encourage the entrepreneur to treat his or her own business as a client by formalising meetings, ensuring that there is a feedback loop and having a service-provider mindset. By making these philosophical and structural changes, you will create a far more efficient and well-run business.

There are four aspects to any business which, in my view, should be formalised.

1. Partners

It still astounds me how informal the meetings are between partners in SMEs, especially when they operate from the same office. There are no set times, no agendas and no outputs required. The fact that you might sit in the same office or chat regularly is the problem because it’s interpreted as proper communication while it’s actually a very undisciplined and unstructured process. Casual chats do not ensure that all the requisite items or issues are being properly discussed and dealt with.

Related: How Investors Choose Who To Invest In

2. Staff

The often-given excuse for not holding weekly, biweekly or monthly meetings with team members at the same date and time is that the business is fluid and the entrepreneur needs to be responsive to their clients’ urgent needs whenever these might occur. And so non-rhythmic meetings are occasionally inserted into the gaps in between the chaos.

The discipline that I try to imbed in the SMEs I work with is to hold rhythmic meetings at a certain time and day every week, month or quarter. Should there be a need to cancel this meeting for whatever reason, it should be rescheduled. The simple discipline of rescheduling and not cancelling allows for a compromise between the practical reality of an entrepreneur’s life and the discipline required to build a sustainable business.

3. Agendas

Agendas are often seen by entrepreneurs as an icon of the structure of the corporate world. They smack of rigidity, stuffiness and boredom so they are often discarded and replaced with warm and fuzzy chats. In reality, in order for it to be an effective use of time, every meeting requires a structure, outline or agenda.

This can be a comprehensive agenda similar to that used by corporates or as simple as each person in the meeting talking about their three top-of-mind issues. What is important is that there is structure and outputs, otherwise the meeting’s output is merely that it’s nice to know. The output from a meeting with a formalised agenda is that it’s nice to do.

Related: Why Reading Is The Most Important Tool In Your Arsenal

4. Product review

When last did you, as an entrepreneur, formally ask yourself if your products are still relevant and effective in the market? One of the greatest oversights made by SMEs is not regularly reviewing the appropriateness of their existing products or services. In a high-growth, chaotic environment that is attuned to constantly producing new products, existing products soon become the ugly stepchild, only getting attention when the client cancels the contract because your competitor has a faster, shinier and cheaper iteration of your product. An incredibly important discipline in any business is the regular and formalised review of products and services.

We resist structure as entrepreneurs and the price of that resistance is ineffective and inefficient businesses. By simply treating ourselves as we would our clients, we are able to imbed a level of structure to our businesses that will create a far more effective and enduring business.

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Strategy

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.

Kyle Torrington

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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.

Related: 7 Factors To Determine Who Are Your Employees (And Who Aren’t)

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.

Related: Reality Check: You Probably Don’t Own That Work You Outsourced

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.

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Strategy

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.

Henry Sebata

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team-management

The staff that work for you determine:

  1. How happy your customers are with your business
  2. The quality of the things that you sell
  3. The costs that you incur to sell your products and services
  4. 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).

Related: Why Innovative Employee Benefits Are Your Competitive Advantage

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?

Everyone wants:

  1. Job security – knowing that you will still have a job next year – and that you will get paid on time.
  2. 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!
  3. 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.
  4. 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.

Read next: Understanding Your Responsibility As An Employer

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