This article is part of my monthly Word Carnival and I won’t even ask if you know what I’m talking about. I know it’s something that just about every small service business, solopreneur and freelancer deals with at some point.
It could be when you’re just starting out and doing what you can to build a business. It could be during a down economy when your customers zip up their wallets. Or it could be something that permeates every business deal you make.
The fact that people will try to cut you down on price isn’t your fault. Everyone wants “a deal” and services are somehow always perceived as negotiable.
The fact that they try to cut you down… and win… well, that is your fault.
Before you get mad at me for telling you the truth, you can put that blame on me, too. I’ve had plenty of experience wanting a job badly enough… not being confident enough about getting it… not wanting to deal with conflict and confrontation… wanting to “help” and feeling almost selfish for (gasp!) asking to get paid.
The good news is that I’ve also had plenty of experience dealing with it and considering we’ve made it almost 15 years in business, I’ve dealt with at least some of it the right way!
It’s not always easy. Sometimes you even have to concede failure and walk away from a job.
But if you start smart, you can mitigate those times when it seems like the only thing someone is interested in is winning a price point. Don’t cave! Try setting yourself up for success instead.
Know Your Own Worth
If you don’t understand the value of what you provide, can’t articulate it or don’t sound convincing when you do, you might as well be a cute little kitten walking into a cage with a bunch of hungry pit bulls.
Got that image in your head?
The only way around it is staking a claim on what you’re worth before you show up at any prospecting meeting or enter any business negotiation.
If you waver from your conviction that you’re damn good at what you do, know what you’re talking about and will do your prospect’s job like a genius, they’ll smell blood. And attack your pricing.
You’re not running a business because you’re lazy and dumb.
Wear your expertise proudly. Show it in everything from your shoes to your haircut. Yes, how you present yourself matters.
I once met with a prospect who showed up looking like a disheveled mess in sweats with a mop of flyaway hair. The only thing missing was the fuzzy slippers. And you can bet your booties I made a judgement call about that person.
Exude high-worth in everything you do from your appearance to the way you sit at a table and the words that come out of your mouth.
If you don’t believe it, nobody else will.
Lead With Value
Price means nothing without context.
What if I told you your website was going to cost $5,000? Would you spit your coffee out onto your desk? Or would you raise a skeptical eyebrow and wonder why so cheap?
If you wanted a simple WordPress site, you’d probably lose some coffee. But if you expect a 10,000 page eCommerce site you’d think I was scamming you.
The fact is, people want to know how much something is going to cost. It’s a reasonable question. But when it’s the first question – and the one that they’ll base their decisions on – it’s the wrong question.
So don’t answer it.
I always start with some version of “it depends” and then turn the conversation immediately to business needs.
Find out what your client wants and needs. Talk about how you’ll deliver it. Make it clear what results you provide and what you can bring to the table that puts you in the unique position of being able to do the job and do it well.
Even if your price ends up being more than your prospect can afford, you want them to walk away pining for all that juicy goodness you just offered – not cruising with a shrug for the next cheapest competitor.
Obliterate Words Like “Expensive” From Your Vocabulary
This is an unnecessary bit of self-sabotage. I used to be so guilty of sitting down with a prospect and apologizing ahead of time for the pricing I was about to give them.
Not because I was overpricing but because my brain had convinced me that since the last person had told me the price was too high, the next person would, too.
“I know it’s expensive, but…” I would begin, and then try to backtrack through value to why it was worth it.
I had become my own competition.
Tuck this little tidbit under your hat the next time you’re in a price discussion with someone: just because they can’t afford your price doesn’t mean it’s too expensive.
Start at worth and value, never at price. And put any issues about unaffordability squarely on your prospect. Trust me – it’s them, not you.
Never Negotiate Below Your Value
The first thing you need to do is know what your pricing threshold is so that when someone says, “Can you knock ten bucks off?” You’re prepared with an answer and you don’t have to look wishy-washy while you consider the 497 reasons why you may or may not want the job/want to lower your price/should or shouldn’t lower your price.
Maybe you’re ok with knocking ten bucks off. But know what that threshold is.
Even better, don’t knock anything off.
There are other ways to negotiate on cost that don’t include cutting into your profits or devaluing yourself.
It could mean taking something in trade. The key is to trade like-for-like value.
It could mean setting up a payment plan. A big price tag may seem daunting but splitting it into small chunks over time makes it more attractive for your client – and a guaranteed income source for you during that time period.
It could mean offering an incentive. Reward timely responses, up-front payments or shorter timeframes with a discount.
Or it could be as simple and straightforward as reducing services to match someone’s budget.
The next time someone tells you they can’t afford your prices, try asking them what they can afford and then removing services until you hit the right price point.
Ask About Budget
Most people will say, “I don’t know” but if you’re lucky you’ll get some input that you can craft your services around.
I haven’t had a lot of luck with this approach because it’s rare someone will have the remotest idea what they should/can/want to spend (until you give them your price, and they know it’s definitely not that).
But here’s a trick that can sometimes ferret out a person’s spitting-out-their-coffee point: Test a few price ranges out on them.
Ask them how they would feel if you told them your services turned out to be $100. How about $1,000? $10,000?
You can pick your increments but keep them simple (don’t ask about every dollar) and keep them relatively far apart. The idea is to find the point where your customer’s eyes start to bug out so you can back down and find a more comfortable place.
Lots of times you can get a halfway decent idea of the range you should be working with. But only after you’ve nailed value!
Turn Your Prospect Into A Co-Conspirator
You may ultimately be doing the work but don’t talk about what you’ll do – talk about what “you” will do – together.
If you have a brilliant idea for helping your customer, phrase it in “we” language.
Oh hey, you know what we could do to make that thing really work? We could totally do this…
If you can get emotional buy-in you’re more likely to get financial buy-in. So get your prospects invested in what you’re proposing. Give them co-ownership.
Before long they’ll start thinking your brilliant ideas are their own. Pat your ego on the head and let them. If they pay you to execute those brilliant ideas – and you do it brilliantly – who cares?
Don’t Get Frustrated
Its not personal. It’s business.
That’s one of the toughest lessons I had to learn. Heck, I still have to relearn it from time to time because when you own a business, it’s a bit like your baby and any sleight or attack on it can feel very personal, indeed.
But when someone tries to knock you down on price, it’s not about you.
When they tell you how crazy your pricing is and that they can get what they want cheaper somewhere else, it’s still not about you.
It’s about their financial situation, their priorities, their perceptions.
Sometimes you can’t influence those things at all and that’s when you know it’s time to walk away. Be as objective about it as you can. You’re still awesome, even if that total idiot can’t see it.
Decide What Your Help Threshold Is
Every year we opt to do a certain amount of pro bono work. Once we hit that threshold, we’re done. Take you’re I’m-broke-but-a-really-great-guy sob story elsewhere.
It’s a good idea to plan ahead of time for the eventuality that you may find a cause to support or a guy you can cry into your beer with whose project you just have to take.
Sometimes we do work for schools or for our community. Once I met a dead-broke woman who had a great business idea and a ton of passion and I would have paid her to do that project just because it was fun and I wanted to.
But we do run a business so if we run around feeling generous and bleeding-heart all day long, that could make for some bad financials. So we plan out our digressions ahead of time. We may not know what we’ll be doing but we’ve got some time and budget slated for it.
Pick and choose where you want to donate your efforts and you’ll be less inclined to feel pressured to lower pricing or give services away.
It’s a tough road from “Here’s my price” to “Here’s what I’m totally worth”. It’s fraught with jabs at your self-esteem, thick-headed prospects and plenty of failure. Sometimes we’re our own worst enemies.
But if you’re tired of pricing negotiations that leave you exhausted, defeated and even angry, it’s time to rethink how you approach them. Before you put yourself through the wringer again, or compromise under pressure, try reminding yourself of these few tips and practice, practice, practice.
Do you have a challenge getting people to understand the value of what you do – and pay you accordingly? Share your woes in the comments, you’ve got a sympathetic ear!
This post is part of the monthly Word Carnival series of posts. This month, our carnies take on the challenge of knowing your value and conveying it to clients so that you can charge what you’re worth – and get it! Read the rest of the Word Carnival posts here for more great advice from some of the smartest business owners and entrepreneurs you’ll meet.