Far too often, we see service businesses undercharging. Though it may not feel like it, going cheap (for whatever reason) and undercharging for the value you provide is often the root cause of a lot of other problems in the business. Let’s dig into why.
Let’s say your prices are cheap and you win a load of clients – great! But…
The problem is, you’re probably working many many hours servicing these clients, missing out on time with family, missing out on seeing friends and doing hobbies. You’re working late into the night, maybe even weekends, and you still never get to the end of your to do list. At the end of it all, you have very little cash in the bank. Quite frankly you’re exhausted. You’re earning nowhere near enough (maybe just about covering the bills) and wondering why on earth you chose to do this – after all, it was meant to be better than employment, right?
I know how it feels. I’ve fallen foul of this myself.
I didn’t believe in myself. I looked at our accountants and thought ‘I’m not good enough’, and I’m not in their league. I can’t charge that. People won’t pay that.
So there I was working far too many hours each day, and at weekends, not having time for my family or friends.I’d forgotten what it was to have time to myself to do what I wanted – I didn’t even know what I wanted!
I couldn’t afford to pay out to expand the team for more help, so I had to do it all myself, or with the limited supply of people I could afford to pay as I went along. I couldn’t invest the money I knew I needed into systems to improve our efficiency, which meant I spent more time implementing ideas for efficiency, which was even more time working away from my family.
Everyone expects to put in more hours when you first set up a business, but long term it’s not sustainable. Yes, you do need to put the hard graft in initially to get going, but it’s hurting you rather than helping you if it continues long term, or sometimes indefinitely.
I needed a huge shift in mindset.
I knew I couldn’t carry on, and something needed to change. And I needed to find the root cause of the problem. The problem wasn’t really lack of time, or lack of cash in the bank. Those were secondary problems, for sure. But I was creating the problem myself by not charging enough! And more specifically, not charging my worth. Plus I also hated selling (and still do I might add).
I took a proper look at my business, what was manageable, what wasn’t.
- How many clients could we realistically service?
- How many clients could we realistically service well?
Meaning more than just getting returns filed by the deadline. Getting them filed in plenty of time and actually giving some real value. Helping people to reclaim their own time to do the things they love with the people they love. This was the actual service that I wanted to give. And to do that we needed to raise our prices – to ensure a real exchange in value.
You are good enough. Charge your worth.
Let me just tell you that again – you are good enough! Charge for your value, because if people want the service or product, they’ll pay. Just look at Apple as an example. The phones are £000s, yet people pay, and why? Because they want to. To quote James Ashford:
I highly recommend all my clients buy James’ book. Don’t worry, I’ve not gone mad. Yes, it’s aimed at accountants (and you are not an Accountant) and it does talk a fair bit about accountants processes and services. But the first two parts are seriously relatable to other service businesses and it’s really worth a read (it will give you that kick up the bum you need!).
Go and really look at your business
- Look at what you want to give to your clients. What you really want to provide them with. What service level must you hit every time? What does it look like to you? How will it benefit them? Then look at what will it take for you to deliver that to your clients.
- Look at what you want to be spending your time and money on. Who do you need to help you? Then you can get a realistic view on your overheads – the amount of money you need each month to pay your team, your bills, your running costs, and more importantly yourself.
From here you’ll be able to see what you need to make each month to pay for all of this and make it happen. When you have that figure, you work it back to what your prices should be based on how many clients you can service.
If you were with me up until I mentioned assessing your figures, don’t worry. You don’t need to do this all on your own, we can help. Take five minutes to fill out our quick questionnaire, so you can get the support. L’oreal really meant it you know – you are worth it.