Charge what you're worth!

[Fred T. Gruber Jr.]

Many business owners make the mistake of not charging what their time is worth, fearing that they will scare away business or not have enough work. Here's why you need to charge a fair and firm price.

• Expenses: Running a business costs money. There are expenses that most non-business owners will never know about. You have marketing,insurance, phone, internet, supplies, maintenance & repairs etc... Plus, your time is worth something. isn't it? I am amazed at how many people think that what I charge for carpet cleaning is what I make. I wish!
• Expertise: Your price must also reflect your experience and knowledge. You weren't born being great at what you do. You had to learn to do what you do and how to be the best at it. Learning takes time and money. Someone has to pay for that. In the long run, they will realize how good of a value your service really is.
• Value: People want value for their hard earned money spent. There's a reason why Filet Mignon costs more than ground beef! If you explain the value in your service, they will pay you what you're worth. Even in a bad economy, Mercedes still has plenty of business. We charge more than most other carpet cleaners, yet have more work than most of our less expensive competitors do! Why? because we do a good job explaining what value comes with our service.
• Change with the change: When your cost of doing business goes up, so must your prices. No one should expect you to work for less than you did, in previous years. Early on, I learned one of the most important lessons ever. I took a marketing class and the instructor told us to go and raise our prices by 10% and to do so, every 3 years. Many of the attendees said that they were afraid that would scare people away. He stated that even if you scared away 10% of the people, that you will be making the same money for doing less. We have employed that philosophy and it has never let us down.
• Introductory price: If you are a new business and are looking to grow your business, you can offer a special or introductory offer. Just make sure that you can still turn a profit. Let them know that this is a special price, for first time customers or they will expect that price, every time. Doing work for free is not fun, unless you want to.

There are many carpet cleaners, that charge much less than we do. We make good money fixing their mistakes.

[Michael Kimsal]

This is a great and always timely point that people often forget.

With higher prices, you might have less work, but... so what? You might actually have money to enjoy that free time then :)

One thing to keep in mind re: "charge what you're worth" is that "worth/value" are relative to the client. You may know you provide the best XYZ compared to anyone else, but if it's not valuable to the client at that price, you have to move on, or deliberately choose to give it away for a lower price (for charity, etc).

I build web applications. I can build the same web application, and client A might get $50k of 'value' from it over a year (in reduced support call costs, increased sales, reduced sales time, etc). Client B might only make $100k per year total - doesn't matter how awesome the application is, they are not able to extract $50k of value from my application.

My skills haven't changed, and my application hasn't changed. What I'm 'worth' is relative to the client's ability to derive value from what I provide.

I'd imagine it's the same for carpet cleaning - the value of clean carpets to the White House is different than the value of clean carpets to a local animal shelter, even if the size of the carpet is the same.

This very topic is something we'll be exploring at indieconf next Saturday, Nov 17, with the session "Charge what you're worth - and get it!" (info posted later today hopefully) I'd encourage all insiders to consider attending the conference, and use the code 'inside919' for a special insider discount :)

[Michael Kimsal]

I'd have to disagree on your reasoning for "expertise".

"Learning takes time and money. Someone has to pay for that."

I don't disagree with the premise that charging for expertise is bad, but it's the value that the expertise provides that is... valuable.

Some people go to school to learn XYZ and end up with $50k in debt. Others pick up the same knowledge and are able to provide the same value with no debt/cost to themselves. I would not want to be charged more because someone paid more to gain their experience.

You've got the right gist, but that rationalization doesn't sit well with me.

Put another way: some people may just be naturally talented at XYZ, and it doesn't take them long to learn how to provide value C - should they be charging less than someone who had to study hard for long periods of time? I think not - I focus on the value.