Never compete on price (NEVER)
As a startup, the pressure to make sales is usually high. In this panic mood, it’s common for most people to drop their prices to close the deal. However, quoting the least possible price comes with several disadvantages:-
Commitment to the job reduces instantly
As a start-up, you are always in a survival mode. You need to work hard to meet your bills. Whenever I closed a deal with little profit margin, motivation to do the work would decrease. My main focus would then be to finish the job as soon as possible and resume looking for other jobs.
Though we are still in our first years in business and still in survival mode, we now clearly understand our WHY; to graciously nurture individuals and businesses to enable them achieve the highest truest expressions of themselves. We have resolved to only work with individuals and companies who appreciate the value they are getting from us and are willing to support our mission.
Our goal is to give these clients our all regarding time, energy and expertise without the pressure of closing more deals to pay bills.
Defaulting the contract if scale increases
If the scale of the job goes beyond your initial expectations, you get tired and the contract does not go so well.
For example; I remember a school where we spent more money (leave alone time) than what we were to get in installing a school management system.
Our IT guy was very discouraged as the school administration kept changing and adding the features they needed the software to have. Honestly, we just finished the job to maintain a good reputation.
Lesson: Have clear terms of job scope and payment. Don’t fear to have well-written agreement letters on the same.
The perceived value of your work is usually equivalent to the price you are charging.
Clients mainly attribute low prices to low quality and experience. Fully determine the value you are offering the client and charge accordingly.
Unrealistic demands versus low prices
Most of the clients who insist on getting the least possible prices are usually the most demanding. I once worked with a very demanding CEO. One time he requested for the cheapest business cards noting that they were for the marketing department hence didn’t have to be high quality.
After approving the samples, I took the final work. I couldn’t believe myself when he insisted the paper quality was lighter than what he expected yet the approved samples were right on his table.
Look for clients who respect and appreciate your work.
When quoting your prices for services, take these factors into consideration:-
The amount of time you are going to spend on the project. For example, a training program will require time for preparation and actual training. Though you may not charge for all the hours spent, the profit margin should allow you to remain in business.
The time, resources and energy you have spent in acquiring the expertise to offer the services. Many young Kenyans are spending time in college and have huge H.E.L.B debts to pay.
The scope of work. For example, if you are designing a website take these into consideration; where will you get the content, photos, videos, logo etc, what type of website does the client need? what is your working time frame? among others.
And of course, as a Kenyan don’t forget KICKBACKS! (You can check out this story on kickbacks)
What do you think? let us know in the comments below...