Income is one of the most overlooked aspects of running a small business, especially at a start-up stage. New business owners worry about the actual number of jobs they get, the clients, where will the next one come from and so on but it is very rare that they think about how much money they actually make. It’s as if in their minds, having no work equaled a failure.
Don’t believe me? Well, how often do you reduce the price to get the job?
The scenario is usually quite simple, a prospect comes in and gives you the brief. You offer a quote, they make a face telling “hmmm, I really don’t know…” and you immediately drop your price down so that you can secure the job.
Only last week I was talking to my neighbor, a new car garage owner who told me that at least half of the jobs he gets he does for nearly half of the price. Just to get the work in. As crazy as it sounds, this is a quite common situation for many small business owners. And a fear of having no work in is one of the reasons. Insecurity about asking for a higher price is another. However, in many cases, they simply panic the minute the quiet times kick in. In the eyes of many, reducing the price is the only way to overcome low sales and end those dreaded quiet times in business.
The problem is however that by doing so you secure the job but not the income.
I have written about quiet times in the past. If you follow my writing, you probably know that I consider them a great opportunity to grow a business (yes, I know, it does sound strange but go and read my main post about quiet times if you haven’t done that already, everything will all become much clearer then). I agree that having no client work to do is not something you would like to experience in your business too often, sure. The problem is, you will and you better get used to the fact. Quiet times are a part and parcel of running a business, simply. Sure, they tend to drag on forever, or so it may seem but there is nothing you can do to prevent them.
The good news is though that there are certain things you can do to firstly ensure that they do not last long and also, that they do not happen too often. Reducing the price is not one of those things by the way.
When quiet times kick in, make sure that you use this time wisely. Work on the following:
1. Your marketing. If you are busy you don’t think about marketing, it’s always like that. Therefore, when things get quiet, immediately jump on to the marketing wagon and work as much as you can on it. It may mean starting at the very bottom, with refreshing your web copy, updating the website and your business listings to some more advanced marketing strategies (if you are unsure of what to do, my good friend Susan Oakes from M4bmarketing offers a great review of marketing strategies – not an affiliate link). The key is to do something. Sure, this won’t give you more work straight away but it will help with making your future quiet times shorter.
2. Your sales. Sales is not marketing although many of you probably think otherwise. The business reality is that if you don’t sell, you will fail, period. And that is in spite of your marketing efforts, it’s a fact. Work on your sales everyday, even if you are busy but double your efforts during quiet times.
Just remember, reducing the price is not selling, it’s a prolonged business suicide.
3. Get active in your industry. One of the best ways to ensure that you quiet times will be short is to become known as an expert in your field. I wrote about it many times on this blog already so go on and read my main post on the subject and find out what you need to do.
4. Refresh your business connections. This is heavily important if you don’t employ any marketing tactics to keep in touch with your contacts list (newsletters, e-zines and so on). Remind your past contacts about yourself and what you do, there is nothing wrong with that. Who knows, one of them may need your services right now. And even if not, they will certainly will in the future anyway.
Sales is about investing, not getting immediate results so use your quiet times to work on that investment.
But what if you feel that you need to reduce your price anyway? Have a minimum charge worked out (just don’t take it from the air, sit down with your accountant and work it out together. You shouldn’t be charging the minimum rate all the time but know it, so that when you feel you need to drop the price you also know what is your bottom profitability level. This way you will always make a profit, even if you not always win the job.
Before I go, here is a rule I run my business by, something for you to think about:
The first discount you give to the client marks the end of your business relationship.
How do you come up with price when you quote? Do you have a system worked out or just estimate how much the prospect can pay?
How often do you check if your business makes any profit at all?