One of the main reasons a small business gets in financial trouble is their prices are too low.
It’s tempting to price too low, especially in the beginning. That way you don’t have to compete on anything but price. Seems easy right? The problem is that it still takes time and money for people to notice you. Now you are spending that money and building a reputation for being cheap.
If you plan to start with a low price – call it an introductory price and name your regular price at the same time. An intro price is not a bad idea as you work out the bugs of your operation. But it needs to have an anticipated end.
Even at that, it should not have you losing money. Your price should cover all your costs – everything you need to keep the doors open and you and your family fed. If it isn’t you will begin to slide. You will have to cut corners, you will spend time managing money rather than your business and you business will spiral down into the abyss of cut-rate businesses.
Remember that people who come to you for price will leave you for price, because there will always be someone who is willing to do it cheaper.
A better long-term strategy is to be more reliable, or offer better service or be the easiest, fastest most complete provider. Be priced appropriately. The best kinds of customers are the ones who would rather pay more for getting outstanding results. They are loyal fans who talk about you and build your business on a solid foundation.
Next time we’ll talk about the other main reason a small business gets into financial trouble.
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