Recently we talked about how to evaluate whether “exposure” is ever a worthwhile payment for giving away your products or services. That blog dealt with how to measure the value of exposure. In follow up, I received some questions about what to do when the people you know are asking for your services for free. How do you make the transition from the early days of your business when you might be offering free work to the stage where you are defining and holding your value? Or to raise prices from where they currently are? Knowing your value is not just a function of marketing – it is a function of business health.
Knowing your value is part of marketing. Certain prices attract certain target markets. The way you position yourself and present yourself is all part of operating as a business instead of as a hobby. Being confident in your pricing structure shows your target market that your product or service is worth the price you have asked.
The question about transitioning from giving away your value to holding your value is a quandary for many small business owners. At the start, you have pressure to test product, to build momentum, to fill seats, to get referrals, and so on. This often means granting favors to friends and family. At that point, it is just as much a favor to you as you work out the kinks and make sure that you have some anecdotal evidence and data to back up your marketing claims.
Certain prices attract certain target markets. #entrepreneur #mktg Share on XHowever, there comes a day when you turn a corner. Suddenly you have a sense that your products and services are worth more than what you are asking. You see that you need to get serious about revenue to pay your bills. In many cases, this shift happens abruptly in the mind of the entrepreneur. Your friends and family might not catch on as quickly.
The good news: this awkward stage means that you are now entering the realm of operating your business as a business instead of as a hobby. The bad news: It’s awkward.
It is in this moment that many business owners start to sour to the idea of marketing. Selling might now feel like an uncomfortable process. People used to be happy to accept your services for free or at lower cost, but they get a funny look when you suggest a price.
This transition is a normal one. In this transition, you are establishing your value and strengthening your resolve, but it can be shaken easily when someone starts to negotiate with you.
For those who are facing this struggle, here are a few words of advice that may help you in the process of knowing your value and setting prices that will attract the right target market…and then holding them:
- Start pursuing new marketing avenues. As you begin to bring in new customers that are not already affiliated with you or familiar with a previous pricing structure, it will be far easier to redefine prices. The new leads will either accept your price or not, but the emotional baggage will not go along with it. You are redefining your target market by setting a new price.
- Review your finances. Look at your cash flow, work on a profit-loss statement, do your taxes. As you see the truth of these numbers in front of you, it may firm your resolve. I have seen the process of doing taxes inspire great confidence in business owners at the end of year one to not only hold but raise their value.
- Do market research. If you did not do market research before, do it now. If you are questioning your value, chances are good that your prices are below your competitors and that you are actually undercutting your own market. When you see the evidence of what the market can bear, it becomes much easier to set the value that is more reasonable for your industry. And it is better for everyone that you close the gap.
- Prime your friends and family. Before the next person asks you for a favor, start laying the groundwork in conversation. Let them know that after this great initial period of launching, you can see that your products and services work well. Knowing your value, you are now marketing yourself in more traditional ways and bringing in new clients. For a percentage of your friends and family, this may mean that the next time they come to you they will ask you your price. In other cases, you may even offer them referral bonuses to incentivize them to make money for you. For those who insist on freebies, be aware that they are being bold in asking, and you are welcome to be equally bold and say “no” if you need to.
- Warm-up to saying “no.” Although the word “no” does not need any qualification, it may sound too harsh coming out of your mouth if you are not used to it. So, prepare a couple of reasons to accompany it at first. Perhaps “I’m really busy at work with my existing clients” is something that would suffice and would also show that you are a sought-after professional. Having a message that you have pre-crafted can take the stress out of declining.
Remember, it is up to you when you grant favors and give away/discount products and services. However, one of the differences between having a hobby and having a business is knowing your value. This means pricing your offerings in a way that will be sustainable for your business. Setting the right value contributes to the perception of your brand and helps attract your ideal target market. So do yourself a favor and respect the value of what you offer!