One of the big issues small business owners face is how much to charge for their products or services. There are many ways to market your business and your pricing will naturally be a function of how you market your business. I’m not a marketing expert and I won’t advise on which methods business owners should choose for their respective businesses, but I’ll share a story and my personal philosophy.
I was recently helping someone through the process of leasing a commercial space. Normally, in real estate, market price prevails. In this situation, there were very few spaces that fit the bill. The location had to be just right and buildings of the desired size were hard to find.
We ended up with 2 satisfactory spaces. Space A (we’ll call Cheapo) was the larger of the 2 spaces and quite a bit less expensive than space B (we’ll call Premo). In the real estate world, Cheapo was definitely the right choice…bigger, less expensive. How could we go wrong? Well, let me tell you.
We submitted an offer to Cheapo. They wanted a 3 year term which was not acceptable to us, since this is a new business and we can’t predict that far out. We tried to negotiate the price down a bit (not much because knew it was fair) and requested a termination option after the first year.
Then, the waiting began. First the owner was on vacation (they almost always are…) and then, no reason at all. Just no response. We waited patiently while continuing to scope out other spaces. 2 weeks later the response came…no negotiating on price, no termination agreement. For crying out loud! 2 weeks to get the offering price back? How long will it take them to fix something?
We tossed the offer back with the termination clause and proceeded to take another look at Premo. At Premo, the owner was on vacation (he was leasing it himself), but a very helpful employee showed us the space. She then proceeded to give us his cell phone number and encouraged us to call even though he was on vacation. Not wanting to show our cards, we waited until he returned.
When we called, the owner explained that he’s very easy when it comes to leasing. He has a standard fair lease that he doesn’t negotiate on nor does he negotiate price. He only asks for a one year lease because it’s an incubator space and that’s what most new businesses need. We asked what he needed from us to lease the space; he replied, bring a check, sign the lease, and I give you keys. What? No waiting? No digging out 3 years of tax returns? You just trust us and we trust you?
Aha! He’s more exensive, but he’s easy to work with and understands the needs of a new, small business. Even though it’s a new business with little cash, guess which lease we signed? Yep, Premo. The very same day he returned from vacation, the deal was signed, the check was written, and we had keys in hand.
Cheaper isn’t always better. That’s always been my philosophy. My pricing strategy has always been, my prices are reasonable for the skill and service you will receive. I’ll never be the least expensive and I don’t want clients who are shopping only based on price…it won’t be good for either of us.
I’ve moved to a flat rate structure for most of my clients so we both know what to expect and I can provide great service without watching the clock. Likewise, they can get questions answered without worrying about what it’s going to cost. I hope my clients feel as comfortable with my pricing structure as I do with the pricing at Premo.
~Kelly Totten, www.acclaroaccounting.com