You can cut and slice your profit margins razor thin and make just two cents profit per sale, only to have the competition come along and cut their margins even thinner, making just one cent profit per sale. Then what? The customers who were buying for price will run to your competition, and that will leave you with no one to buy your products.
Here's why you should charge more:
- You are worth it. First and foremost, you are in business for yourself to earn a living. As a fellow human being you should be able to earn a living doing what you do. You are worth the money you charge for your product. Don't undervalue yourself and your product just to get the business. Be proud of your product and your prices.
- Don't do business based on price, but rather on value. Running your business by price-based products or services will hurt your business in the long run. Your price-conscious customers are not loyal customers; when they find someone cheaper, they'll switch. Instead, offer value to value-conscious customers; they are much more loyal.
- Work that costs more is valued more highly. When your work costs more, people value it more highly. There are many "bottom feeders" scurrying around to get the cheapest work. If your work costs more (and you deliver more) it will be worth more to the buyer.
Here's how you should charge more:
- Identify what your competition is doing and add value. If your competition is selling their widgets for $2.00, don't bother selling yours for $1.00. You aren't doing yourself any favors. Instead, sell your widgets for $5.00 and throw in free delivery, installation, and removal of the old widget. Add value to your product with additional products and services and you can get away with charging much more.
- Contact your current customers and tell them your prices are going up. If you are a service provider and you have a stable of clients you rely on to do business with, contact them and tell them that your prices are going up. One way to do this is to tell them that your price is going up but offer them an opportunity to lock in at a discounted rate, half way between your old price and your new price. Your price will still go up and your customers will be glad for the deal. And the ones who leave would have left anyway, when a cheaper provider came along.
- Aim for higher paying business and say goodbye to lower paying business. When bidding on jobs as a freelancer, or when pricing your products, include in your business plan a calendar of price raises, either according to date or to units sold. For example, for every 10 units sold, raise your price by one dollar. Eventually you'll find "the sweet spot" where you get the most customers at the highest level of profit the market will bear.
Running a business means earning a profit. Increasing profits should be part of your business plan prior to your first day of business! Don't try to be the low cost provider for your product or service. Instead, offer your customers real value and increase your prices and your profits.