One of the first things you learn in sales is how to deal with objections.…
Clients always come first in business, right? Well, actually, no. Not when it’s at the expense of valuing your own worth and hard work. But for some reason, it’s how so many small business owners operate (and I’ve worked with hundreds). At the end of the day, no matter how many hours we’ve put in and how many clients we’ve looked after – we always give ourselves the burnt chop.
It comes from an analogy of pricing expert, Natalie Coombe, who specialises in helping female service-based businesses. We’re like the parent who cooks the dinner and then takes the burnt chop, because we’re so focused on putting everyone else first. In a business space this translates to putting the needs of our clients, suppliers and team first, without making sure we’re looking after ourselves.
“We’re raised, rewarded and valued for putting ourselves last, we put the client first. It’s a questionable strategy in our personal life, but in our business life it’s not a strategy that’s going to bring growth,” says Natalie.
Why we suck at putting ourselves first
It’s a trap I know all too well. When I started Identify Marketing, I priced everything as a freelancer. (And a cheap one at that.) This was because I really had no idea of how to ensure all my business costs were covered. As Identify grew, I had to pay my team and suppliers every week (which I did no matter what), but then I quickly found the business could no longer pay me. I came last.
I also thought it was most sensible to ‘reinvest’ any extras I did have back into the business.
And gosh it is so frustrating to be working so hard in our businesses, but not seeing the results we need. So why do we do it to ourselves? I recently talked to Natalie on my podcast MAP IT Marketing, and she explained it often comes down to a combination of the following:
- That we have inherited a mindset which says to get a successful business you need to sacrifice all first – we believe that we need the suffering to get to the success.
- We don’t calculate the right pricing from the get go, because we aren’t factoring in the cost for us to be paid. Natalie says we need to be pricing our services two to three times our running costs to make this happen.
- As Kiwi’s we don’t want to put our prices at a point where we truly see ourselves, as we’re worried about Tall Poppy syndrome. “As soon as we put our head above the parapet we expect tomatoes to be thrown, so we quickly pop our heads back down,” says Natalie.
Natalie also says it’s such a common misbelief to see your salary as the reward that you get when you’ve worked hard enough, but the problem with that approach is you may never get to that place. So what you need to do is start seeing a salary as a fixed business cost that you must plan for.
The right pricing structure is a crucial first step – before marketing
There’s little point in bringing in more clients if it is only going to make you busier, but broker. Which is why working out the correct pricing structure is an important first step in growing a successful business and as a marketing strategist, this is our first priority when working with clients.
Because what we are looking for is the best areas to grow, which ones need to be adjusted and what needs to be completely reworked before going to market. Often our clients are quite resistant to share pricing models and margins with us, but this is typically where we find issues. For example, last year I worked with a product based business owner who had not worked out the true cost price of her product. This meant she was selling it at just below the cost price, with no profit margin added, and was slowly destroying her business. ALL the marketing had to halt while we got the structure right.
What if we don’t know what we’re worth?
The problem is, most of us go into business not really understanding how to correctly price our services and/or products – we just come up with a figure and it’s not until later down the track that we realise it has got us stuck in an unsustainable cycle. Natalie predominantly sees two typical methods that small businesses owners use when it comes to pricing, which unfortunately end up being damaging to their business.
- Setting your price to match your competitors. Because while this sounds great on paper, how do you know you are comparing apples with apples? They may have lower costs than you, a less premium product, or they might look great on the outside but aren’t making any money either!
- You work out your pricing as an hourly rate. (This is how I started). The problem with this is that as you add on team members, offices and other business costs, you can lose margin or start to lose money completely.
So how do we make sure ‘the price is right’?
If your goal is to create a healthy business that generates a consistent profit, then Natalie says it is really important to start by working out your true costs, including what it’s going to take to pay yourself. Ask yourself the hard questions like – where you want the business to be in twelve months time and what life you want to have while owning this business in twelve months time.
After this deep dive into your aspirations and goals, the next step to set some milestones that will help get you there. And it’s really important to not focus so much on turnover, but more on what the growth means for you in terms of your goals, your life and how you are creating a healthy business.
Then, you should consider one of two pricing models:
- Cost based pricing – working out an accurate pricing structure that’s taken the true costs into account.
- Charge on the value that people receive for the product or service (this is most effective for premium brands or services.)
Paying yourself your worth
Natalie doesn’t accept small business owners saying that they don’t pay themselves because they are reinvesting in their business (oops! I wish she was in my life all those years ago).
To her it means that they are simply not generating enough to pay themselves. It’s not a reinvestment strategy – it’s a ‘didn’t plan to make enough’ strategy.
And while this blog may be a little confronting, what’s important is taking the right steps to make change. However, be kind to yourself – many of us didn’t start our businesses with all the right skills and tools at our disposal.
But we live and we learn, right? I have, and I have helped many other small business owners prioritise their needs, so at the end of the day, they end up with a nicely cooked chop that they can really enjoy.