Signs You’re Undercharging for Your Work
When it comes to the overall success of your business, one of the most important decisions you’ll face is what to charge for the work you do. Charge too much and you could scare away potential customers. Charge too little and you could run yourself out of business.
Working out how much to charge is stressful, but it’s worth it. If your business doesn’t bring in enough money to pay all the bills and compensate you, it won’t last long.
So, how can you tell if you’re asking too little for your services? Here are some signs you need to consider charging more, and soon.
1. The work isn’t worth the money
Many small business owners have periods where they don’t feel motivated to work. That’s normal. What is not normal, is repeatedly taking on projects (or clients) that you don’t feel are worth the money they bring in. You may feel obligated to do the work but there might also be a sense of resentment about it.
If the work doesn’t feel as though it’s worth the money you’re making, that’s a sign you need to charge more. You don’t always have to feel excited to work (although that is always a plus) but you should feel as though you’re being fairly compensated for what you do.
2. You’re not taking home a salary
Small business owners have a tendency to make sure everyone else is taken care of first. There are bills to pay, marketing to take care of and employees who need to earn a living. While these are obviously priority payments, you can’t forget about yourself.
If your business doesn’t bring in enough to make sure you bring home a reasonable salary then you aren’t charging enough for your services. You own a small business so you can be in control of the work you do—you should also be in control of your salary. If you don’t make a salary, you need to charge more and you need to do so quickly.
3. Your prices haven’t changed in years
If you can’t remember the last time you raised your prices—or you can but it was a long time ago, then you need to increase your rates. The cost of living is constantly on the rise and so is the cost of doing business. If your cost of doing business increases but your prices don’t, you’re earning far less from your small business than you used to, or than you should. Don’t go longer than two years without reviewing and increasing your prices. Ideally, you should review your prices annually.
4. Productivity and cost efficiency
When looking at your bottom line, you also need to consider if you are operating productively. Are there ways to improve your efficiency of a job? Are there opportunities for you to maximise your output and minimise costs in order to improve your overall profit? If you are not sure how to achieve this, come talk to us. We are always on the look out for technologies, strategies and methods in order to help business improve their bottom line while maintaining the integrity of the business and its values, to provide quality products and services at a price customers are happy to pay.
Will you scare away customers?
If changing your prices for current customers seems overwhelming, start small. Set higher prices for your services and charge new customers those rates. If you’re concerned about losing existing clients by raising prices too high too quickly, increase their rates incrementally. You can also give your clients plenty of notice about the increased rates, so they have time to become used to the idea.
Do you have competitors in the industry? What are they charging and most importantly what are they offering? You may both sell the same item but what is it that you offer that adds value? Know your value and help customers understand that. We’ve all had a great, an average and a clearly cheap and nasty experience with business or trades we have engaged. Which business would you recommend? What is it that made you recommend it? Would you want a business operator to provide you with a super cheap option if it meant they were barely covering their costs to survive?
The customers and clients you want, will understand that you need to raise the rates and will support you for doing so. Good clients come for the quality of your product or service, not because you offer a cheap job. You get what you pay for. This is not a free product or service you are offering, it is not charity. Those who don’t like the price rise probably weren’t great clients to begin with. Either way they aren’t helping you make a living.
It can be daunting to think about raising your prices, but it is important. You work hard as a small business owner and you deserve compensation for the time you put into your business.
We are here to help our clients get the best from their business. See value in the product and service you provide. Maximise your productivity in order to spend more time on customer service and satisfaction. That is what brings clients back again and again.
Got a question about your business? Get in touch with us today. 08 64360900