In two main areas of your business you don’t have to do what everyone else does.
And these two areas are critically important to your success.
The key is – once you set your Rules of Engagement, then you must ensure that you deliver on your promises.
These two critically important areas are – (1) price, and, (2) how people pay you.
Business owners tell me all the time that these two things are unchangeable with only small variations. Why?
Because if they set their own prices and terms of how they are paid for those services, and that becomes very different from how everyone else in their industry does it, then they will fail.
Yet, we all know that there are many, many exceptions to that rule, even in seemingly commodity-driven industries, like computers.
Most of us can agree that in the computer industry, laptop computers have become like commodities, with an overall low price per laptop, and little ability with the computer manufacturers to add enough value to charge a premium price.
And, then along comes Apple. Their computers are built using pretty much the same components as the other computer companies, yet they charge a significant premium.
How do they do that?
In two ways…
Add Real Value
You must find ways to add real value to what you are selling at a premium price. For Apple, the build quality is arguably superior. The designs are beautiful.
The service levels at Apple stores are high with swarms of Apple employees on hand to serve customers (I know for some this is not true, and they will not be loyal Apple fans!)
Tell the World
You must continually market your superior services to your customers (actual and potential), so that the perception of value is high for them.
You not only need to give them objectively definable value in both the products and how they are delivered, you must tell them – in all your marketing efforts – what that value actually is.
If you don’t, the risk is that they won’t actually get what the differences are and assume everyone offers the same.
On the other hand, even if your competitors offer the same features, if you do a better job telling your customers what makes your products and services great, then you will dominate as a strong player in your industry.
Some More Examples
Here is a personal example in an area that we all have come to expect a certain style of practice – massage therapy.
Generally speaking when you go for a massage, you go to the massage therapist, and you pay for about a 1-hour session, maybe 90 minutes.
Recently, I had a badly pulled back muscle, and a friend recommended an osteopathic massage therapist on Salt Spring Island.
I called him, and he said, he only does house calls, and the minimum charge is 2 hours plus a $10 cleaning fee. I was rather surprised, as the price was over $200.
Yet, he was highly recommended! So, I agreed, and it was a superb massage and really helped my back.
The point is this – he set the Rules of Engagement. He had decided how he wanted to work and how people paid him, and then he followed up with a great service delivered with incredible experience and competence.
Other massage therapists would have said – “you cannot charge for a 2-hour massage plus a cleaning fee!!”
Why not? Because no one else does it in our industry.
Most accounting firms (and other professionals) charge by the hour. They would never think of billing as a set Fixed Fee.
Yet, since 1997, we have not billed a single hour! We only charge Fixed Fees, and we discuss those in advance of any engagement so that the client knows exactly what they are paying for in advance.
We also state in our Agreements how we get paid, and clients sign that section. As a result, we have virtually zero accounts receivable.
We are not the least expensive firm in Canada, yet we get work from other accountants, who were negligent, who had charged less. Their clients were not happy with the level of service, so price became less of a factor.
What mattered more to them was getting quality work delivered with awesome service!
A man named John Buskin once said,
“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money, that’s all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do.
The common law of business balance prohibits paying a little and getting a lot—it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.”
I want to repeat that bolded line above – “the common law of business balance prohibits paying a little and getting a lot – it cannot be done.”
I am sure we have all experienced thinking we got “a deal” on price, only to discover that we “got what we paid for”.
In every industry there are opportunities to be a price leader (by adding exceptional value, of course). People only shop on price when all else is equal. If you focus on your price, people will buy on price. If you focus on your benefits, and service deliverables, then that is what they will pay a premium for.
In regard to payment terms, the way to reduce your accounts receivable is to change your payment terms. As with decisions you make on pricing, you can set the terms.
You can ask for cash up front. Think Dell Computers, or Amazon.
You can take credit cards, or PayPal. You can ask for a 50% deposit (as a retainer).
So, the lesson for all businesspeople is this:
Look to where you can add great value to your customers. Tell them what you are doing – all the features, the bells and whistles, and then set your pricing to the value being given, not what your competitors are doing.
For payment terms, you get to say how you want to be paid. Will you lose some business? Yes, of course. And isn’t it better to lose that business before you get started than after, when they don’t pay you and you’ve incurred all those expenses and have a bad debt?!
Thanks for reading….