My friend Howard owns an in-home service company. I was delighted to hear his response to the implementation of Obamacare. Howard said, "My controller told me that our health insurance costs are doubling this year. Right now, that expense represents 2 percent of sales. So, if we raised prices to cover the additional costs, we would have to raise prices by 2 percent. We are going to raise them 5 percent. That makes it easy and gives ourselves a little breathing room. The customers who really want to work with us, can handle a 5 percent increase in price. The price increase will also help us handle any additional cost increases we know are inevitable."
Keep in mind that Howard is a very conservative fellow. If he were a legislator, he wouldn't support the Affordable Care Act. However, he is also a responsible businessperson and a good man. He has promised that, as long as health insurance is how you get health care, he will provide it for his employees.
Howard's prices are going to go up. He and his team already charge more than their competitors. A lot more than some of them. He has learned this uber important business lesson:
You have to charge more than it costs. If costs go up, prices go up.
So, why doesn't Howard have his underwear in a twist? Because he knows how to sell his prices... to his team and his customers. He knows how to market. He knows that not everyone is his customer. And, he knows that if he delivers more than expected, his customers will continue to call him.
There is more to business than offering the lowest price.
The low price battle has been fought, and lost, by the small business owner. Walmart and Home Depot and Lowes won that battle. Unless you can find a way another way to go to market, dear small business owner, you are not going to make it. The great news is: When it comes to personal connection, real conversation, appropriate problem solving and love, Walmart and Home Depot and Lowes don't have a chance against you. Let them be the low cost providers.
Your job is to be something else. What is that? Whatever makes you different and better, at least in the eyes of enough customers.
Here are three ways you can raise your prices and gain more customers.
1. Learn how to sell. Have you taken a sales class or read a book on sales? Right now in your vehicle, do you have a CD loaded up with inspirational sales tips? Adopt a sales trainer. "Interview" a few online. My favorites? Jeffrey Gitomer. Kenny Chapman. Tom Hopkins. Also, check out what Howard has learned at www.howardpartridge.com Find a sales coach who resonates with you and use their sales system. Sales skills can be learned.
Hone your sales skills by selling your team on higher prices. Do your employees
know enough about accounting and finance to understand what goes into your selling prices? I am a big fan of Open Book Management (and its head cheerleader, Jack Stack, of www.greatgame.com) Show them your pricing calculations. Crunch some numbers together. If you are going to lower prices, you have to cut costs. What are you willing to give up? Salary? Benefits? Safe vehicles? Sound office equipment? Instead, you can all get better at communicating the value of what you offer at a price that allows you and your team to make a living.
2. Fall in love with your employees. As The Plumber's Wife, I didn't know anything about what plumbers actually did in the field. I knew that they often resisted the prices I was asking them to present. When I became the president of a plumbing franchise, I started riding along with the plumbers to see what they did and to ask for their help growing the company.
What I learned? Your team members can solve every problem. They are waiting to be heard and engaged. You can ask them what their goals are and commit to helping them achieve them. When you spend one-to-one time with your team members, you develop a relationship. You will have the chance to talk about life and family and, yes, even, prices. Discuss what's in the price that is of value to them and your customers. That makes it's easier for them to present goods and services with a higher price tag.
3. Ask your favorite customer why she loves you. Call or visit and tell her why you love working for her. Then, say, "We are not the low price provider of cleaning services. Why do you love us? Why do you continue to call us?" Write down her answers and take a picture of you and her - smile with teeth! - and use this testimonial as the centerpiece of your marketing plan. Include her words and a cull from them a catchy headline. "I thought I could save money by calling the low priced guy. Here's why I will ONLY call Howard from here on..." Send a postcard to her neighbors. Share the love on your Facebook, twitter and +google pages.
Howard regularly visits his customers and other business owners who refer business to him. He brings donuts and lots of love. He thanks them for being a part of his cleaning company family. His customers know there are people who may charge less. But then they wouldn't get Howard's great staff!
Business is an engineering problem. There are a lot of variables, lots of moving parts. The rewards in business come from a willingness to embrace the problem...for the joy of the challenge and for what it will make of you to take it on. All the planning and execution are required to keep the business running. The "awesome sauce" is love. All of these activities are opportunities to create a culture of love. You show people you love them by how you treat them. How you treat them is reflected in the costs on your Income Statement. Those costs include whatever is required for health insurance and other company benefits.
That's how it works. No need to get your underwear in a bunch.
"Don't wish for less problems. Wish for more skills." ~ Jim Rohn