Learn why (and how) taking on less work can make you more money
Why are precious metals worth more than other metals? They are scarce, obviously. But, they are also precious – in other words, they hold value. And this combination makes them expensive. What does this have to do with you or your business? Have you ever wondered when that day will come that you can charge the rates you want to? Do you wish you could dictate what your product or service sells for? Read on to see how.
Very few businesses owners start out with that level of confidence where they can say I charge X, nothing less, and only take on certain clients/projects/jobs. Majority of business owners are happy to take on any work they can when they start out, giving discounts and free stuff as they go in an attempt to gain acceptance in the market. I know this because I see it, I have taken advantage of it as a customer and I have done it myself when starting up a business. And while this is alright in some cases when starting out, some business owners are still doing this after years of operating, still waiting for the day they can raise their prices to what they dreamt of when they started out.
Whether you are selling your time or making products, your capacity is limited in some form. This could be hours per day for an accountant or output of units per hour for a manufacturer. As I said before, when starting out it is very tempting to say yes to anything that looks like it will turn into a profit. And when you think about the hardships of a business, you try everything you can to avoid having to face that now or in future. So, oftentimes you take on jobs at rates lower than you should. This entire problem boils down to confidence. Confidence in your service or your product.
I used to lack that confidence. And it’s not that I wasn’t good at what I did back then, but it was what the world made me believe. In the type of consulting I do, rates are generally dictated by ‘K-levels’. A K-0 consultant being an intern. A K-3 being someone with relatively high experience that can work autonomously, and a K-5 having 10+ years of experience and would generally run the show on projects. It took me 2 years to realise this model was flawed for people like me – would I have to wait 10 years to charge the rate I wanted now? So, I asked myself the following questions, and the answers changed the conversations I had from that time forward –
- Does the value/quality of what I deliver outweigh what the client is paying for? Yes!
- Am I outperforming my peers (or competitors)? Yes!
- Will my customer agree with my previous 2 answers? Yes!
If you answered no to the first or second question, then you are probably getting market related rates. If you are unsure about the answer to question 3, then the answer is NO.
If you were able to answer yes to all three questions, then you can equate yourself to a precious metal that holds a lot of value in your market and you can be confident to do the following: Start Creating Scarcity…
What should be scarce: Access to you should be scarce. ‘You’ meaning your time, your skills, your resources, your facilities.
How to create scarcity:
- Learn to say no. This means saying no to customers and to yourself whenever you get tempted to take on work at rates or profit margins lower than you need to. If you cannot see a worthwhile amount of profit and determine when the profit will realise, do not take it on. Here is where the confidence I spoke of earlier comes into play. If you are truly confident that you deliver a high-quality product or service that adds the value it is expected to (or more), why would you compromise on your price? You have nothing else to prove. Customers who are not willing to pay for that, are not worth dealing with and generally give you more headaches than the ones who understand what they are paying for. By doing this you have started limiting their options in the market.
- Sell blocks of time. This doesn’t only apply to professional services, it applies to manufacturers as well – you are selling access to your facilities for a period of time to produce a good. Selling blocks of time benefits you and your customer equally. For your customer, it creates predictability for when the work will be completed, and it means they have your full attention and commitment for that period of time (= better quality). For you it means better planning and dedication to deliver a better product or service. Sell your customer a day, week, month at a time – do not take on bits here and there. If your minimum block is a day, then even 2 hours of work is charged at a day’s rate and they can ask you for whatever else they may need during that day because they paid for it. By doing this you have forced them to buy the slot or let it go to someone else, again limiting their options.
Why create scarcity:
- You want to create scarcity to help your customer understand that you are a scarce resource that delivers high quality. When you limit the customer’s options by knowing when to say no, you force them to consider the quality you deliver and weigh up their options in the market. Do they move along to someone else or do they take the time slot and price you are offering?
- When you stop taking on just any work that comes your way, it also means you have time to develop your yourself/your business. Instead of doing work that delivers very little profit, it is better to spend that time improving things within your business. For the work you do take on, you will deliver on time/-budget and then 3 things follow –
- You will get more work. Customers come back for more and they refer you to someone else, which gives you a good story to tell. Now that you have better references, you have more credibility, and this will turn into more work.
- You will get rid of difficult customers. Where you were saying no 3 times a week, you will now be saying no 6 times a week. Lower paying customers are often the most difficult to deal with – that is a fact. Now that you are rid of the problematic customers, you have better customers who pay the premium because they have your dedication and you deliver quality – they are too scared to ask someone else to do the work because they are accustomed to your level of quality.
- You get things done faster because you become really good at the work you do take on. Meaning you are able to build, implement, troubleshoot and advise more effectively. You become more efficient and can either free up your own time or take on more work comfortably.
In summary, limit the volume and type of work you take on to deliver better quality. This keeps your customers happy and it also means higher profit margins for the same amount of effort. Working hard is working hard, whether you do it for a lot of money or little money, whether you do it for a good customer or a difficult one. So, choose wisely and make it worth your while. Do not be arrogant and don’t raise rates unnecessarily or unfairly. All of what I have said here, should be fair to your customer and most importantly, your customer should profit from the transaction – that will keep them coming back. Your rates should be what you believe they are worth, but for the customer to pay those rates, it needs to benefit them more. People pay what they do for gold jewelry because their perceived benefit is higher than the price. The same should apply to you as you become a more valuable and scarce resource to your customers.