There's An Extra Charge for That
by C.S. Clarke, Ph.D.
Too many micro business owners and solo entrepreneurs not only don't charge enough for their services and/or products, but also don't charge extra for add-ons. If you're one of them, you know it. You know it on your own, but also your friends and family are constantly nagging you about it. The problem is almost always obvious.
Why would you do such things? First of all, you are afraid of losing customers/clients to someone with lower prices. Second, you are concerned that you might not please the customer/client with the actual service or product. So you imagine if your prices are a bargain, the customer will accept mistakes more easily. Third, you know people don't like extra charges and you really want them to like you, because you know that they give hiring preference to people they like.
Does that all sound kind of petty? Maybe. But those are the thoughts and feelings nearly universally behind failure to charge a fair price for one's work. They are realistic thoughts and feelings, but inaccurate. They are inaccurate because you're not seeing or believing the entire picture.
Many customers know approximately the value of your product or service, vis-à-vis what others charge. Many more haven't got an inkling of what your service or product is worth. And there are simply thousands of pages written about the psychology and strategies of pricing for both kinds of customers. But all of that is irrelevant to you. Why? Because your pricing problem is you. You have to overcome the unrealistic beliefs behind your inability to ask for a price that is fair to you.
So here's a dose of more realistic thinking:
1. It is true that people are price sensitive and many will settle for lesser quality to get lower prices. That is primarily relevant to large businesses who can buy and sell in large quantities. You are a one-person business or a micro business with fewer than 5 employees. You do not need large numbers of customers/clients. It is rare that a very small, well-planned, well-established, niche business cannot find sufficient customers or clients for its products or services just because of small price differences. Furthermore, if they are patronizing a very small business, customers are not expecting particularly low prices or fabulous discounts. They are patronizing your business because you offer something a little harder to get than usual or you offer a personalization not largely available.
2. In particular, if the customer is paying for custom work, he generally knows there are charges based on variables. If he doesn't, tell him. Always have a written sheet of charges and extras. Indeed, such a sheet often results in upsells. But, most of all, have a sheet of "bundles" of services or products that cost you less by preparing for and doing them at the same time, so you can pass the savings on to your customer while being paid for the extras. That avoids your having to be concerned about the customer's disgruntlement about extras. Folks mostly mind the "extras" when they don't know about them upfront and/or don't have any flexibility with them.
3. It may be true that people will deal with you more readily or regularly if they like you. So it is important to have a pleasing personality. But what people prefer is having trust and confidence in you. If you have clear agreements about prices, performance and quality expectations from the beginning, you have the basics of a trusting relationship. Having everything in writing keeps all that clear. Always have a written understanding in hand that includes a description of what is estimated, what is established and what is negotiable or non-negotiable. If the customer makes changes that are substantial, get a written upgrade order. People like you best when there is clear understanding of what they can expect and you live up to your promises. No low price will change that.
Here's a handy guide to the most disputed areas of extras that solo entrepreneurs run into:
Depending upon the kind of business you run, you may have to get materials to perform a service or produce a custom product. What is customary -- and necessary-- is:
1. Get materials fees upfront. If you take it upon yourself to supply the job-specific materials, you must always charge for them before you purchase them. You can't afford to take the risk that the customer/client won't pay for the job and you'll have weeks or months of time to take legal action against them, while you are out-of-pocket. If your customer balks at paying in advance for materials, don't take the job.
2. If the customer buys the materials and doesn't supply enough, either make her get the extra quantity or charge for the time and trouble and expense of getting it yourself. For example, in hiring construction or repair work, some customers purposely get less materials than needed and pretend that the service agreement covered anything extra; then they refuse to pay. There are about as many customer scams in the decorating and construction trades as there are scams by the builders and decorators.
Shipping and handling or delivery
No one really likes to pay shipping and handling, so you can roll the cost into the price and call it free shipping. Most businesses which regularly ship products to customers are doing this nowadays. In fact, many customers much prefer to know the final cost before ordering and often abandon their virtual shopping carts on line when they get to the shipping costs. They often become suspicious of businesses that hide shipping costs until the last page.
Nevertheless, shipping and handling is a huge cost to you. You have to pay for packaging supplies and you have to use valuable time to package your product and take it to the shipper or wait for the shipper to come to you. If you are a one person business, you either must charge for shipping overtly as an itemized cost or make it clear that it is included in pricing, so the customer will have some way of comparing your price to others.
This is particularly important if your business is local and you do deliveries or make house calls. Anything out of the ordinary should have an extra charge included. If you show up for an appointment (on time) and the customer is not there, you should have a policy of collecting an extra trip charge. If your customer wants you to deliver your product to another address that is not within your service area, you should charge for shipping and handling.
Changes and upgrades
In many trades and businesses, you will find one or more of the following kinds of customers/clients:
1. Customers who change their minds and ask for different materials or services after you've started. These folks are not only interrupting you but also are costing you lost time and materials. Add the cost of your time and materials to the bill and get their approvals in writing before making the changes. You can do it by mail, fax, email or face-to-face.
2. Customers who change their minds after they see the end results. If you've provided exactly what you promised under contract and there is no dispute about the quality of your work, collect your payment for the work you've done before you take on any changes. Then make a contract for the changes as new work.
3. Customers who ask for an upgrade that is a small part of a more expensive service or product. This is fair negotiation. If you're willing, figure what the upgrade is worth and add it to the bill with their written consent. If you don't think it will work out right --- e.g. it really needs to be applied to the higher quality materials in the more expensive product -- say no and explain why. If the customer still insists on it, don't take the job. You won't like doing it and the customer won't be happy in the end. If you've already started or even completed the job when the customer asks, just say no and stick to your guns. You might lose him as a customer, but you actually don't want unreasonable customers.
All of the above suggestions are ordinary and customary ways of doing business. Customers who balk are, more often than not, too much trouble in the end. You deserve to be paid for your time and product. You are the expert in your field and you know what your time and product are worth. Expect your customer to agree to your reasonable charges and he will.