Landing the Big One!
You know how it is. You sit down to bid that big job, the job that could make your whole month, but you’re concerned that unless you lower your prices, your competitor down the street may land the sale. Should you do it? Should you take a short term cut in profits, or even take a loss, in order to land that big job?
No, probably not. Spend some time setting your prices and then stick to them. If you do change your prices, change them across the board because of changes in the market, or changes in your business strategy. For example, Jim O’Boyle, president of Journalbooks/Timeplanners Calendars, talks in this post about one way to temporarily change your prices. Keep in mind though, Mr. O’Boyle’s idea has to do with a temporary shift in policy due to changes in the market, not simply the desire to land a single job.
Bottom line, stick to your business strategy. If you’re like a lot of small to medium size companies, you’re not trying to be the low cost supplier. Instead, you’re trying to add value for your customers and keep them coming back again and again. You’re looking for customers that are willing to pay a little bit more for your products and services. If this is the case, don’t lower your prices just to get work or compete with other companies that seem to be offering the new lowest price. You need to maintain your prices so that you can cover your costs, make a profit and have cash available for growth.
Check out these ideas that we put together about pricing your services:
- Pass your artwork preparation costs through to your customer – It is normal to charge some type of setup fee to cover the costs of digitizing, vectorizing or order processing. You don’t need to absorb these costs since they are part of the cost of doing business.
- Mark up your digitizing costs (recommended) – Edigitize prices are wholesale prices, meaning that your customers would normally have to pay more for quality digitizing if they went straight to a digitizer. You deserve to be rewarded for the extra value that you add sending us the order, checking the sewout scan we provide and sewing out a test file from your machine. We suggest that you mark up our digitizing fees to cover your time and effort. With our new flat fees, you know ahead of time what your costs will be, making it easier to mark up your digitizing costs.
- Be careful what kind of incentives you offer – You may decide to waive setup fees as a way to get new customers or generate more business from existing customers. You know your business; so perhaps that is the best way for you to offer incentives. However, if you do waive setup fees, make sure that you recover your costs and make a profit in other ways.
- Get payment up front – You don’t need to fund your customer’s business. Ask for 30%-50% of each order up front, depending on order size and the supplies involved. If you ask for less money up front as a way to get more business, make sure you have surplus cash available to cover your costs if something goes bad. Our advice: always collect at least 50% of the order amount up front.
- Offer incentives for volume and loyalty – Whatever incentives you do offer, consider tying them to a customer’s order volume or degree of loyalty over time. So if you offer free setup, offer it only on orders above a certain piece or dollar volume. Or, offer a discount only to repeat customers.
