When it comes to building your business, everyone always talks a lot about how you have to add value to your customers and deliver solutions that move the needle for them. That’s a critical step in developing lasting relationships with your clients and of course, it helps you create a sustainable business…
See, it’s not just that simple and I see a big mistake that people make related to this all the time… They forget to think about their own financial best interest.
It’s strangely more common than you might think.
How it usually plays out is when someone is just starting in their business they lack the confidence in themselves and their offer, so to get around that they go overboard with what they say they’ll deliver and/or they make the price really low. That combination leads to a scenario where if they happen to have even a little bit of initial success, they find themselves in trouble because they have created an unprofitable situation for themselves.
Another way this problem manifests itself is when people convince themselves that they are playing a “long game” and so they’ll take the hit now to build up their email list or their client base with a view to increasing their profits and margins later on. You see this a fair bit with people who create info products and they don’t have buyers so they sell their product for a super low price that doesn’t even cover the cost of their time.
The last scenario I’m going to talk about involves the “free line”. If you pay attention to online marketing for any length of time you’ll hear about this mysterious “free line” at some point. In simple terms, marketers talk about “moving the free line” which means they give away more and more things for free that they should be charging for under the impression that they are creating so much value and goodwill for their audience that when they offer them something for sale, it will generate curiosity and inspire a need for the prospect to reciprocate your generosity with buying stuff from you.
All three of these scenarios have some shred of merit to them, but for the most part, they are totally overdone and lead to people earning less and less money over time.
The problem at the core of all of these situations is a lack of confidence. When you lack confidence in yourself and your product you inevitably undercharge or worse, give too much away for free.
Let’s be honest, you’re in business first and foremost to improve your own personal financial situation.
Some of the fluffpreneurs among you will object, “Oh no Sean, I’m in business to make an impact and change people’s lives.”
I call BS on you. If you want to change people’s lives then give whatever you’re selling away for free. And don’t give me this rubbish that you need to charge for your stuff because that’s the only way you can afford to keep funding your mission.
You’re either lying to me or you’re lying to yourself.
And if by some random stroke of luck you are one of the aforementioned fluffpreneurs who are out to change the world and money isn’t important to you, then what can I say, good luck to you because living outdoors and eating out of dumpsters is a tough gig.
On an aside, whenever I hear someone say that they want to change the world and make an impact, I immediately have the theme song from the “Mary Tyler Moore Show” start playing in my head…
“Who can turn the world on with her smile? Who can take a nothing day and suddenly make it all seem worthwhile? Well, it’s you girl and you should know it! With every little glance and movement, you show it! Love is all around no need to waste it, you can never tell why don’t you take it! You’re gonna make it after all!!!”
Seriously… I bet at least twenty of you out there started humming along or outright singing the words while you read that. Reply to this email if you did, I’m curious to know who you are because I’m betting you’re a MASH fan as well!
Damn it, I’ll have that song in my head for at least three days now and the vision of Mary Tyler Moore throwing her hat in the air.
Oh geez, we really got sidetracked there.
Seriously though, one of the biggest problems people have with their online business is underestimating what you or your products are worth. There’s nothing wrong with starting low and increasing your prices as you gain some traction, but just make sure that you’re not going too low or worse, giving everything away for free. People don’t respect things they don’t pay for online as a rule.
You need to keep in mind that you’re running a business and you have to get a positive return on the investments you’re making be they financial, from a time and effort perspective and possibly both. You need to do well enough so that you not only fund your current operations and future growth, but you also need to be able to release some financial rewards for yourself by way of a dividend.
You can’t pay your mortgage in email subscribers or positive reviews from people you gave free stuff to and homelessness is not great for growing a business, so remember to keep your financial well-being front of mind when making decisions about the value you’re offering and the prices you’re charging.