she said in shocked surprise…
A few years back Evelyn started a commercial services business after retiring from a major corporation that ran into financial trouble and had to drastically reduce retirees’ pensions. This type of service is one that most purchasing agents treat as a commodity. As a negotiating tactic, they claim they buy on price and price alone.
By the time we met Evelyn, she had several clients. We saw the need for an automated pricing model that would allow her to quickly generate a quote based upon the needs of the client, her desired gross profit margin, and her cost of materials, labor and overhead. We had a similar client in another city a few years earlier, and we developed a pricing model for them. They were just starting out and have seen dramatic growth over the years.
We also worked with Evelyn on her unfair advantage and helped her select a website developer. During one of our conversations, she lamented that she didn’t know what she was doing when she bid many of her early jobs and was either losing money or just breaking even on them.
What would my mentor have said?
I began to reflect on my early days in business when I had a mentor. One of the most useful things he did for me was verbalize a sample script I should follow in a given situation. He made it clear that I needed to put it in my “voice,” not his. As I thought about the various scripts we discussed over the years, I realized how thoughtful, subtle, polite, and nuanced they were. They were carefully designed to overcome a myriad of objections without burning bridges or being in the client’s face. They also, based upon the mentor’s wisdom, anticipated issues that were likely to come up in the future and provided a foundation for handling them.
In reply to her lament, I grumped, “Shame on those selfish big corporations for allowing you to lose money by subsidizing them!”
“But they don’t know I’m losing money on their business.”
“That’s why you are going to tell them! You must raise your rates for the accounts that are losing money.”
“I can’t do that. They will leave me.”
Aha! Time for a script
“Didn’t you tell me that all of your clients rave about how much better your service is than the vendors before you?”
“Yes, that’s very true.”
“Well then, ask for permission to raise the price.”
“What? You mean I can do that?” she said in shocked surprise.
“Of course. But let’s talk about the strategy for how you will do it.” (The script!)
“Meet with each client in person and say how much you appreciate and value the business. Then say what you said to me, that quotes in the early days were just guesses, and you are losing money on their account. Follow that with ‘I’m asking your permission to adjust my pricing by X dollars a month so I will make the profit I need to meet my financial obligations. Now if that is a hardship for you please say so.’”
“Why won’t they always say it will be a hardship?” Evelyn inquired, not totally sold on the idea.
“Because you didn’t give them a take-it-or-leave it ultimatum. You left yourself vulnerable. They know you are a quality person running a quality business and they know that you know they can afford the new rate! And, the person you’ll be talking to is a manager who is directly affected by your service, not the purchasing agent who took bids for the service. I’m betting not a single person quibbles about the new price.”
Evelyn visited each of the selected accounts, said her piece, and all of them insisted on paying the full amount of the proposed increase. She got bawled out by a few clients…for waiting so long to raise the issue!
• When you take care of your clients with extra effort, you build up a reservoir of goodwill. When you approach them with a valid issue and offer a resolution fair to all, they are going to bend over backwards to be accommodating.
• Had Evelyn encountered resistance, we strategized she would tell them about the bidding model which would give them comfort that she was asking for a fair rate for the quality of work she was delivering. And, a rate consistent with what she was charging others.
• This experience gave Evelyn a tremendous boost in self-confidence and prepared her to deal with other issues that later would come up in her business.