The worst thing to do is cut prices

Mar 10, 2008

A friend of mine who redoes old houses here in town was telling me the other day about an architect he’s been working with lately. She’s a registered architect, has her own company, and is charging only $25 per hour for her time now that “business is slow.” Twenty-five dollars an hour?? “What’s wrong with her?” I thought. I’ve met the woman— she seems nice, doesn’t look weird or anything— and does some decent work. She’s even got some really great 3-D software and knows how to use it. Something doesn’t add up. Then I was talking last week with an electrical engineer who is an owner in his firm. He, too, was worried about the current business climate and “what people will pay” for his services. He, too, wanted to slash prices so far that it would have killed his business. I had to prove to him through simple math that they would need to sell or do four times as much work to make the same amount of money they currently make if they cut their rates down to where this fellow wanted to cut them. It was pure, unbridled fear at its worst I was witnessing in this case. When things get a little slow, the first thing inexperienced planning, design, and scientific professionals want to do is cut prices so they can “stay busy.” Yet, this is the worst thing you can do. If you cut your prices and stay busy all of the time, you won’t make any money, nor will you have any time to do the things you must do to market yourself or make your processes for doing work more efficient. Now, more than ever, is the time to redouble your efforts to please those clients who value quality, service, and care above low price. You know who these clients are— do what it takes to keep them happy. If you are thinking your prices are too high, maybe you aren’t spending enough effort on your marketing— your brand-building activities, in particular. A well-recognized brand— and we have them in every market served by A/E and environmental firms— will allow the company behind it to charge more for its services. Just think “Coca-Cola” vs. “Made Right Cola.” While it may even be the same product inside the bottle, Coke sells for twice as much per ounce because the brand is better-known. And while I normally suggest raising prices every year at the same time, if you aren’t comfortable doing that this year, you should at least tell your clients that you are holding your prices this year and not increasing them as you normally do. So if you see things slowing down a little, don’t freak out and start cutting prices. That’s rarely the best way to be successful! Originally published 3/10/2008

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