As a small business owner, there’s nothing more disheartening than finding out that you’ve been undercharging for your hard work. Making ends meet is challenging enough without undervaluing your services.
Unfortunately, this happens more often than you’d expect. With inflation causing constant fluctuations in market prices, it’s difficult to know exactly how much you should be charging at any given time.
This is why it’s essential to keep informed about industry standards and adjust your pricing structure accordingly.
In this article, we discuss what steps you can take when you realize you’ve been undercharging clients.
- Conduct Market Research
There’s nothing wrong with checking up on what your competitors are charging for similar services. Sure, being able to offer competitive rates is a boon to your business, but you don’t want to undercut your competition by too large a margin. This might lead clients to question the quality of your services and leave you with barely enough to break even.
For this reason, it’s good practice to establish mutually beneficial professional relationships with other industry leaders. The more in tune you are with the pricing strategies of your professional peers, the easier it will be to set fair prices that help you turn a profit.
There are also plenty of tools you can use to find out what clients are willing to pay for your services. Online surveys are quick, easy, and inexpensive to administer and can give you valuable insight into your client’s expectations.
Focus groups are even better in terms of market research, but they’re much more expensive and time-consuming. For this reason, they’re usually only used by large companies with big marketing budgets.
- Take Your Time with Quotes
You might be eager to seal a deal and secure a client’s business, but this doesn’t mean you should rush your quotes. There are several factors that affect the way you price a job—labor, materials, hours, and more. It’s difficult to know how much to charge ahead of time.
If you explain to your client that you need a few days to figure out your pricing, most people are quite happy to wait.
If the time comes for payment and you realize you’ve underquoted for the job, you either have to accept the loss or charge your clients more than they were expecting. Neither outcome is good for your business, so it’s vital to take your time coming up with accurate figures.
- Get Over the Fear of Overcharging
Being afraid to overcharge is a common mistake that many growing businesses make. While you don’t want to drive away potential clients, you don’t want to undervalue your services either. It quickly becomes exhausting to give all your time and energy to a job only to feel like the compensation isn’t worth it.
Remember how much sacrifice and commitment it took to get you where you are. If you weren’t providing a valuable in-demand service, your business would never have taken off in the first place. It’s important to recognize the value that you have, otherwise, you’ll never feel comfortable charging fair prices for your work.
Most of us have the unfortunate habit of undervaluing our contributions to the world of work. Take some time to think about your friends and colleagues when they were starting out. You’ll more than likely remember the tentative expressions on their faces when they asked if they were charging the right amount for their products or services. It’s obvious to everyone but them what they’re worth. Learning to look at your services objectively is one of the most beneficial things you can do for your business.
- Regularly Reevaluate Your Profit Margins
The economy is constantly shifting and changing, which means that your expenses are as well. Fluctuations in the price of materials, utilities, and other overheads will always affect how much you’re laying out on a monthly basis just to keep operating.
Unfortunately, when your cost of operations changes, it rarely becomes cheaper. Expenses never stop growing, especially during times of global economic uncertainty. Rapid shifts in the economy can render your current pricing completely unsuitable.
The only way to remain in touch with the fluctuating economy is to regularly calculate your expenses down to the last cent. Doing this once every couple of years is not enough. By the time you get around to it again, you may have already lost thousands of dollars in revenue.
Set yourself a reminder on your calendar to recalculate your expenses in regular intervals. Most businesses do this at least once a year. But in times of global economic turmoil, you may need to do it more frequently.
- Give Your Clients Due Warning When Changing Prices
You may be in the middle of a job and suddenly realize that you’ve underquoted. It happens to everyone from time to time. However, if you make a habit of changing prices too often and too suddenly, clients will get frustrated. You need to strike the right balance and keep your clients updated accordingly.
If you have good working relationships with your regular clients, it’s good practice to inform them about price changes well in advance via email. You can even include a reminder on your invoice template to ensure that every client is informed about the coming increase, and that future invoices will reflect the new pricing.
Open communication and being transparent with your clients about any changes that may affect their experience with you is vitally important. It helps you to maintain good working relationships and shows that you care about retaining their custom. It also shows that you respect them enough to keep them in the loop about changes to your business.
Make The Change To Becoming More Profitable
Every business owner makes the mistake of undercharging for their services at one point or another, so don’t berate yourself too much if you realize it too late. Instead, recognize it as an opportunity to make some much-needed changes to your business and get things running smoothly again.
Staying 100% on top of your business’ financials is an ongoing process that isn’t always easy. However, it’s always good practice to dedicate a day to making sure that everything is balancing and all the lines are going up. If you follow the steps in this article, you should be back to making a decent profit in no time.
Author: Nina Sharpe
