You’ve undoubtedly heard the story about the independently wealthy guy who went into the Mercedes dealership after spending the morning planting bushes in his garden. All the salespeople thought he couldn’t afford one of their cars, so they ignored him. The joke was on them, right? What I often see is a parallel situation where a business owner sizes up a potential client and then, even prior to any conversation about price, decides that they need to lower their fee to what they believe this client would be willing or able to pay. All too often, the assumptions in that kind of decision are way off base.
Again and again, I have been shocked to learn a client’s circumstances in the light of what they spend their money on. Someone takes very expensive pleasure trips but considers health insurance to be something he or she cannot afford. Someone else with no savings, living month to month, signs up for a $3,000 self-esteem enhancement program via a monthly payment plan.
Service providers have been known to knock their fee down 20% or more because of a worried, tense look on the prospective client’s face during a fee conversation or because of expressed hopes in an email that the price will be affordable. That’s pre-emptive decision-making, and it damages your prosperity.
People’s reasons for spending what they spend can be very surprising, and it’s not your place to decide which motives are legitimate and which are not. A friend of mine told me that she spent $20,000 for a business group mentoring program because she wanted to understand the mindset of other people who spent at that level. Someone else might spend gobs of money on guitars they can’t play because imagining themselves as a musician and posing with them in the mirror fulfills a childhood fantasy. And perhaps someone feels fine about paying for information that can be dug up on the Internet for free. They don’t enjoy doing Internet research and value the convenience of packaged information.
Do not let your own feelings about what’s worth spending on govern what you charge! Years ago, a portrait photographer I knew was having trouble making ends meet. Her Small Business Development Center mentor showed her the math: Her fees were too low and didn’t afford her any profit after expenses. “But how can I charge more than I’d pay for a family portrait?” she objected.
This comes up a lot where there’s a disparity in social or economic class between a service provider and the client, such as a craftsperson selling to wealthy travelers; a micro-business serving a big corporation; a personal organizer helping families in McMansions, or a nanny working for socialites.
Another form of this discomfort comes up in the objection, “But what I do is just common sense!” I heard this from an experienced real estate lawyer, who had a hard time with the concept that what he considered common sense was, rather, his familiarity with the basic concepts and typical wrinkles of real estate transactions. For non-lawyers who may buy or sell a house only once every 15 years or so, those concepts and wrinkles are as mysterious as rocks on Mars.
Whether you went to school or not to learn your profession, your knowledge from experience has immense value for others. To someone who knows nothing about gardening, the basic difference between annuals and bulbs is a revelation. To someone who has never sewed a stitch, threading a needle, not to mention creating a hem, is an ordeal. The tremendous success of the “… for Dummies” series of books shows that almost any area of life, from window treatments to Windows 10, has people who will pay money to learn about it - or have someone take care of it for them.
People even pay for common sense! Sometimes people go to experts not for their technical knowledge but primarily for objective, non-involved advice. If the attorney suggests, “Try to settle things with the broker before you sue,” the client may go away with a profound attitude change and gratefully pay the attorney’s fee.
It’s fine for you to feel discomfort with your prices - just don’t let that determine your schedule of fees. What really matters is whether your target market is willing to pay what you charge. Step out of your own shoes and observe the behavior of your target market. Investigate what value means to them. If it helps, imagine you’re selling to folks in another country, with different customs and cultural norms than yours.
Let the client decide how to spend - or not spend - his or her money. And don’t use yourself as a price measuring stick.
Better items and services generally cost more, and what costs more generally is better, right? That’s our question for the next lesson.
