Pro Tip: Focus on Value, Not Cost

Pro Tip: Focus on Value, Not Cost

If you see a kid selling lemonade at a neighborhood stand, it’s not the same as a vending machine with lemonade. Although it’s basically the same product, the difference lies in the story around it and the experience it provides.

I often talk to startup business owners about their companies, and when I do, I listen for the things that set them apart, their unique story and their value proposition. If they start giving me sports stats about being 2% better than their competition or having a slightly better return on investment, they start to lose me. I’m not as concerned with those details if they don’t have a compelling story and value proposition that can be bottled and sold.

Purpose in pricing
I have had a few clients over the years tell me that our prices are too high. On one project, a client requested a quote for a very small renovation job. They gave us a list of specific needs and how they wanted them addressed.

After providing a proposal to their committee, we were told the price was too high. We asked them what they thought a more reasonable price for the project was and their answer was half our number.

We suggested that it might be best for them to do the project themselves, but they didn’t feel like they had the skills required for it. They also lacked the necessary tools and equipment to complete the job. When looking at the logistics, we estimated that it would take a minimum of 10-12 consecutive days to finish the on-site work.

However, they all had regular jobs and were unable to commit that much time to the project. Even if they took a few days off as a group, there would still be the additional time required to plan the project, acquire materials, set up equipment, dispose of waste and much more.

As they researched the cost of materials alone and compared it to our total project cost, they began to see the value in what we were offering. It’s important to remember that the cost of something isn’t necessarily what you pay for it, but what you ultimately gain from it.

Value proposition
Keep in mind that when a client pays for a project, they’re not just paying for the materials and labor involved. They’re also investing in something that holds far greater value. They’re investing in the time and effort put into preparation and planning, as well as the knowledge, experience and tools utilized by the professionals working on their project. They’re paying for the level of professionalism that they expect, and hopefully, they’ll receive excellence, discipline and integrity, as well.

Additionally, they’re paying for taxes, licenses and insurance, as well as any sacrifices or liabilities that may arise during the course of the project.

The challenge lies in finding a way to package this added value in a way that your customers will recognize and appreciate. Consider your unique story and the experience you’re striving to create for your customers.

By identifying your real value add, you can ensure that your customers truly understand the benefits of working with your business.

Quality matters
It is always my hope that when people request a proposal for professional work, they wouldn’t disrespect a service provider by trying to get them to lower their prices. If a proposal exceeds your budget, it’s perfectly fine to seek other proposals.

However, it’s important to remember that the lowest price doesn’t always equate to the best value. I cannot tell you how many times we’ve lost a job to price, only to be called back later to fix it. Ultimately, it’s better to do it right the first time than to pay for it twice.

Knowing the value you bring to the table, being able to effectively communicate that and having confidence in your work is powerful.

By Donnie Brawner, Partner Colligo Holdings

CEO, Paragon 360 & Paragon Fabrication  

Originally featured in the Springfield Business Journal

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