You’ve built a small business you’re proud of, but it feels unsustainable. You don’t make enough money. It’s not that you don’t work hard. You do, crazy hard. But you’re still just scraping by. And you know that you must be doing something wrong, but what? And you ask yourself, “Is this the way it’s going to be for the rest of my career, my life?!”
After years of owning businesses and talking to dozens of other business owners, the issue often comes down to this. You don’t charge enough. Your prices are too low. And because of that, you don’t have the means to cover their costs, make a profit, or hire anyone to help you. And you push ever toward burnout.
It’s a cycle. You don’t charge enough because you are afraid to lose clients. So you continue working to the bone barely getting by because you are too scared to charge more. So you just keep working to the bone…Repeat.
But you can break the cycle. Start with this one act: Negotiate.
You need to negotiate your fee. And every time I tell other small business owners that, they immediately ask “How? How do you negotiate for more money?” And I always say, “It’s simple. Ask for it.”
Broaching the subject is the hardest part. It’s breaking the ice; it’s like asking someone out or introducing yourself to a stranger. But in some ways, it’s harder than just breaking the ice with you don’t know because you’re talking about money. We are trained not to talk about it. It’s shamed out of our systems; it’s taboo in some ways. It’s sensitive, private.
But this is business. We own businesses. And money is an essential component. So we need to talk about it, especially when we aren’t charging enough and want a sustainable company. Don’t expect your client to say, “John, you know what? We need to pay you more! I don’t know why we’ve been underpaying all of these years.” That. Won’t. Happen. If you wait for that, you will be waiting for a very long time, probably until your business goes under. You need to talk to them about it now. And you need to initiate.
Before you talk to them, you should have a reasonable plan.
And a big part of that plan is price. You need to know how much you want before you ask them for the conversation. So you need to weigh and decide how much you want. Ask for a fair amount. If you have an idea where your competition is pricing, and let’s say you are forty percent less, don’t go all the way up to your competitor’s price immediately. You can tier it. Raise it by twenty-five percent one year then the full amount the following year. Or you can go all the way. Regardless, you need to have a rationale for the amount you want.
Most likely you are talking to a client in an existing relationship which is different from negotiating with a new client. With the former, there should already be a report and trust. So you shouldn’t try too hard. Don’t get weird about it. You can do it over email, over a call, or a combination. “I’d like to talk about our fee, do you have time to talk about that?” is one way to ask. But the point is to do it. There isn’t a perfect way. Just find your way and go for it.
When you’re negotiating, don’t make it a demand or get pushy. Make it a conversation. Tell your counterparty that you’ve really enjoyed the relationship. And that you want to continue it. But that there is an issue of pricing. You can say that it’s been unsustainable for you and that you need to raise prices. And then tell them what you think is a fair price. Then wait. And let them decide what they want to do. They may agree to your amount on the spot. Or they may ask for a couple of days. Or they may say no. But I think that is unlikely. Worst case, they will ask to delay the increase for whatever reason. But now they have in their mind that they should be paying you more. And you can bring the request back up to them in a couple of months.
Last year we were signing an updated contract for a client, and it had our hourly fee in it. And I knew that our competitors were charging more than what we were, so I put in the contract that we wanted a thirty percent increase. After a couple of days, I got a phone call from the decision-maker, and he asked me about the increase. I told him, “We hadn’t raised our prices in three years, and that it was time. And in a sense, you got a deal since we didn’t raise at all for so long, but now we need to catch up for the sake of our business.”
Our client said,” Ok, that makes sense.” And then added, “But let’s make sure we don’t raise it again before a year.” I agreed.
Remember, most clients want you to make money. But it’s not their responsibility to negotiate against themselves. No matter how nice they may be or how wonderful of report you have, they probably won’t pay you more just because you’re working so hard. It might happen, but it’s super rare. And that doesn’t mean they wouldn’t be willing to pay you more if you ask for it. So give them the benefit of the doubt. They are not your enemy. They’re not trying to cheat you. They may be enjoying a bargain, but can you blame them? Who doesn’t love saving a dollar? I know I do.
Negotiating isn’t a game to squeeze every dollar out of them. It is a way to make your business healthy. Remember that this is a relationship. Treat it that way–with respect and love. But that doesn’t mean it can’t be a win-win relationship.
And you can have a business that wins, one negotiation at a time.