These thoughts originated in relation to a small craft business, but many would apply to all businesses.
Notes to Self...
BUSINESS: MAKEING MONEY:
CUSTOMERS:
Ultimately your customer is the most important part of any business…if you want to participate in the use of THEIR money.
There are many customers out there with lots of money and looking for creative ways to spend it. Your job is to attain the skills, develop the image, and get your reputation out there where those with the money can find you.
Don't quit your real job. Most of the craftspeople I know and have heard of, have other sources of income…either another job or a spouse that brings in money too. At least, in the beginning, you need some other source of income to support yourself until your craftwork will do so. Otherwise, the pressure to pay bills will make you compromise in quality in order to generate money. This is not a good way to begin the development of good craft skills.
A dissatisfied customer can be disastrous to a business. If this happens you have failed to educate your customer before the transaction occurs, to be sure he knows what he wants and what he can expect to get, at what price. You always want to keep your customers happy. In your own mind, you must remember it is better to give the customer his money back than to make him swallow what he considers a loss and starts spreading that negative information around town.
Chose your customers well. It could be a long relationship. Listen to your inner "voice" when you first meet them. Listen for hints that they are a good or bad match for your talents. Proceed at the speed that trust develops. Some customers are just not worth the effort, and later on, we look back and say: "Why didn't I pay attention to those early signs".
If a customer says he can get it cheaper elsewhere…. explain why you think your price is justified. If they don’t agree…encourage them to check out someone else…. do you really want this customer? If quality is what you are selling…. he will most likely come back. If not…let the other shop argue with him for the money.
If you can’t sell a customer something, then give him something to remember you by. A bit of education that he can remember that will be valuable to him. Something to carry home is better…. like a promotional card with a great picture on a brochure of your top quality product or even a photo of your product he can dream about owning. Perhaps a sample of your work….like a small piece of your product that demonstrates your work, etc. A pencil with your name and address if nothing else.
Don't let a customer walk away empty handed. If you can't answer their question or provide a service, recommend where they might go for help. Give them information, if nothing else be nice to them and try to develop a positive rapport with them. Your help and kindness is the best advertisement to encourage them to return another time or spread your good reputation. You want to be known as the shop that was helpful and had good ideas and service.
In most businesses, your job is to sell something (a product or service). Only by selling do you generate money. If a customer comes in, sell them something…. If altering the product or price will help, do it. If you sell him something, you have a customer. If you let them walk out the door empty-handed you just lost an opportunity.
WORK:
In the beginning, you may have to have lower prices, commensurate with your abilities and reputation. Or you may have to have other sources of income until your reputation can bring in enough work and money to satisfy you.
Some people are in love with the romantic notion of running their own business. They like to talk the talk and go through the general motions and associate with the people and materials related to the business. For money to be made, someone has to actually spend a lot of time and energy doing the product and service of the business. Loving a business only makes money if the toiling at the work gets done.
Why are you in business? To make money, or to do what you want and feel good? Making money usually falls under the category of WORK. Feeling good and doing what you want are usually called vacations.
Wholesale/retail pricing: Make your money at the beginning and NOT the end of a transaction. Some say buy low and sell high. Better is to buy LOW and sell below the market. Trying to make the money by selling at a high price turns your business into a museum with stagnate shelves of merchandise. Paying a high price for your products that you plan to resell, in the beginning, just makes money for the person you are buying from. If you can’t make money upfront you probably won't make it in the end either.
You have to understand the market you are in, otherwise, you are just guessing and betting your next supper. You must know the value of your products and services. Know what the competition is doing and where you stand in relation to them. If you don’t, you are just wasting you and your customer’s time and money.
Working for someone else, you put in eight hours a day and it is a good way to learn the business, make mistakes and gain experience on someone else’s dime. Work for yourself and expect to put in 12 hours a day, six or seven days a week. You learn on your own time and pay for your own mistakes.
The primary purpose of being in business is to make money… if you aren’t making money, you have a hobby.
Don’t worry so much about trying to be the lowest price around. What does it actually cost YOU to do the work? If someone else can do it cheaper, that’s their business.
You might as well raise your prices to a point where you can survive. You will either go out of business because you can’t meet the overhead with your low prices or raise your prices at the risk of losing your customer base. Usually, you attract higher-income customers as you raise your prices. Remember, if you are too cheap, people will agree with you that you are not worth more.
Keep accurate records/photos of time, materials, formulas, procedures and problems on every job. It is good training when trying to estimate future jobs, or to help analyze what went wrong at the end of a project. Photos are good for promotion and can show how you improve over time.
There is only so much money you can charge per hour, and only so many hours in a day that you can charge for. Hiring help or farming out work at a lower wage then you normally would charge, in effect creates more billable hours that you can make your profit on.
Don’t be afraid of a written contract with your customers, specifying time and money issues and what will and won’t be included. It is really just a written road map to guide and remind both parties of what to expect.
Try to collect some money down in the beginning. It keeps both parties interested for the entire project. The last thing you want is to complete a project and have a customer walk away "with no skin in the game".
Don't be confused between motion and action. You can give a lot of motion by spending many hours, studying, talking, improving the shop, cleaning, sharpening tools, etc. and think you are busy with the business. But this is different than those actions that actually produce money.... doing the work.
It is a rare craft business where one source of income brings in enough money. A survey of small woodworking businesses indicated that most had spouses who were providing a healthy portion of the household income. One of the problems is that many craft people are artistically inclined and not business-minded. Craftsmen /artists focus on what is it that they like or want to do, rather than how they can make money. Be assured that in order to make money doing a craft …dollars and cents thinking (the business part ) is as important as the artistic part.
Don’t kid yourself into thinking you are just selling a product. To excel, you are selling a dream. Every product/service needs a story, an image, something to capture the customer’s passion. Your job is to know enough about the product or service AND the customer to create that dream/image, for the customer. Emotions are powerful incentives to spend money.
When you charge a lower than value price, what you are really doing is teaching your customer to expect lower prices. By teaching your customer how you are worth the charge you ask, you help set a standard that the customer should expect to pay for good value.
QUALITY:
The sweetness of a low price will soon be forgotten, compared to the long-time agony of living with its poor quality.
Providing genuine, quality and service is the best way to the top dollar. You may have to provide a variety of level of services (plain or fancy etc.) to meet various customer income levels, but be sure that at each level, the quality of service is the best.
If a person would study and perfect a service or a niche in the market where there is a NEED, money can be made.
There is nothing wrong with working at the higher (luxury) end of the market. Especially if you have the skills and reputation to attract it. Someone has to, and will, meet these needs. It might as well be you.
Never promise more than you can deliver….. Always deliver more than you promised.
There is very little competition at the top. You really can’t compete at the bottom of the quality or price range. That is where everyone in the WORLD wants to be. Few people are willing to put in the time and trained effort to participate at top levels. But look at the top…there are very few people competing for the top quality and price customer base. You might as well set a plan to rise above the rest…. Where will you be in ten or twenty years, if you don’t… still floundering away at the bottom with everybody else.
Most customers don’t really know what a job is worth. It is your obligation to educate them on why YOU are worth what you ask for.
Everything you do, say or display, is telling a story. What is the story you want to present to the world?
Work at the bench is hard enough even with happy customers. If a customer isn’t happy with a job…make it right! The lesson learned is that you didn’t screen or prepare your customer first…. they didn't understand the complications or couldn’t afford your standard of quality. Next time, when the FIRST question they ask is how much…be warned, they are more interested in price than quality. Send them to the shop down the street, they can’t afford your quality of skill.
Your job is not arguing for money…your job is doing the absolute best job and service you can do. The money will eventually follow.
Do you really want to be known as the cheapest shop in town?
Making money is not the central focus…. Producing quality service is, and one deserves to be justly compensated…at least a decent living wage for valued quality service.
Why would you want to have the highest prices in town? Hopefully, because your service is worth it. Higher quality work deserves better pay. Higher quality projects attract better customers. Better customers are often the ones that have the money to spend on your services. You may not be worth higher prices now, but this should be your goal…. to be worth top dollar.
You may not know if your work is quality work or not. You may have cut some corners on previous work with resulting poor quality. You may not be doing quality work now. Your job is to learn what quality is and how to produce it. If you have observed other’s work and judged it, think of what others are and will be saying about the quality of your work. Don't let the fact that you may not be able to produce the quality you want, to dissuade you from setting high-quality standards. The important point is to know what quality is and to set that goal for yourself.
Estimates:
Estimates are approximate prices of a product or service. Be sure the customer understands that this is not a firm price. If the estimate is written, be sure to emphasize the approximate nature of the price. Always estimate HIGH unless you are willing to eat the difference yourself or go into the uncomfortable situation of requesting more money. If you are stating a final price, this is not an estimate and you have to be prepared to deliver for that price.
Estimates may be necessary. Try not to make casual estimates without real thought…. they often come back to haunt you. If you want an estimate to be binding for both parties, put it in writing after you have thought it out. Don’t put anything in writing you don’t plan to stick to.
Be careful about providing estimates….. soon they can take up too much of your time, leaving little time for paying work. If at all possible, charge for the estimate…say one hour’s worth of work. You can reimburse that fee if you actually get the job. This keeps those who are just kicking tires from wasting your time, or those who are seeking an insurance settlement, from using your estimate for their claim and then going somewhere else to get the job done cheaper.
If you suggest a service will be in a range between two amounts, for example, $150 to $200, say the higher number not the lower number. The customer always remembers the lower number. It is easier to give back money, then to ask for more.
If you don't want to do a job, don't use a very high estimate in hopes of driving the customer away. These tactics often backfire and you end up doing a job you didn't want to do.
If you make an estimate of the cost of service (most customers want that) and it turns out to be wrong, contact the customer and explain the situation with a revised estimate. Offer to return the work and deposit if the customer does not want to pay the higher price. Learn from this to not make snap judgments on costs and to quote higher estimates in the future.
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