How much do you charge to make a healthy profit?

It is difficult to decide on a price, and too easy to lower your price so that your customer will buy your product or service. What you should really consider is “what is valuable to your customer?” and “How valuable is it to your customer?”

If you can show your customer how they will get back more than what they put in, the amount they put in is not as important (as long as they can afford it). This is the best pricing strategy. Always charge as much as you can, while still showing your customer how they are getting a great deal!

Here is an example that will show you how to be profitable. You figure that it will take about two hours making a video advertisement for a customer. It is a very simple idea, and only requires $30 in props. How much do you charge? There are a few things you need to consider:

1) what is the customer’s budget? Ask them! Remind them that they need to save some money for promoting the ad, or buying advertisement space.

2) Take one third of the budget. Does that much money pay for enough time and material that you can complete your work?

3) What does the customer get out of it? Make sure the customer knows this, and gets excited about it. Remember, this is their initiative, If they want a product or service, it is because they want something out of it. For the example we are using, the customer might expect to make 5 sales worth $10,000 in profits from people that visit their website. Can you give them what they expect? If not, that is ok! You just need to manage expectations, and explain the value that they are getting. First ask them “how many people need to visit yourwebsite to make a sale?”  Based on this number, you will know how many people you need to send to get 5 sales.  Even if they do not make 5 sales, as long as you make sure they get the number of visitors they expect, they will feel like you did your job.

I will probably add to this post later… It’s getting kind of late.  See the copyright notice in my last post, it applies to all posts.

Do you have any bad habits when trying to make sales? Do you ever find yourself creating countless revisions of a proposal or quote for a customer?

Sometimes we feel like a customer wasted our time .  Does it frustrate you?  I used to think it was the customer, but after analyzing the parts of a sale, I found that there are some things we miss.  By paying more attention to these things, we can avoid experiencing those customers that can never decide, those ones that love to take up our time without buying a thing.

I developed a cycle that you can follow to save time and increase sales.  I broke it down into parts: 1. Initiate Dialogue. 2. Qualify. 3. Create Value (and the Value Circle*). 4. Close the Deal or Close the Conversation

1. Initiate Dialogue

To increase sales, you need to fill your “funnel”.  By talking to more customers, you can uncover more opportunities.  These will eventually trickle out, or pour out the bottom of the funnel as closed deals.  If you want it to pour, you need to open a conversation with as many potential customers as you can handle. You can find twice as many customers, maybe more, by networking. Simply ask every customer that you encounter if they know any one else that might be able to use your product or service. Are you too busy? Well, the time saving part is knowing how to end these conversations quickly.  This leads to:

2. Qualifying your Customer

Before you do ANY work for someone, you need to qualify them.  Does it make sense to sit down, crunch numbers, put together a proposal, and give it to someone hoping that they will like it and pay you for your product or service?  Well it depends.   Maybe the customer is really interested in your product! Great!  Except after spending time preparing more information for this customer, you might find out that they don’t have any use for it, they just wanted to know more.  Or maybe it is out of their budget.

Again, do NOT do any work until you qualify your customer!

3. Create Value (and Keep Qualifying)

Before you even think about giving a quote or price, you should think about how much your customer expects to pay.  Let’s say that you are selling a widget.  The customer might think it is only worth $5.  But, if you emphasize how it will save one of his or her employees half an hour a day, you can put a dollar amount on that value.  At $20 an hour, they will save $50 a week!  Most customers do not think about the value of a product or service they are considering. They think about how much it probably costs to make such a widget. It is YOUR job as a sales person to find out what is important to your customer, and show how your product or service will create value for them.

There is the Value Circle* that makes this very easy. Step 1 is entering the circle.  Then you rotate around the circle made up of step 2 and step 3. You then exit with Step 4.

1. Enter the circle and ask “If I show you how my product or service will (insert benefit here) will you buy it from me?”

2. If the answer is no, ask “Why?” and try to narrow their reason to be as specific as possible.

3. Ask “If I am able to satisfy that reason, will you buy from me?” or “My product or service can satisfy that reason by (enter feature and benefit here).  Now do you want to buy it?”

The circle is between step 2 and 3.  Repeat step 2 and 3 until you achieve one of two things:

A. The customer commits to buying from you, provided that you can satisfy their “buying needs” (in which case you justify any work that you are going to do such as a proposal) or

B. The customer gives you a reason that they will not buy from you.

There is a snag… people might say they are not ready without reason.  Whatever they tell you, once one of the above conditions is satisfied, you can exit the circle with step 4:

4. Exit the circle by asking “When?“  Here are some more specific examples to help you close the deal:

If they are not ready, ask “ When will you be ready?”

If they say “sure”  ask “Are ready to buy right now? How do you plan to pay?  Do you have a budget for my product/service?  Do you plan to save up for this?  How long do you think it will take to save up enough money?”

The Value Circle* is designed to quickly qualify your customers and create value at the same time.  These is is the most important sales tool.

4. Close the Sale or Close the Conversation

a. No opportunity? Close the conversation.
If you and the customer determine that there is no opportunity, first ask if they might be able to use your product or service in the future. If so, ask if you can follow up in 3 months or 6 months.  Close the conversation by thanking the customer for their time and asking if they know anyone else that might benefit from your product or service, and if they think of anyone to please let you know.

b. Opportunity? Close the Deal.
Great! You found a customer that is willing to buy.  Now you need to keep your side of the deal.  Give the customer the proposal or quote in a timely manner. Remember to include all the points you uncovered when you were in the Value Circle* in the proposal, or along side the quote. You need to remind the customer that you are selling them something of value, and they are getting a deal! It is a good idea to get the customer excited and make them feel like they are getting a deal so they will feel good after the purchase rather than coming back to you with buyer’s remorse.

Finally, and most importantly, you must ASK FOR THE BUSINESS!! Make sure you include an order form or contract or a template purchase order with your quote or proposal.  Ask them”how long will it take you to get a payment ready?”. This will get the customer in the mind set that they are committed to buying and they have a method to pay you.  Make your customer aware that you are waiting for payment by including a form with payment options when you give a quote or proposal.

If you make it this easy for your customer, I guarantee they will not look for your competitors. Everything is in front of them and they will think “chances are other companies will charge around the same price”, so they might be too busy or lazy to do the extra work of looking at the competition, giving you a higher rate of closing.

*Value Circle is a trade mark of Frank Forte. If you want to reproduce any content written by Frank Forte, please contact him, he is a really nice guy and would be happy to share, but only with his written permission.  If you do not have written permission from Frank Forte, be prepared for his team of lawyers and the legal costs you will incur by either defending yourself and/or (more likely “and”) settling by paying him and his lawyers a substantial amount of money. He has a highly trained robot named LawBot** constantly searching the internet at light speed to protect his work.

**LawBot is also a trademark of Frank Forte.

Notice:  Following advice you find on the internet has a high amount of risk. If anything bad happens to you as a result of comments or advice posted on this blog or website, even if it is my fault for telling you something or providing you with information or links to other websites, I assume no liability. You are responsible for your own actions.

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