More proof of the good advice shared in “Should You Start A Company In Uncertain Times” and “The Most Important Thing In Establishing A Client Base” is evidenced in the subject of pricing. Should you lower your prices when your business goes through tough times? One of my greatest mentors was my bookkeeping client.
6 things I learned from watching the company navigate tight cash flow was:
- Increase collection efforts. Whereas an email to the accounting department was our go-to, during lean times, a phone call had quicker results. If the phone call didn’t work, escalating the past due bill was to call the department services were being rendered to.
- Slow or halt progress on work being performed until you receive payment. I don’t recommend this unless the account is severely delinquent as this is not the rapport you wish to set with your customers fresh out the gate. It’s a last ditch effort (can be quite effective when used sparingly).
- Rather than lower pay, my client opted to let some folks go. It was difficult for them, but they reasoned it better to let employees who weren’t critical go and redistribute their workload to those remaining in hopes that their job security would make it worthwhile.
- To have more cash on hand, my client made minimum payments on credit cards and lines of credit, even those with high interest rates. With new contracts on the horizon, there would be opportunity to catch up.
- With pending renewals or new contracts, my clients upped their rates. Of course, I believe there was a strategy to it so as not to price out. They reasoned that.
- Diversify your product or service portfolio by selling bundles. This way, you can introduce less expensive items without lowering the value of your brand. This will also go further in retaining customers.
The most important takeaway from my work with my bookkeeping client was to not slash prices. They chose trust the value of their services. It paid off.