Wednesday, October 8, 2014

How to Charge What You're Worth and Get It: Part 3 of 6 - Communicating Your Value

In my previous two articles, I looked at the understanding your value part of my formula (UV + CV + CA = CW) for charging what you're worth. So now let's take a look at communicating the value to your prospective clients; the CV part of the equation. I have a sneaky feeling that this is often omitted for a number of reasons. Perhaps because the service provider is unaware of the importance of doing this or because he/she makes assumptions about the prospective client's understanding of the value or because he's/she's just not comfortable doing it.However, this is a key step in the process of charging appropriately. By ensuring that the client knows exactly what they'll be getting for their money, they're much more likely to do business with you and pay you accordingly. So it's not just important to discover your clients' problems and how extreme they are, as mentioned in the previous article, it's also vital to ensure that the client understands just how badly they want to have the problem resolved. To do this, you need to reflect both the value of your service and their pain back to them.If you read my previous article, you'll probably remember that I told a story about an engineer. A manufacturing company rang and asked him to come in and look at a machine which had broken down. He had the foresight to ask the company what the cost of non-production was and they said £100,000 a day. Armed with this information, the engineer went in to take a look at the faulty machine. As he walked around it, he prodded, poked and listened to it and then, after just a few minutes, he hit the machine hard with a hammer. Bang. Hey presto, the machine immediately burst into life. He then stayed around for a few minutes, until he was satisfied that the machine was running sweet and as soon as he was happy that all was well, he packed up his things and went on his merry way. Because he understood his value, even though it had only taken him 10 minutes, he sent an invoice into the Company for £2,000.00. The company wrote back and asked for a breakdown of the invoice. He said:For hitting the machine with the hammer £ 50.00
For knowing where to hit the machine £1,950.00
Total £2,000.00What he could have said when he asked them how much it would cost them a day for the machine to not be working was something like "£100,000 a day - that's an awful lot of money isn't it?" Thus reflecting the pain back to the client. Then he could have added, "so if your machine normally operates for 8 hours a day, that means you're losing a massive £12,500 an hour and even if your machine is running for 24 hours a day, that's still costing you £4,166 an hour." Then he could have said, "that's still an awful lot of money isn't it?" Thus reinforcing again. Then he could have asked what problems they would have if the machine was not working for any length of time. If the client couldn't think of any answers, he could have said "presumably that means that your customers' orders will be delayed. So you will need to alter transport arrangements. No doubt it will also mean invoicing is delayed and that may affect cash flow. Also staff would not have any work to do and you would then probably need to pay them overtime to catch up with the backlog." Anyway, you get my drift. So his parting shot could have been, "so if I can solve this problem quickly for you that will be hugely beneficial won't it?" If he had done this, they would have been grateful to him for solving the problem so quickly that when he presented his bill, it's unlikely they would have queried it. In fact, potentially, £2,000 was a very small sum to pay in the circumstances and perhaps he could have actually charged more!

Remember the focus is on the value you're creating, not how much you're charging or how long the job takes. It's about a shift from charging for time to charging for solutions.One quick tip to help you get more comfortable with this process is to keep your mind focussed on the fact that you want to help this client. So rather than thinking, what can I get from them, you're thinking what can I give them? So if you adopt this strategy, it is very likely that you will feel more positive, confident and comfortable, and you will convert more prospects into clients as a result. To me, it's very important to be sure that I can genuinely help and, If I don't feel that I can help a particular business owner, then I just won't take that client on. By making sure that I can provide real value and produce tangible results, it ensures that not only do I remain true to myself but also my clients trust me implicitly. In the next article, we'll take a look at how else you can communicate your value to your clients.

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