As in most sectors pricing is a crucial issue entrepreneurs often find themselves facing a dilemma as to whether they should go in for a price cut. Does slashing prices make great business sense?
This decision becomes critical when you are working in an intensely competitive arena or during a recessionary phase when it is a case of the survival of the fittest.
A quick search online reveals that while most small businesses that lack competitive power wind up there are still many others who are willing to get by through price cuts. The dilemma that most small business owners face then is that should they consider lowering their rates?
Let us look at the pros and cons of the issue…
Asking for lower rates is an option most newbie entrepreneurs can consider mainly because if you are a new to business then that is the only way you could get your foot in the door. Customers are unlikely to offer new entrants a good amount when there is a pool of well established businesses already available. So those of you who have chosen an intensely competitive time or a recessionary phase to enter the market this is a compromise that you could have to make.
If you want to remain in the mainstream irrespective of what you get paid then lowering your rates is definitely an option. But then again what you need to look at is the amount of time and effort that you are going to put in to your work.
If the remuneration is far less than your effort then the possibility of you becoming disillusioned with what you are doing is very much there.
Established businesses too may have to sell at lower rates and since entrepreneurship really isn’t for the faint-hearted I’m sure you are already prepared for the bumpy ride during such times. Yes, working for less pay may be on the cards but there are ways of generating residual incomes that you can adopt.
If you don’t want to lower your rates for fear of getting stuck at the lower end of the market another way of ensuring that you get your due is differential pricing. You could decide on amounts based on the turnaround time in which you deliver your work and make sure that you get the amount that you want.
For delivering goods within 24 hours, 48 hours, 60 hours and so on you could ask for varying rates with the earliest delivery being the most expensive. This is one way you could get good returns for high efficiency and quick results while giving clients the opportunity to pay less for work delivered within a bigger time frame.
Settling for less than what we expect is not something that all of us look forward to but considering the tough times that are upon us that is a compromise even well established business owners may have to make.
Whatever you choose to do remember that it’s important that you enjoy your work; ultimately as in all walks of life its quality that survives and the rest doesn’t really matter. So while you may have to work for less now it may just be your way of tiding over the economic slowdown and things could be looking up soon.
Image: Danilo Rizzuti