If a business owner is confident about the worth of her product or service (translation: price to the client), and she is confident about her performance goals for the year (translation: I am in business to make sales, pay my vendors, my employees and me, and make a profit), then her selling process will be less fearful and so much easier because she has an advantage in client negotiations.
Generally, women business owners have a hard time setting their prices to reflect what they are worth and asking for the sale at those prices. However, women also are adept at negotiating from a win-win standpoint, making sure the deal works for everyone. The trick is not to give away the store just to make a sale or discount your prices when challenged by a client who “never pays retail” for anything.
The two key issues here are to have confidence in your ability to:
1. Price your product or services based on your business needs first
2. Negotiate from a position that champions your business goals as well as your client’s needs.
Pricing Your Product: Financial data vs. SWAG (Scientific Wild-Ass Guess)
The foundation from day one of any business is to set up your financial reporting system so you have a balance sheet, an income statement, and a cash-flow statement. These three financial reports are all you need to help you solve almost any problem that arises in your business.
Yet, most women business owners are not confident in this area of the business. Yes, you can hire a bookkeeper or accountant to input the information and to help you interpret the information. But you know your business better than they do, so you need to review the accuracy of the reports on a monthly basis.
In the area of pricing, these reports can show you the difference between “markup versus margin pricing.” Every item in the profit-and-loss report is viewed as a percentage of sales. Most women give their client a deal by marking up the cost of a product at a lower percentage. In margin pricing, one discounts percentages off a retail price: that gives you more money while also giving the client a break. The difference to you could really impact your bottom line.
These reports will tell a banker if you are creditworthy for a line of credit. They will tell you if your pricing is where it should be, or even if your clients are happy. So the more you understand these reports, the more confidence you will have in your product or service pricing and the cost of running your business.
Negotiate: Your Needs vs. Client Needs
In my business I oversaw the sales teams, and I felt I had the weight of the company future on my shoulders on a daily basis. My business partner taught me to be confident in our company pricing, as we were worth every penny. Since I had a good background in finance, when a gentleman client once said, “Of course you have given me this product line for cost?” I could confidently say, “Sure, just like you are passing on the Federal Reserve interest to clients in your mortgage loan business!”
Not! But I could say, “I did provide you a better-than-average discount on all materials, but not labor!” So we both won. I knew my numbers, I knew what I had to produce, and I had no fear that I couldn’t do it.
So the next time clients want a deal, give them one – but give them a confident one that works for you, too!
About Your Columnist
Michelle Burkart is a featured columnist for Women Taking Charge, the official blog of Connected Women of Influence, where she covers business strategy, revenue growth and profits for sustainability. Currently, Michelle is the owner of TH!NKbusiness, a San Diego firm specializing in advising women in business on restructuring to achieve revenue growth and profitability. Michelle has experience as a business owner, corporate executive, trainer, speaker, and overall advocate for women in business.