Pro Tip: Focus on Value, Not Cost

If you see a kid selling lemonade at a neighborhood stand, it’s not the same as the vending machine with lemonade. It’s basically the same product, right? But it’s different because it’s the story around it with a very different experience.

I talk to start up business owners from time to time about their business. That’s what I want to know about a company. How are you different, what’s your story and what’s the value proposition? Now, if you start giving me the sports stats of being 2% better than this guy and a slightly better ROI and so on, you start to lose me. I’m not as concerned about all that if there is not a good story and value proposition that can be bottled and sold.

I have had a few clients over the years that feel a price we have given them is to high. On one project, a client asked us how much it would cost to do a very small renovation project. They gave us a list of what needed to be addressed and how they wanted it done. We provided a proposal and the committee felt that it was high. We asked them what they thought was a more reasonable price for the project and the answer was half our number.

We suggested that it might be best for them to try and do it themselves in house. However, they determined they did not have the skills sets to do that. Regardless of skill, they would not have the tools and equipment necessary to do the project. When looking at the logistics, it was going to take a good ten to twelve consecutive days to complete the onsite work. They all had regular jobs and didn’t have the time to do that. Even if they took a few days PTO as a group, there is all the additional time that would be spent in planning the project, picking up materials, setup time, waste disposal and more.

When they researched the cost of materials alone and then reexamined the delta between the actual cost of materials and our total project cost, they started to realize the value. What something cost is not what you pay for it, it’s what you get out of it.

Remember, the client is paying for material and labor, but they are also paying for something far more valuable. They are paying for time they don’t see for preparation and planning and for knowledge, experience, and tools. They are paying for professionalism (because they expect it), and hopefully excellence, discipline, and integrity. They are paying for taxes, licenses, sacrifices, liabilities, and insurance.

In addition, you should be adding unmatched customer service or doing anything you can think of to make this an awesome experience for the customer. The challenge is to try and make sure you are packaging that tremendous value add in a way that it can be recognized by the end user. What’s the real value add? What is your story and the experience you are trying to create for the customer?

It is always my hope that when people request a proposal for professional work, that they are careful to not disrespect a service provider by trying to get them to lower their prices. It’s very possible the proposal exceeds their budget and there’s absolutely nothing wrong with getting other proposals. One just has to remember that you typically get what you pay for. I cannot tell you how many times we lost the job to price and then got called in to fix it. The client ended up paying for it twice. Why do it once when you can do it twice right? It's powerful to know the value you bring to the table, be able to communicate that and then be confident in it.

Originally Featured in Springfield Business Journal: Springfield Business Journal

Donnie Brawner, Partner Colligo Holdings
CEO/Owner, Paragon 360 & Paragon Fabrication