I was recently reading a thread on the Technibble forums where a technician posted about an interesting problem he had. Here is part of the post:
I’ve been reading a few threads where people are saying charge what your worth, make people pay for your skills etc.
My problem is this i’m only just starting out so I need to be competitive, but there are two or three local competitors (I live in a small market town in the UK) and they are only charging £20 p/h with free call outs. If I only charge that i’m going to struggle to make a living.
It is a fairly common problem that many Computer Technicians encounter, but it also has a fairly simple answer. This technician should charge what he believes he is worth and what he believes to be sustainable. He should not worry about the cheaper competition. Let me explain:
The forum member mentions that they live in a small market town in the UK, so we need to take into account that the cost of living is going to be lower than someone living in the city of London for example. However, even taking this into account, his competitions “£20 p/h with free call outs” is just not sustainable.
The competition may be making enough to cover the cost of petrol and to survive personally, but not enough for their business to survive and prosper. A business owner also needs to be making enough money to reinvest back into the business for things like insurance or advertising. The main reason why computer businesses fail is because they undercharge.
The forum member mentions that they live in a small market town in the UK, so we need to take into account that the cost of living is going to be lower than someone living in the city of London for example. However, even taking this into account, his competitions “£20 p/h with free call outs” is just not sustainable.
The competition may be making enough to cover the cost of petrol and to survive personally, but not enough for their business to survive and prosper. A business owner also needs to be making enough money to reinvest back into the business for things like insurance or advertising. The main reason why computer businesses fail is because they undercharge.
Many new computer businesses will drop their price to gain their first few clients and this is fine, but a factor worth considering is the perception of quality. For example, without knowing either technician, which technician do you think will do a better job? The one charging £20 or the one charging £40? Most people will say that the £40 technician will probably do a better job, even though they dont know either. They are basing that off the perception of quality.
By having higher prices, it can also lead to higher quality clients. By being the cheapest person in town, you are going to attract cheap clients and cheap clients generally expect you to do more work for less money.
Of course, you cant just charge higher prices without being able to back it up. You need to justify why you charge more. You need to act professional, look professional, do professional work and because of this, your customers will pay a premimum for a professional to work on their valuable PC containing their valuable data. Once you get a reputation for doing good work that is well worth the money, it wont matter what your price is compared to the other business.
Of course, you cant just charge higher prices without being able to back it up. You need to justify why you charge more. You need to act professional, look professional, do professional work and because of this, your customers will pay a premimum for a professional to work on their valuable PC containing their valuable data. Once you get a reputation for doing good work that is well worth the money, it wont matter what your price is compared to the other business.
I would like to give you a hypothetical example of what can happen between a business that follows this advice and a business whos prices are as cheap as possible.
Lets say that these two computer repair businesses started up next door to one other. One of them charges £20 per hour while the other one charges £45, both of them are starting with very little money.
The £20 p/h owner attracts people that are only looking for the cheapest repairs in town. The £45 p/h owner attracts people with a little more money and possibly other business owners. The cheaper guy may get more customers initially but as soon as he raises his prices, he may not be the cheapest technician in town anymore and we need to remember that his customers chose him because he was the cheapest. There is a good chance his clients will change their loyalties and seek out the cheapest technician yet again. The £20 technician may get lucky enough to become really busy but if he gets too busy, his quality and turn around times will drop.
Since his prices are so low he wont be able to take on any additional staff, he will possibly gain a bad reputation and guess where his clients are going to go? Right to the £45 guy that does great work for a reasonable price.
Lets say that these two computer repair businesses started up next door to one other. One of them charges £20 per hour while the other one charges £45, both of them are starting with very little money.
The £20 p/h owner attracts people that are only looking for the cheapest repairs in town. The £45 p/h owner attracts people with a little more money and possibly other business owners. The cheaper guy may get more customers initially but as soon as he raises his prices, he may not be the cheapest technician in town anymore and we need to remember that his customers chose him because he was the cheapest. There is a good chance his clients will change their loyalties and seek out the cheapest technician yet again. The £20 technician may get lucky enough to become really busy but if he gets too busy, his quality and turn around times will drop.
Since his prices are so low he wont be able to take on any additional staff, he will possibly gain a bad reputation and guess where his clients are going to go? Right to the £45 guy that does great work for a reasonable price.
It wont just be the cheaper guys customers that the £45 technician will be getting, it will also be new customers since the cheaper guy now has a bad reputation for doing bad work.
After a while, the £45 business is making double the money the £20 business is making and doing only half of the work and because of this, he can afford to get insured and mention it on his new and improved advertising.
If you were a business looking for an IT guy in the local Yellow Pages and both of these businesses had ads side by side, would you choose the £45 guy who is insured for your business? or the £20 guy? Chances are you would choose the £45 guy. It seems the “safer” choice since the ad is all the information you have to go on.
After a while, the £45 business is making double the money the £20 business is making and doing only half of the work and because of this, he can afford to get insured and mention it on his new and improved advertising.
If you were a business looking for an IT guy in the local Yellow Pages and both of these businesses had ads side by side, would you choose the £45 guy who is insured for your business? or the £20 guy? Chances are you would choose the £45 guy. It seems the “safer” choice since the ad is all the information you have to go on.
Fast forward two years and you will probably either see the £20 guy with a bad reputation or out of business. The £45 guy would be a far stronger business because he is sustainable, is able to reinvest money back into the business and has a quality client base made up of businesses and people who will pay a good price for good work.
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