338: The Damage of Undercharging
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How can undercharging damage your business? While there are clear benefits of raising your prices, we tend to ignore the damage of undercharging. Undercharging impacts everything from your quality of life, to the perception potential clients have of your business. We break down 5 ways not charging enough can impact you and your business, and give some ways to start changing our mindset around what we charge.
Main topics:
Perceptions
Sustainability
Scaling and Experimenting
Giving Back
Main takeaway: Money cannot buy happiness, but it affords you a quality of life that gives you the ability to care for yourself.
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Episode 270: www.petsitterconfessional.com/episodes/270
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
business, prices, clients, charge, pay, problem, talking, pet, experiment, service, burnout, appropriately, expenses, people, impacted, set, fill, money, associates, charities
SPEAKERS
Meghan, Collin
Meghan 00:10
Hello, I'm Megan. I'm Collin. And this is Pet Sitter confessional and open and honest discussion about life as a pet sitter. Hi, there you are listening to Episode 338.
Collin 00:21
Hello,
Meghan 00:22
thank you to pet sitters associates and our lovely Patreon supporters for financially helping with the show today.
Collin 00:30
Yes, and we are really looking forward to this Friday, December second 2022 For our first Friday of the month meet up on Zoom. So patreon supporters can look out for that link coming shortly.
Meghan 00:42
We have talked about the benefit of higher prices. But what happens when you under charge, that is what we're going to talk about today, you'll notice that we will not be talking about clientele and the type of clients. And this is for a very important reason. Because the quality of clients is purely subjective to the business owner. And while it can correlate to the price of service, it's not necessarily guaranteed. So today, we're going to focus on five things in your life and your business that are impacted by not charging enough. And the first one is the price of perception.
Collin 01:19
Yeah, this is the image that your price shows and tells to potential clients looking at your business. This speaks to the professionalism basically how seriously we take this because we recognize that we have other expenses that we have to cover. And you our clients should take this as seriously as we do. You see, you adversely affect the perception of the value of what you offer. When you under charge, you do a complete and utter disservice to your skills, all those years of experience and education, and all of the research that you've done all those podcasts that you've listened to or courses that you've taken, because if you undercharge, the perception will be that what you're offering is actually of low value. And this could be off putting to some clients because they're paying for you to solve a problem that they have. And if they feel like your price is too low, they'll make an assumption that it's not going to solve their problem. It's not what they're looking for, it's not going to meet their needs, and they will move on to somebody else. When we talk about marketing and putting out messaging for our business, we usually focus on Instagram posts, we focus on our brand and what our colors are, what our font is, how what kind of words we want to use, your price is part of your brand, that speaks to the inherent value that you bring and the service that you are going to try and provide to solve people's problems.
Meghan 02:45
And that's why this next point is so important, which is empathy. So if you under charge for what you do, you're potentially sending a message to your clients and potential clients, that you underestimate the severity of their problem, you know, they want to pay for the solution to their problem, are you that person who can provide that, because if it's a very painful or difficult or stifling, restrictive problem that you can help your potential client solve, we can sometimes put a small charge against solving that problem. And thus it makes the client straightaway feel that we don't get it we don't understand how difficult this thing is for them. Or we don't understand the the problem, the bigness of the problem that they have. And that can be a really unexpected consequence of not charging enough
Collin 03:35
yet where the client doesn't feel like you take this seriously. They look at they're going I have to leave my furry family member alone for two weeks while I go on vacation. That's a stressful to me, this is I'm staying awake at night worrying about this, I don't know what I'm going to do. They are looking for somebody that they can pay to solve that problem for them. And they will subconsciously compare prices to go okay, this person is charging this amount this person charging way more? I wonder why that is part of the sales psychology that comes into this as somebody who starts going, they understand the severity of what's going on here, they get it. But there's a lot more that goes into all of that we've talked about the sale psychology to people and what our price communicates to them. And this is a big one, do we empathize with the person and their concerns that they have and they're bringing to
Meghan 04:27
us, we can sometimes think that by undercharging, we're making what we do more accessible to people. But in reality, that's not necessarily true. We're not doing that we're encouraging them to deselect themselves from our potential client list. You know, obviously, we want to work with our ideal client. And hopefully your ideal client is one that sees the value in what you do and knows that hey, they're going to be able to solve my problem, and I know that they're worth it.
Collin 04:55
And that's a different way of looking at understanding what we charge we love Look at most of the time going, okay, what are my skills? What's my history? What's my experience? Let me charge my worth what Know your worth. But do we know their problem? Do we know the severity, the price tag that they're putting on a solution to their problem to understand the bigness use that word earlier making the bigness that they are coming to us with? What price would we put on that that's usually very different than when we look at our own experiences. And we we tend to shrink back our prices many times. But if we realize that people are coming to us with a big problem, big problems have a higher price tag to them.
Meghan 05:33
Yeah, I mean, we have a client who wants us to come over four, sometimes five times a day, they don't care what the price is, because their pets are their family, they have special needs dogs, and they understand and they get that what we do, how we solve their problem, and in what manner we solve their problem is basically immeasurable in price.
Collin 05:53
Yeah, and again, this is not a discussion of quote unquote, rich clients versus quote unquote, not rich clients. This is not a discussion about that. This is purely a discussion of what value people are placing on their problem that they have before them. And who can solve that for them.
Meghan 06:07
Another problem with undercharging is that it's not very sustainable. So the longer you're in this business, the more potential burnout that you have, it comes faster and faster sometimes, especially during the holidays, what we're experiencing right now you know, you're working harder for your money, potentially less money than you could be making. So if you aren't chronically under charging, you do have longevity, because you aren't necessarily digging into your pockets every month to pay for other expenses, or running a zero based business every month,
Collin 06:39
you aren't having to self fund your business from other resources, putting more of your business expenses on credit cards that you have to pay back later. Using friends and family to help get you along, the business becomes self sufficient, which is a big goal that we should all have in our businesses is the business should fund the business and the business work that it has. The business should pay for my continuing education, the business should pay for travel expenses, the business should pay for my equipment that I have, the business should be able to do that. And I'm only able to do that in the business. If I have a money above and beyond what I'm taking home for myself. And then making you mentioned earlier, there's that burnout fax faster of I am working so hard to meet all my business expenses and my personal expenses that I'm instead of having to book 15 visits a day, I have to book 30 just to meet my income goals. You you're putting all that burden on yourself. And you don't have to do that.
Meghan 07:33
Throughout this discussion, though, when we're talking about under charging or knowing our worth, whatever it is, if you are not doing a budget every month, if you don't actually know what your numbers if you don't know what your business is bringing in what you are paying out to either other staff, or your own expenses for gas, leashes, whatever that you're buying, if you don't actually know those things, then this whole discussion is kind of moot. So figure that out first, because then you're I mean, if you don't know your numbers, you're not going to know if you're under charging or not.
Collin 08:05
Yeah, you don't know how much if you don't know how much you need to pay for gas, or pay for groceries or pay for your rent, and how how that translates into the number of walks and the number of sets that you have to do. That conversion is something that you should be able to do relatively quickly. And it takes sitting down recognizing that you have actual business expenses that you actually have all this stuff going into it. And then you can take that huge step back and Okay, now, how do I change my prices to meet all these other goals that I have.
Meghan 08:33
And if you would like to learn more about knowing your numbers, and what numbers you should know, we did a podcast episode on that it was number 270 was called knowing your numbers. The fourth reason why you need to not under charge and the damages of under charging is because it doesn't allow you to give back. It doesn't allow you to be philanthropic. When you appropriately set your prices for what you can afford and a little bit of profit. It allows you to do other things. It allows you to buy client gifts. We're coming up on the holidays here. And I've already heard some senators say I can't buy I can't afford to buy my clients gifts. And if that's the case, if that's you, I would very much question your prices. Because you Absolutely. I'm not saying you have to buy your clients gifts every year. But if you can't even afford to, then you need to be looking at your prices and whether they allow you to do the things that you actually want to do.
Collin 09:29
I really liked that idea of our business can do things our business can do things obviously for us by allowing us to have a good quality of life and make a living from this. Our business can also give back it can contribute to charities it can help those in need. It can not just spend time volunteering at a shelter but pay for resources that they need pay for equipment that they need, or give to other charities and donations in your area. Again, we can only do that kind of work if our prices are set appropriately in the states just looking at where my priority These are and what I want my business to be able to do. And I genuinely believe that we should want our businesses to be able to do this in whatever way that is no, we don't have to do big grandiose things. These can be small. These can be local. These can be one on one kind of interactions, but looking at our businesses as engines of good in our communities, engines of change in our communities. And the only way that we can do that is if we have our prices set appropriately.
Meghan 10:28
Something that you should definitely factor into your budget is insurance. As pet care professionals, your clients trust you to care for their furry family members. That's why pet sitters Associates is here to help for over 20 years, they have provided 1000s of members with quality pet care insurance. Because you work in the pet care industry, you can take your career to the next level with flexible coverage options, client connections, and complete freedom in running your business. Learn why pet switches Associates is the perfect fit for you and get a free quote at pets@llc.com. You can get a discount when joining by clicking membership Pet Sitter confessional and using the discount code confessional when you go to check out, check out the benefits of membership and insurance once again, at pets@llc.com. This is a little bit on the same vein of what we just talked about. But the fifth reason why it can be damaging to under charge is because it doesn't allow you to experiment. So when you consistently under charge, it means that you're not going to have the right amount of money, you should have to reinvest back into your business to give you the opportunity to grow or to scale if that's something that you want to do, or even just to try new things. You want to go bake cookies, baked dog cookies and see how that goes, Well, do you have enough dough baked into your budget to do that? Well, I had to, you know, if you are under charging, you have no space in your business, or very, very little space in your business to try new things to experiment to, to do the exciting bit to really kind of chase shiny objects a little bit and not that we need to be spending frivolously on our businesses. But if there's something that you think is interesting, you want to get into dog photography, you want to start trimming nails, and you need a good nail trimmer set or grooming or whatever it is, and you want to just experiment with it. You know, building in a little bit of money into your budget to do these things is a good idea.
Collin 12:21
Some people may tell you to focus on the core of your business and hone that, and I understand where they're coming from. But it is so liberating to know that you do have the space and the capacity, the affordance in your time in your business in your schedule. To chase those shiny objects, this could be potentially adding a new service that could be something completely unrelated from pet care entirely. If you just have an interest in going cars, or photography, or hiking or whatever that is, you're only able to do those new things to feed your soul in those ways to invest in yourself in those ways. If your prices are set accordingly, as soon as you have that space, you can try as many things as you want to there's the possibilities are endless. But our ability to do that is severely limited by how closely we are tied to our business, which is linked to how busy we have to be in order to meet our budget.
Meghan 13:15
And I mean, the math really makes sense here. If you are profitable by $1 on every single visit, well wouldn't it make sense that you could reach your goal faster if you were able to invest $2 from your profit into whatever you wanted to do,
Collin 13:29
you can sit down and play with the numbers as much as you want to. And what's important with this aspect is going if I can meet my obligations, my financial obligations with 10 visits a day, let's say I raise my prices, such that now I can meet my financial obligations with eight visits a day. Well, don't go and fill back up to 10 visits today, find something new and exciting, find a new pastime or hobby or take some free time for goodness sakes. Instead of go building back up to capacity with 10. And realizing that we can do much more in our lives than just consistently Chase more profits or more bigger, better things. Now, if you are interested in going bigger, the scaling aspect really comes in here as well. The only way we are able to scale is if we have time and space in our days. And in our business, I can't get bigger if I'm already feel like I'm at 100% or operating at 120% capacity. There has to be some wiggle room in there so that I just have time to sit and think through my planning to scale think through my hiring procedures, think through my new services or whatever that looks like having that space allows you to do so much.
Meghan 14:38
I think we also need to preface all of this by saying that there are people out there who want to run their businesses kind of like a charity and don't necessarily mind dipping into their pockets every month because the animals are cared for at the end of the day. And that's really their ultimate mission. They want to kind of run their businesses like a nonprofit
Collin 14:58
and that's totally fine. Okay, that is there's nothing wrong with that, if that truly is your goal, yeah, what who we are talking to right now as if you were sitting in your business concerned and worried about things, like the perception that people have on you whether you are empathizing appropriately with their problems, if you are worried about being sustainable, giving back or being able to experiment with new things, if those are things that you have, in the back of your mind that our worries, this episode is talking to you is going, yes, some of these concerns could be grounded in the prices that we have in our business and looking at our prices and going can what could what could changing my price do for me. And that's really what we're talking about. And all this kind of wraps up in a bonus one here, this is the sixth bonus bonus. One is it focuses on your quality of life. So we recently took on a new client. And during the meet and greet, we were talking about price, as we do with everybody confirming what had already been texted and was in the contract and all that good stuff and what he had seen on the website, and he had offered to pay us considerably more than what we had agreed on. And his exact quote to me was, if you make good money, you will be happier and more likely to keep doing this, I want you to be happy. Now, after almost 11 years of doing this, I've never had a client say to us that they want us to be happy in that way and linking it back to the finances of the business. Now this is obviously not saying that more money is the solution to our happiness,
Meghan 16:31
Mo Money Mo Problems.
Collin 16:34
Exactly. That is not what this is talking about. When we have margin in our life, though, if we have margin in our budget, you're less stressed, this gets back to a little bit to that burnout, you're less, you're not working as hard, you're less likely to suffer from that burnout from the compassion fatigue. And you're you're able to have that space in your life to reflect and heal from things that happened to you. And you're not always operating at 100%. It really changes your perception of your value and the value of your time you start recognizing I'm worth it, I'm worthy of whatever this is that I'm going to do you stop doing things that don't align with your worth. We talked about doing things that align with our goals that align with our values. What about things that don't align with your worth? That's a different approach to understanding what our prices start speaking to about ourselves about our business about our services.
Meghan 17:32
I think this really hit home for us about the ninth year of doing business when we were slowly when we started talking about hiring staff. And we had to obviously pay them at least minimum wage. And we didn't realize just how much we were undervaluing our time. We were not factoring that in because I had to pay staff now. And actually, we were not going to be as profitable as we thought because we were not charging what we would be paying our staff
Collin 18:06
or what would you be willing to do with ourselves, oh, it's easy for me to run and get the keys or it's easy for me to spend an extra 20 minutes over here it's or it's easy for me to go and do these visits. But now all of a sudden, whenever I start to put in a bid black and white a price tag on that, it cost me how much to have somebody go do that. Wow. I was really undervaluing my time doing that. So I need to make sure I'm valuing their time and they're paid appropriately. And that means my prices have to go up.
Meghan 18:36
And so I think it would be an interesting experiment. If you are solo to go in and do that research. And you it's okay. If you never want to hire staff. That's totally fine. Right. But I think it would be interesting to go in and look at your state's minimum wage. And you know, if it's super low goes a couple dollars above that of what you would actually pay somebody and run those numbers and say, am I am I actually paying myself what I would be paying somebody else?
Collin 19:03
Are you operating in a profitable manner? Again, the whole pickup drop off, go here, go there running all over the place. If you have to pay somebody hourly to do that, would you still make enough money on that visit that really puts it in stark perspective of what we're actually doing with our time going again, this align with your worth? Do the tasks align with your worth? Well put dollars and cents to it charted out and see, and then you can really start see that's a really good way. I'm glad glad that you brought that up making because I still think about that going, would I pay my staff to go do this? Is it worth their time? Well, let's look at the dollars and cents to see if we can figure this out. It's a great starting point. Because you can start to question if it's all worth it. If you're under charging. You start having these seeds of doubt come into your business. I've been there in a visit going they paid me how much to do this. This is not worth
Meghan 19:56
it. That's particularly come into play when there's like diarrhea on the wall. Oh, like the cat missed the litter box? Yeah,
Collin 20:03
well, in early on when we were way, way, way cheaper than we are now, and people would have seven 810 dogs, and I'm trying to get everything done and you just look at this and you go, this is, this is not worth it, this money that they've paid me is not worth it, I don't want to do this anymore.
Meghan 20:21
And so with potentially undercharging, if you never raise your price, you'll never know the ceiling of your services value. You know, maybe you see where you want to be price wise, but you don't think you have the skills or the knowledge to get there, you still see a gap, a skill gap there? Well, you don't have to keep that skill gap, you can, you can fill it in with knowledge and experience, you can hire a coach and try out new services. But a lot of times these things cost money there are you know, free things and free resources out there. But a lot of times the trainings and the certifications, those costs money. And in order to do that, you need to be charging appropriately.
Collin 20:57
So Megan just did a thought experiment. I have another one. Go ahead and take a moment right now. And imagine how you would structure what you would personally do in your business. For if you charge $30 for a 30 minute walk? What would you need to know, do implement have on hand to make that service? Something that you could offer to your clients, which implement training aspects? Well, you need to go and learn about training, fill that skill, that knowledge gap, would you implement special waters and massages? Oh, you need to go learn about dark massages and pressure points and all that good stuff. Maybe you're already at $30 for 30 minutes and haven't changed what you do in a walk at all. You've just raised your prices to keep up with inflation and the cost of living. But you still have your years of experience your expertise that fills that skill gaps. Importantly, here, over time, it doesn't have to happen all at once. But look at a price point that's above where you are right now. Because many times we do that we go there's no way that I could charge XYZ. Well, what would it take for you to get there, personally, and then start filling that in one brick at a time?
Meghan 22:11
Well, because I mean, frankly, in 1020 years, we're all going to be at whatever price you just thought of. Because, you know, I never thought we'd be at the price point that we are now 10 years ago. But we are. So again, it
Collin 22:25
can happen over time. But if you are looking at something and going, I need to change this, I want to change this, think about where that starts with you and how you want to fill that in. And that's where this personalization, this customization, and this individualistic approach comes in where there's no set standards of what a typical walk or dropping look like, we get to fill that in with our expertise, our goals and how we want to serve our clients. So
Meghan 22:50
basically, we feel that you need to be raising your prices. Here's your monthly reminder to raise your prices.
Collin 22:57
And just look at this in a holistic approach. That's really what it is, we're not going to tell you exactly what to charge or how to charge it or anything like that. Because you know, you your area, your clients and the services that you're offering. The best? Well, we want to make sure is that everyone's looking at that and asking that question, Am I under charging? Am I under charging? And that's impacting the perception and I undercharging? And that's, that's impacting how people think I'm connecting with them? Am I actually not sustainable? Like I thought it would be I'm not gonna be able to give back to those charities that I love. Do I not have time to experiment is my quality of life being impacted by this? Am I am I am I not realizing the true value of the service that I'm bringing, that is all the all of those are impacted when we under charge. And then we can start experimenting and changing with our prices here and there. $1.50, maybe it's a whole $5 however, you want to structure that. Make sure you're communicating that well to your clients to make sure that you have that planned out. But if you feel like you're being impacted, this is a reminder that you don't have to be impacted. It doesn't have to be like this.
Meghan 24:05
If you've ever felt like you have undercharge in your business, and you want to share a little bit of that story with us. You can email us at feedback at petsitter confessional.com. Or if you need a little bit of help, knowing what to charge and how to implement that in your business, your specific business and specific problems in your business. We actually offer consulting so you can go to petsitter confessional.com/consulting. for that.
Collin 24:30
Yeah, let us know if we missed anything. We'd love to hear from you.
Meghan 24:34
Thank you also to pet sitters associates and our amazing Patreon supporters for financially supporting the show today. Thank you all
Collin 24:41
so much.
Meghan 24:42
Talk to you next time. Bye
