The past few years have been, quite frankly, devastating to many businesses. Budgets have shrunk or disappeared altogether. Many companies are scrambling to fight over a shrinking piece of pie. And, worse, many others are fighting over the crumbs left over by their competitors.
I was recently speaking to an event company about this very issue the other day. They have seen their revenues shrink dramatically over the last couple of years. As a result, they have been tempted to take on significantly smaller projects to get their feet in the door of large corporations, in hopes of being able to work on their large projects.
Here’s the problem with this model:
It devalues your work
If you were pitching Apple’s annual 5,000 person gala event, would you show them a $1,000 event you’ve done? Of course not. It sells your business short. It puts you in a box and tells your potential client that you’re a $1,000 event company. Working on a client’s small events in hopes of scoring their large events can have a similar outcome.
It devalues your reputation
Reputation is one of the biggest assets a company can have. You can’t buy a good reputation, you earn it. And, you earn it with every single transaction your business has when engaging your customers or your employees. If your business isn’t set up to do small events, you’ve opened yourself up to 2 problems:
- You run the very real risk of not being able to service this small project well. You’ll likely find that this small project takes up as much time and as many resources as your larger jobs, but you’ll be inclined to scale your services based on the revenue you’re getting for the project. Or, you’ll over-service the project and demotivate your employees when they see that the value they’re providing is only worth a pittance in the customer’s eyes. In other words, it’s likely you won’t meet either your customer’s or your employee’s expectations.
- If you can’t meet your client’s expectations on the small project, how could they possibly believe that you’ll exceed their expectations on a large one?
It uses up valuable resources
Just imagine what you could accomplish if you refocused your resources to attracting the types customers you do great business with or growing your existing customers. I will guarantee that this time will be worth significantly more short and long term than taking small projects to cover your overhead.
Think before you accept that project
Before you think about taking on that small job, ask yourself what the cost to your business will be. If there’s a risk of devaluing your business, under-servicing a client, de-motivating your employees or affecting your reputation, don’t take the project. And remember that turning down business can be one of the best ways to build confidence and reinforce your expertise.
[on READY2SPARK] Think before taking on that small job – http://www.ready2spark.com/2010/10/think… #eventprofs
Lara, this is all too painfully true, especially in my business (promotional products). I have to keep reminding myself of this every day.
Actually, there are two ways I’m pursuing to approach those dreaded small jobs:
1) I’m finding a way to service the smaller customers through websites and shopsites. That helps assure that they still do business with my company, but will not receive the full scale service package. I am steering more and more of these inquiries to these sites.
2) I will only handle a small job for a client ONLY if they are doing much larger projects with me. For example, some of my larger clients might have needs throughout the year for gifts or holiday items that are smaller than their usual buys throughout the year. And even then, I’m trying to steer them to the shopsites and websites too.
3) When I get a new inquiry and it starts to head into the “small job” zone, I tell the client that if they want to continue for me to work on this, it will cost them $X dollars. I had this happen recently with a former client who passed off the buying to a staffer. The staffer started to have me check into item after item after item. After a couple of these inquiries, I actually sent her to a competitor. Weird, I know. But I no longer want to continue to work for free.
We have to keep reminding ourselves we’re not charities and we’re in business to make money.
Thanks for this all-important reminder!
Interesting enough I was just having this discussion with another vendor partner recently… We almost lost a business with a major insurance firm because of too low of a price! strange when you think about it! but it was because they couldn’t believe we would be to offer them a reliable service and quality product at the price we quoted.
I think if you are going to break normal pricing structure you have to explain the reasons behind otherwise it comes back to all the points mentioned above! The trick for us was to explain why… from a technology point of view we have tapped into new ways of automation and creating an efficient system that reduced our cost, and when we go into new deals we look at the whole picture for long term involvement with a client. Taking this into account we can discount the early event to reduce the trial risk. However, we didn’t explain our thinking behind our pricing strategy for sure our clients would be questioning our offering quality!
Cheers,
-Bob
http://www.EventMobi.com
Ultimately you need to look at the potential for investing in the relationship. If the small project had potential to lead to something bigger, I would consider it but would not under sell myself. If the small project is simply small and time consuming, try and refer them to an alternate resource to maintain the value of the relationship.
Thank you, Nancy. Great points. I do hope that in addition to weighing the potential gains that businesses also weigh the potential losses. I very much agree with your comment on an alternative resource. One thing that has worked very well for my clients is to create a strategic partnership with non-competitive but complimentary businesses that can service the smaller projects. Thanks again, Nancy.