If you’re like me, you are willing to do whatever it takes to win a deal. As our market becomes increasingly competitive, it’s easy for MSPs to use price reductions as a closing strategy. After all, it’s better to get a customer with a little margin than to not get one at all, right? Or, perhaps we trim a few of our more expensive licenses from the stack for a reduced cost option? Anything to make the buyer happy, right?
At first, that sounds like a creative and honorable solution. Well, let me ask you a question: Would you pay less for a puzzle that came with five pieces missing?
NO! Hopefully, you wouldn’t pay anything for a puzzle that’s missing pieces! Because if it’s not a complete product, it simply shouldn’t be sold.
Your services cost you money. Your time costs money. Your energy costs money. Your peace-of-mind costs money. Your future costs money. And in order to carry out your mission statement, you have to have a black number on the bottom line.
So how do we avoid this frustrating trap during the sales process?
Know your numbers
The best way to strengthen your convictions about pricing is to have a very clear understanding of what your services cost you to perform. Have an accurate read of your fixed monthly costs and your per-seat costs to deliver managed services. Don’t forget to factor in your business-development margin (cost for lead-generation.) Once you know exactly how big your margin is, you will instinctively protect it.
Of course, you don’t have to share your margins with your prospects. In our industry, I don’t believe there is such a thing as an unethical margin. The marketplace will keep you in check if you try gouging your customers.
Know your value
There is a reason that people need Managed Services. Without technology, businesses cannot function. And without MSPs, technology cannot function as it should. Businesses simply need you, the same way they need the internet. It is also important to remember that value is determined by a buyer, not a seller. There is a reason why a prospect is engaging with you for your services. Ask them what it is, and help them understand how you can solve their problem.
If your prospects are fighting you with pricing, it’s very possible that you didn’t accurately portray the value that you provide. This is a much larger conversation that I’ll write about in the future, but if a customer responds to your proposal with shock and awe, the opportunity to sell this deal at full price may have already passed.
Break the news slowly
Nothing is more frustrating than working a sale over several weeks only to have it fall apart at the finish line when you present numbers. Conversely, not all prospects are ready to hear what managed services cost when you haven’t had a chance to qualify them. I’ve always had success by breaking my price down over every step of my sales process.
First, I break the news that I do not sell break/fix; they’re going to have to pay a fixed monthly fee. Second, I give them a range of what that can cost per seat. And finally, they’ll see the actual numbers. By breaking down this decision into three smaller decisions, we give the buyer time to process what it will actually mean to work together. This keeps them locked into the sales process and continually qualifies them.
Buyers tell lies. It’s not their fault, and it’s not ours; it’s just their job. When I’m in the buyer’s seat, I’m always going to ask for a better deal. Oftentimes I am fine with the deal on the table, but I owe it to my company to see if I can get a better one. Some salespeople fold under the slightest opposition and they drop their pricing. Good ones ask me follow up questions to determine if a discount is really necessary.
Don’t take it personally when people ask you for a discount; just follow up with a question. I can’t tell you how much money I’ve made over the years by testing the authenticity of price objections. It’s much more effective, and much less frustrating, than responding with a bunch of value. If a prospect tells you that your price is high, try responding with a relaxed “Hmm. What do you mean?”
You’ll find out right away if there is any logic behind their objection, or if they’re just trying to push.
All of these techniques require preparation and practice. You don’t have to get it right every time, and you don’t have to charge full price on every single deal. Just get out there and keep practicing, keep selling, and keep solving problems.
Like this philosophy? I run workshops every month where I help MSPs make more money and enjoy their work life. Find out about our next online workshop at www.feelgoodmsp.com.