Why do so many of us expect products and services to be free or cheap because it comes from a small business? And why is it that so many small business owners oblige, selling themselves short and barely making a living?
Society has created a lot of strange norms, where people are surprised at having to pay for the skill and expertise of a small business professional but are ok with paying thousands to multinationals every month. (Yes, multinationals have their place.) The obvious example is when a big brand superstar releases their new lipstick, it is an overnight sell-out. A small business with an equally great product can struggle to get your interest or even a like on Instagram.
Why Small Business Owners Feel Pressured to Undercharge
There are a few reasons why this is the case.
First, rather than building credibility and dismantling a common perception that small businesses are less credible or have an equal or better quality product or service than larger businesses and brands, small business owners try to get loyalty and exposure by undercharging or offering services for free.
We KNOW that most small businesses are crafted with care, but it does not change the default mindset for many of us. Bigger does not always equal better.
Secondly, giving in to the pressure to undercharge comes from buying into a misguided belief that a small business should be grateful for any work they get. “Small” business means cheap or lower prices. This mindset for small business owners is unhelpful. It is a big money and confidence block stopping many small business owners from owing their expertise and thriving.
Thirdly, many small businesses have not invested in appropriate legal terms or service agreements for their services or products. No contracts mean you are on the back foot with your pricing. As a result, you are less likely to feel confident about charging what you are worth.
No service agreement or terms also indicate a lack of certainty in the service or quality of the product, a lack of business professionalism, and a lack of consideration and knowledge of consumer obligations and responsibility that builds the know, like and trust factor that makes a business successful.
Lift your game (and your bottom line) through good contracts
While there are a few reasons why small businesses feel the pressure to work for free or cheap, there are also a few solutions.
Here is what I have found from my experience of drafting many contracts and advising numerous small businesses.
Good service agreements and client and supplier contracts help small business owners value their service, products, and branding. Customised contracts help clients and customers appreciate what they are delivering and how to engage with you in the best way possible. Legally drafted contracts protect you and give you the ability to enforce the terms, for instance, to recover fees and make sure you are paid on time.
Contracts help build a credible initial experience and reputation, so your clients and customers are confident they know who they are working with, what they are getting and what is expected of them.
Finally, your contract is a blueprint, a rule book and a quality assurance tool for your business. It is a living document that reflects what is happening in your business processes and client relationships here and now.
If you think you need to build better relationships with your customers and clients, you might like to check out the podcast episode I did with Lauren Stratford from Seriously Sorted about this topic.
If you are constantly leaving money on the table by offering discounted rates, freebies, or disputes about what you had agreed to be paid, you need a service agreement or a contract review if you already have terms in place. At Love Your Legals, we have both easily-editable legal templates and custom drafting solutions, so you can start to value your business and make sure your clients and customers value you. Our free checklists are a great place to assess what legals you need for your business.