Page 177 - The $100 Startup_ Reinvent the Way You Make a Living, Do What You Love

of a computer glitch, an employee will call the customer proactively to apologize
and ask if she would like a substitution.

“Be nice to people and provide a great service” may not sound like much of a
differentiation, but all these things add up. Whether you have a retail store or
not, you could learn something from Happy Knits.

Note to Service Providers: Raise Prices Regularly

You might expect that a price increase has a tendency to filter some customers
away from the business while making up for the loss with higher overall income.
Sometimes this is indeed the case, but many of the service providers I talked
with were surprised that almost no one left after an increase. Several said that
when they told their customers or clients about the increase, the response was,
“It’s about time! You’re worth more than you’ve been charging.” (When your
clients complain about the price being too low, you should listen.)

Andy Dunn is a developer in Belfast, Northern Ireland. He left his day job
after pitching a Web application to a CEO. Crucially, Andy didn’t just pitch an
idea—he had the idea and then acted on it by creating the entire app and sending
it over to the CEO, requesting approval. Impressed, the CEO called him up to
say thanks, and even agreed to underwrite the expenses for some additional
features.

Out on his own, Andy had no problem attracting new business, but he did
have a big problem with pricing. Wanting to appear attractive to prospective
clients, he priced his services so low that they were unprofitable. In one case he
ended up several thousand euros in debt by bidding too low and then outsourcing
part of the work. After that experience, he knew he’d have to make a change.
The change came in the form of a 25 percent raise, something he was initially
afraid to do, but he was greatly relieved after it was done.

“The simple act of raising my rates by 25 percent allowed me to either work
seven hours less a week or make a significant increase in my monthly income,”
he told me on a Skype call from Belfast. “The other, unexpected benefit was that
it gave me much more confidence. Until I upped the rates, I didn’t make the
connection that I was worth more than I had been charging.”