I had the good fortune – and good fun – to sit in as a judge and hear the pitches from the entrepreneurs in this year’s Knight Digital Media Center News Entrepreneur Boot Camp. These professional journalists were all working on new ways to create successful news- and information-based businesses, and many of them came up with exceptional ideas. I’m excited to see how big they can grow – because I’m confident that many of them can succeed. Their big problem was: none of them were planning to get rich off of it. And that’s a little sad. They all brought immense expertise and know-how to the business, and, for all of those hard-earned skills, were charging their clients nothing. Or, next to nothing at any rate. I see that a lot: passionate entrepreneurs, with real, important knowledge, who relentlessly underprice themselves. (As my wife would say, I’m one of them!) There are a million reasons to underprice yourself, including:
  • Lack of confidence in the market, so you try to price down to what you believe the market will bear
  • Being used to making a salary, rather than running a business, and thinking of charging in terms of making a salary, not in terms of making a profit
  • Close identification with a philosophy or idea, and wanting to make sure you don’t take resources away from others with that philosophy or idea
  • A warm heart that just makes you want to be able to help everyone
I have all of those problems, in spades. Especially the last one. But there is a way out. The first step is to realize that greed, really, is good. Not in the Michael-Douglas-in-Wall-Street way, but in the keep-your-business-running way. A good dose of greed is the surest path to a viable business. At the end of the day, only a lucrative, prosperous business that gives you and your family the life you strive for is a viable business. If you aren’t making enough money, then:
  • Eventually you’ll leave for a better opportunity – no matter how much you love what you’re doing.
  • You don’t have the resources to help those you want to help.
  • It’s hard to grow and hire others. If you do hire talented staff members, you’ll be unlikely to be able to pay them and give them the job stability they deserve.
  • Somebody else who enters the same market, making enough money to support themselves and grow, will eventually develop more resources than you and gobble up the whole market, even if you are priced lower.
So be greedy, charge that higher price. Instead of having a business in which you struggle to meet expenses every month, have one in which you:
  • Have specialist employees who do what they’re good at, so you can do the things you’re good at. I’m particularly talking about administrative assistants, bookkeepers, and the other kinds of detail-oriented tradespeople who do the crucial jobs that entrepreneurs usually hate.
  • Grow and hire new employees who share your values and goals.
  • Serve and work with a constantly growing group of consumers.
  • Get to go on a great vacation every year!
So what price should you pick? Well, that’s another blog entry for another time.