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Wednesday, 14th December, 2016 8:34 pm

Low-Ball Pricing Will Sink Your Business

Published in Business Practice / Be the first to comment! /

Pricing Matters

by Michael Gambino

I can’t imagine that Frank B. Nightingale had much competition at the time when he practiced his business of garden lighting, now called landscape lighting.  He was the first to enter the marketplace.  However, I can only assume he faced challenges in selling his services for a premium price.

Prospective buyers needed to be educated on exactly what they were getting, so that they could understand the value that existed.  Education is a key component to successful selling.

There is no way of knowing, but we can connect the dots and assume that Mr. Nightingale did very well financially.  Enough so, that he built the Kim Manufacturing Co. in 1933, a very solid business, which still exists today.  Along with the fact that during his lifetime he owned several high value real estate properties.  It is safe to say that Nightingale sold himself and his products for a respectable profit.

The Common Mistake

If I had to pick the most common mistake made by new and established business owners in the landscape lighting industry, it’s that they under-value themselves and price their services too low.  This practice or trend is also considered, “low-balling” in the construction and home services industry.  It’s a practice where you allow low prices to drive your business.

Business owners are motivated to generate enough business to keep the operation afloat, especially so in the early stages of development.  But, this is a flawed strategy that will most certainly lead to your company’s demise.  Learning how to become a successful business owner means dedicating yourself to understanding business fundamentals.  A necessary part of this is learning to price appropriately.

I will admit, I nearly fell victim to the low-balling trap in my earlier days.  I was scraping for business any way I could and looking for ways to ensure a constant stream of cash flow, but my bids started drifting lower and lower in price.  The middle-class customer would hire me consistently at this lower price point, but I was working harder and harder for less and less.

The Change

It wasn’t until I studied salesmanship and practiced those skills that my business really took off.  I can remember one particular day that enlightened me so much, it was a tipping point in what I was doing.  I gave a low bid on a huge property and instead of getting a gleeful response, “when can you start?”, I get a multitude of questions.  They asked why my price so low, as compared to the competition…..if I was going to do quality work…..and, what kind of references I had that could prove my abilities.  This threw me through a loop and it opened my eyes to the fact that I could actually be losing business because of my low pricing!  What was most concerning to me was that I was losing the demographic I most needed–the wealthy, time-challenged, and highly connected property owners.

Targeting Buyer Class

I have found that most quality-minded, upper-class buyers view low bids as a warning sign.  In their mind, they consider that we must be cutting corners somewhere in order to stay in business.  A super low bid equals ‘low quality’ work and even worse, this will include services.

It is true that many of the middle-class customers are most concerned with price over anything else.  Therefore, this is the competitive factor involved with selling to them.

Middle-class do not and should not be your ultimate target group, as they will not provide for the most profitable jobs.  Rather, focus on targeting on the upper-class or higher-end projects, and charge what you are worth.  Target this group aggressively and you will effectively be able to support your business and make a decent living.  There’s no point in being a dreaded “low-baller” that works more, and makes less.

Mike Gambino of Gambino Landscape Lighting, Inc. is a professional landscape lighting system designer/builder that has been designing, installing and maintaining systems for more than 26 years.  He resides in the Los Angeles area with his wife and two sons.  To visit his website or to contact him about a project, go to www.gambinolighting.com.

Author: Mark Carlson

Professional landscape lighting designer located in the Sacramento region of N. California. I am a consultant, specifier, technical writer, and activist to promote excellence in this specialized discipline. My company is award-winning and I have done projects throughout the state, N. America and internationally. My business, Avalon Lighting Design has been serving at this capacity for 18 years and it now resides in Orangevale, CA. I perform as an individual designer and contractor for most of my local projects and in a collaborative effort with Gambino Landscape Lighting. This intriguing relationship is one of a kind, as we fulfill to primary roles in this trade/art-form this is unmatched by any of our competition. We lead in the advancement of this craft by continuously raising the bar to standards and practices. I serve with Mike Gambino in the preservation of history for this unique trade--landscape lighting. We have made it our goal and mission to preserve the history of Frank B. Nightingale, the "father of garden lighting"--the man who started this discipline in 1933. Additionally, we republished his book called, Garden Lighting (1958) with an enhanced version called, "The Original Garden Lighting Book" (2013). It allows Mr. Nightingale's words to be redistributed and protected for many years, as well as us providing relevant commentary and updated photos.

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