Don’t Undercut Your Piece of the Pie

The Profit Pie

Some friends of mine are starting a painting business. Initially, they found it difficult to get contracts as most small businesses do. The best way is to just go out and start knocking on doors to introduce yourself. I suggested they hit small businesses where they can talk directly to the owner and just drop off 20 or 30 business cards a day.

It’s pretty much guaranteed in this market that you can line up 2 or 3 jobs just by doing that kind of networking for half a day. But most people, for whatever reason (lack of confidence in their own business), just won’t do it.

The Subcontracting Trap

So, as a lot of entrepreneurs do, they started talking to a contractor to get work. The good thing about being a subcontractor is they go out and get all the sales, do customer service, etc. Which takes that burden off you.

The bad thing is they usually take up to or over 50% of the pie. It can still be good money, but it’s little more than a glorified job. And it doesn’t make your business the killer cash you need to grow your business; it’s more like earning a wage.

Now, subcontracting can be a great way to get started. It’s paid training and experience. But at some point you have to cut the cord and go out on your own.

Just Put a Bigger Number on the Table

After some discussion, my friends decided they didn’t like the idea of earning 40% of the pie and put a plan together to go out and start networking their own business. And then my buddy said something really strange to me …

He said, “Those guys would charge $6k for a house and only give us 40%. And we could do that house ourselves for like $3000”.

Eeeeeerrrrch! … now hold on a second. That’s still only 50% of the pie. It’s only 50% of the going rate. There’s that confidence thing again. And you know what … let’s go with it …

But let’s do it the right way to get the business rolling. And it’s all in how you frame the proposition. So here’s the deal; for a $6000 job, you charge $5500 BUT you give your customer a $1000 business-launching discount for a limited time only.

That’s an easy way to get your business rolling, get a bigger slice of the pie, give your customers a savings incentive AND give your confidence-meter some slack too.

Don’tcha just love pie.