In our industry, it’s not unusual for a client to ask us to include travel in our proposals.
So, we look up airfare costs, hotel costs, and anything else needed — and then we have to decide what to do with it. Do we pass it through at cost? Do we mark it up? If so, how much?
I was discussing this with a client recently, and he said, “We can’t mark up travel. Clients won’t pay for that.”
As I challenged him, I realized that many owners, like him, are likely suffering from the same mindset: We forget that it’s okay to profit from our value.
And that’s true even for services that are secondary to our primary offering.
Offer Value, Earn Profit
When someone points out that you’re making money on something you’re doing for your customer, the tendency is to become self-conscious. You start to feel guilty about making money on a service you think is easy to carry out, so you cave on price or margin a little bit.
But you’re overlooking the fact that “easy” services, or secondary services, are very valuable to the customer.
We all need a little reminder here: Why are you apologizing for doing something valuable for your customer and making money at it? That’s what the fair exchange of goods and services for money is all about.
As a business owner, your number one job is to make a profit. And you earn a profit by offering value to your customers.
If what you’re offering isn’t valuable to the customer, then either you haven’t done a good job of explaining the value or that particular customer didn’t ask for and doesn’t need what you’re offering. Either way, it’s a salesmanship problem.
When you understand your customer’s needs and wants, then you can provide for them at a profit.
The things you consider valuable don’t always turn into gross profit. What’s important is what your customer considers valuable. Flip charts, air travel, deliveries — it may not be sexy, but it’s still providing value to the customer.
Once you know what customers find valuable — even if it doesn’t seem difficult or high value to you — you can and should make a profit on it.
‘But I Could Do That Myself’
Customers are adept at saying, “Wait a minute, I could just do that myself,” but that’s often not really the case. And even if it is, they probably don’t have the time or desire to do it themselves.
So yes, they probably could arrange their airfare. But they’re not going to. And, just like a travel agent charges the cost of the ticket AND their services, you need to charge for the value of the service you’ve provided. It’s not a markup. It’s the cost of the service.
There’s value in doing something for your customer that makes their life easier and ensures the job will go well.
How to Approach the Cost of Secondary Services With Clients
The fact is, YOU are better at doing these things than your customer is. And your customer doesn’t really want to do them.
At bottom, you’re really offering your customer two massive benefits:
- Lack of complication
You offer convenience by taking something off your customer’s plate. “We can take care of this. We’ll just put it on your bill, and that’s all you have to worry about.”
You remove complication by taking on travel arrangements (in this example) for all 12 of your technical team — who all have different schedules, live in different places, have different travel idiosyncrasies, and are moving from show to show — and your customer never has to hear about any of it.
I used to tell my clients, “You have no idea how many times I’m going to have to change these flights. You don’t want any part of that. Let my travel department do their job and put up with all that stuff.”
The same holds true with trucking, logistics, expendables — all the things we bring to the party that make life more convenient and less complicated for the customer and increase the value of what you’re doing.
Frame everything in those terms: convenience and lack of complication. You’re providing the things they don’t need to understand or parse or detail. You’re doing it for them, and making it all go away.
One option you might explore is using flat fees for your secondary services. For example, at one point I switched from charging travel + service fee to a flat rate for all airline arrangements.
So rather than saying, “This person’s airline ticket is $400, but this person’s is $600,” I just started charging $750 for all airline tickets. The client might complain, “That seems like an awful lot. You can get flights for $300.” But I’d say, “I can’t get all flights for $300. Some of my tickets will cost $1,200.”
What if the Customer Objects?
When the client makes it their business HOW you make money, they’ve crossed a line.
They’re just being customers, but at some point you have to ask, “Well, where would you like me to put my profit?” Because you have to make a profit, and you have to put it somewhere.
If the customer wants to believe that you didn’t put any profit on your travel, that’s fine — as long as you put the profit somewhere else.
Bottom line: Have the conviction to stop apologizing for making a profit. It’s your job. In fact, it’s your first job. Everything else you do supports job #1, and you don’t have to be embarrassed about it.
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