5 reasons why low prices damage your business - compensation lessons from the book “Homeless to Billionaire”
I recently stumbled across a book that’s included in my Audible subscription: “Homeless to Billionaire” by Andres Pira. He is a top real estate developer in Thailand who tells his story of a rocky start before he found his legs and became a billionaire. In the book he speaks of 18 wealth principles that he discovered along his journey. I felt that principle #14: pay more, give more, keep more needed to be a topic for this blog and for this photography audience. More specifically: PAY MORE.
Andres Pira speaks of the pay more concept in relation to a team/ employees. Many of you don’t have any employees, but actually that’s not quite right. You have one. You are the employee of your business and you are also the boss of your business. This advice rings true for all of those charging low prices - it is damaging in more ways than one. Damage on multiple levels can become irreparable fast. Many state that they keep prices low to be affordable to everyone, but that’s the BIG, SECRET COVER UP, isn’t it? The truth is, those words are code for “I’m scared to charge higher prices” - cuz on the outside the first one sounds magnanimous and selfless rather than the second that sounds meek and powerless. The first step is to face your truth: you didn’t enter business to lose money, but to make it. Beyond another BIG, SECRET COVER UP — that you’re afraid to admit you want to make money for fear of looking greedy or heartless — if you acknowledge your truths fully, you can transform them from stinking, useless thoughts to possibilities of success.
Andres Pira is a smart man who has made his way to the absolute top - far beyond me and anyone reading this blog. Let’s listen and keep an open mind to what he says. I’ve taken the liberty to listen to his book and apply his lessons to the photography world where you are in a business with an employee of one. The lessons are just as powerful, if not more, for us, because your boss and employee share the same body. Can you call yourself out for being a bad boss? Can you assign blame if the employee doesn’t perform?
Here are the five top key points from his pay more section applicable to our industry. None of this should be a surprise for you when you consider the working world of bosses and employees, but perhaps this can change your perspective on your own business as well if you are in the boat of low prices.
Employees who are paid more are more engaged.
When you have increased engagement, this translates into clients sensing more value being provided to them. When people aren’t worried about the money - because it’s a good amount- they can really focus on the client, the relationship, the details of the transaction. They are happy to serve and do it well and don’t slog through their days for minimal reward.
When you’re paid $50 for a session and are delivering 20 or more images, this takes a LOT of work and effort on your part - a session is committed time and the process of uploading, culling, editing and delivery is intensive. The compensation your boss gave to you as an employee doesn’t match that output. Can you tell me honestly that you’re not preoccupied with the fact that you only yielded $50 (and part of that goes to taxes, and part to expenses before it even gets to you as salary)? It’s stressful to know how many $50 sessions you need to even pay your most basic bills and that takes up a lot of bandwidth in your brain. We should be able to put the money situation to bed so to speak, so that we can be preoccupied instead with our clients and their incredible experience with us, so that they come back again and again.
Damage: That $50 undermines your ability to serve clients in a top-notch way, and is counter to what you actually want to achieve - having great clients and a profitable business.
TWO: “If you want the best, be working with the best”
This is a pretty common sense statement that no one would dispute in corporate circles. Top performers earn top dollars, right? You can’t get a top performer on a non-performer compensation - it only makes sense that compensation is commensurate with top skills (see #4)
This is a loaded topic for many a photographer. You don’t feel like a top performer so you don’t feel deserving of top dollar. But you have to ask yourself - how do top performers get to the top? They weren’t always that way - they climbed the ladder so to speak, elevating their skills, pushing through challenges, learning from mistakes and having someone give them opportunity to aim higher and be compensated better. If you’ve ever asked for a raise and your boss had told you to come back in three months with certain achievements and they’ll give it to you, then you know what needs to be done and motivation kicks in to get there. But then transition someone to becoming a photographer and all of a sudden they are aiming lower instead of higher - what the heck happened?
So it’s not necessarily a good idea to feel like something - top performer or not, but better to ask if you want to be a top performer. If you do, then ‘ask’ your boss what it will take to get to the raise (and specify what you want that raise to be).
The funny thing here is that if you promise yourself a raise in 3 months, it will be less motivating and more terrifying than an external boss doing it because it’s not you who is accountable for that increase. Some other division of the company brings in the money that gets you paid, where being a photographer, you’re also that division of the company. You have to try to be able to look past that fear, at what a happy employee you’ll be when you have a raise. Because when you’re happy and on cloud nine, you feel invincible! Even your first win with your raise could be enough to convert you for life to be a top performer for your clients, and then be paid as the best.
Damage: If you strive to be a top performer then it harms your business to pay yourself a salary of peanuts because the top performer won’t emerge without the motivation to something better. This leads to the next point:
Three: The downward dance spiral of low price and low performance
Andres Pira says that when a company is solely focussed on maximizing profits and minimizing expenses, they’ll often pay employees “as little as they can get away with.” Yes, that’s definitely a way to cut expenses. But the side effect of that is that it’s the “perfect way to have workers, in turn, provide as little effort as they can get away with.”
Just as top performers command top dollars and they perpetuate this positively by bringing in results and reinforcing they deserve the top dollars, what happens when you’re paid like crap? Do you want to work hard and achieve goals when you’re sour about how little you make? Low compensation can breed hate for something you even have a passion for, because it’s exhausting to work for a wage that’s insufficient or even insulting. The downward spiral is perpetuated here. Some may put on a brave face and in the spirit of integrity, try to do an amazing job anyways cuz that’s who they are, or to get noticed so that someone blesses them with a raise, but for the most part, they’ll go in, punch the clock, do as little as they can to not be fired, and punch out. And never go above and beyond because no one is giving them anything above or beyond a poor salary. Sometimes by circumstances we are forced into taking this work but it does zero for your motivation and morale. And when you don’t perform, the company doesn’t make its numbers, and well, perhaps minimizing employee wages wasn’t as great a strategy as the company thought.
You don’t want your only worker - you - to provide as little effort as they can get away with, do you? Back to point #1 - employees who are paid more are more engaged. You only have one worker to serve your clients and when that worker is doing as little as they can and aren’t engaged, how will that impact your ability to book and retain high paying clients who require engagement? If you can’t afford the things that support engagement - proper software and systems, luxury touches, and you’re scraping and scrimping with everything - what is that saying to your client? The low price usually says it all. As a consequence, low price tends to attract clients who can be more difficult because they are tied to the price and not to you as a person. So they want to milk the bleep out of their dollars and that usually translates into taking up your sweet time with exceptional requests, complaints, payment delays. And, well, you aren’t paid anywhere near enough to tolerate let alone help these clients and you lose ground.
Damage: A downward spiral to the bottom of a deep, dark, hole of hampered performance and lack of motivation which strangles your ability to serve clients at your best.
And:
Andres Pira summarizes this well: “[paying the] lowest possible wages cripples employee performance and engagement, and damages your bottom line.”
“Great people don’t work for garbage wages”
Did you have one or more jobs before you entered the world of photography? I bet at least one. Did you look at job boards and skip over minimum wage work? Did you ever ask about a salary in an interview and cringe inside when they quoted something quite a bit lower than you’d hoped? I know when I looked for work when I was younger, I wanted to find the highest paying job I could get with my skills. And I’ve been working since my teens! As I advanced in life, that never changed and while sometimes I had to settle because I wasn’t the top performer, I always sought opportunities that would pay me as nicely as possible and then elevate skills to gain better compensation. I bet you did too. No one really sets out to read through job postings to look for the lowest paid job? And yet, many of us transition to becoming a photographer - which is a skilled profession and entrepreneurship, and start taking massive backsteps. You know who else in an entrepreneur? Richard Branson as an example. Mark Zuckerberg. Mr Wonderful. Barbara Corcoran. When you think of entrepreneur, do you think freedom and wealth or do you think fast food hourly wage and bottom dollar? Yet, we come into this world of entrepreneurship and skilled worker and accept the fast food salary and lowest dollars, in the name of those who can’t afford photos (see the BIG, SECRET COVER UP in the opening paragraph). Tell me, are you as a low priced photographer poised help people gain affordable photos, or would a billionaire like Andres Pira or the others I mentioned here better poised to do it? They make and multiply their money and can then afford to give back in great amounts, where you cut your money to the point where you may eventually be unable to continue with this dream.
Damage: This is a defeating contrast, isn’t it? This can’t be what you want. No one on this planet wants to work for poor wages and will avoid it if at all possible. But you, as your boss, may be giving exactly that to your employee. What can a garbage wage eventually do to a great person who has a good heart to wants to help others?
“If you want people to perform at higher levels, set the bar higher. You can’t excite the top performers when you have low expectations”
This one is a doozy. Set the bar high, and then it makes sense that those who rise to that bar are top performers and deserving of the top dollars. Conversely, low expectations won’t enthuse anyone, but they might just prevent the absolute and utter terror of setting higher expectations and then having to meet them. I solidly believe after years in this industry that many photographers price low because somehow if they fail, the low price will make the failure acceptable. I wrote a post about pricing for your mistakes that talks more about this. If you have low confidence and charge someone $100 then the pressure to perform is not as high as if they paid $1000. I’ll venture to say that many photographers stay small and play small in order to justify any damage if they mess up — and they fully expect to do so even if they’ve never messed up! This is like leading a business while tied with ropes and having anchors tied to your ankles.
Damage: Being fearful of rising up to meet higher expectations keeps you and your business in chains, preventing you from moving to where you truly want to be. Feelings of burden and defeat.
What do you think of the lessons from Andres Pira and his book “Homeless to Billionaire” and do you think they indeed ring true for this industry and gulp, maybe to you? Be a great boss. Hire the best, treat them well, reward them for being a top performer because when you do, they will give you back in spades. And by spades I mean attracting, booking and keeping great clients who will pay you for your engagement with them because they want value and service and satisfaction. Isn’t that better than a deep, dark hole of poor compensation?