By Ed McLaughlin and Wyn Lydecker
The Mona Lisa is frequently described as “priceless.” It is a unique and marvelous work, and its value cannot be measured by something as vulgar as currency. (May your work be equally extraordinary.) It was also a labor of love – Da Vinci carried it around for four years and only parted from it upon his death. So it is priceless also in the sense that its creator never saw a penny for it. (May you never suffer that fate.) The story of entrepreneurship is frequently told as a story of following one’s dreams. For many, it is the culmination of years of the advice and desire to do what you love. Many entrepreneur forums are awash with the advice to engage in your passion and never give up. That advice, while it may help some find their inner fire, has always seemed a little myopic to me. In the Name of Love, by Miya Tokumitsu at Slate, puts a finger on why that is not enough, and can even be damaging. Her message is a little more focused on the social injustice of embracing that mantra to the detriment of laborers, but the article has some valuable take-aways for entrepreneurs, too. She explains the natural consequence of thinking this way:
If profit doesn’t happen to follow, presumably it is because the worker’s passion and determination were insufficient
I believe this is misguided thinking. Not that people don’t have this thought wiggling around in their brains, but it is not a right way of seeing the world. If you prepare your business well, especially by organizing your business model around your distinctive competence, profit will be the natural result. An entrepreneur who suffers failure is less frequently lacking in passion and determination than in good planning and a full understanding of how to offer and price his or her strengths to the world. Guiding yourself by your distinctive competence is not the same as following “do what you love, love what you do.” That should not mean you hate what you do, but that when what you do becomes your business, it is tempered by a healthy dose of pragmatism. That’s how you get paid for your Mona Lisa.
It can be very hard to know how much to charge for your product or service. It’s one thing to tell entrepreneurs to look up comparable prices in their fields, charge enough to cover their costs, and quite another to convince them they deserve to charge what others do and make a profit. In How One Entrepreneur Realized She Was Charging Way Too Little, (Business Insider, March 6, 2014), Jill Beirne Davi takes us through her personal journey of finding out what she was worth. While many of us, especially those raised in a culture that discourages bragging in any way, it can be hard to muster the audacity to charge a market price for what we do. Pundits are exhorting us to do what we do for love and passion, not money. They urge us to work for psychic income. Unfortunately, it drags down our value of ourselves and our work, and it broadcasts that lack of faith to customers. Davi describes how she discovered that she was costing herself business by charging too little – which seems like an oxymoron on its surface, but makes a lot of sense. Potential customers associated low fees with low value, so underpricing was undervaluing. Price is a strong perceptual factor. When you create your Mona Lisa, create it because you know someone wants it, and it’s something you will do better than anyone else. That’s tying your distinctive competence to someone’s needs, the quintessential requirement for entrepreneurial success. Understand the story your product’s or service’s price will tell about its value, and tell one with a happy ending. Your customers will appreciate the alignment between what they paid and what they received, and that integrity will carry your business relationships forward.
Ed McLaughlin is currently co-writing the book “The Purpose Is Profit: Secrets of a Successful Entrepreneur from Startup to Exit” with Wyn Lydecker and Paul McLaughlin. Copyright © 2014 by Ed McLaughlin All rights reserved.