Believe In The Value Of Your Product

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I ran into a client this morning who told me about a difficult negotiation he’s currently having with a critical customer. The customer represents a significant portion of his startup’s revenues, but servicing the contract is so cumbersome that it is stifling growth and opportunities elsewhere. Moreover, the product was initially underpriced. The contract term is up this year and my client has asked for a price increase for a renewal. The customer has indicated that it may not want to pay the price increase. My client said that he’s holding firm and is willing to move on without the customer.

He can do this because he believes in his product…more specifically, the value it creates. If the customer doesn’t see it, then he will find another customer. But he’s not going to sacrifice price just because the customer is asking for it.

I frequently see our startup and small business clients make this mistake – they let the customer dictate value, rather than the other way around. I fully understand how difficult it is to get your initial customers, so don’t misinterpret this blog as me advocating for an absurd pricing strategy (something that needs to be tested and refined). But do not sacrifice the value of your product just because a customer is asking you to do so. If you believe that the value is there, so will others. You just need to find a new customer.

About the Author
Kevin Vela

Kevin is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, M&A, fund representation, and gaming law.

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