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What are you worth? Pricing the value of your business

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Greater Baltimore Committee news story

Companies often undervalue the cost of their products and services, said Angeline Huffman, founder of HFS Associates, LLC. Many businesses underestimate their worth and do not have the courage to charge consumers the price needed to keep the company profitable.

“You need to have the guts to charge what you’re worth,” Huffman told GBC members in a meeting on Tuesday, Sept. 11. Proper financial management is critical to business success, and that includes accurately pricing the value of your products and services, she said.

Value-based pricing is just one of the strategies companies should consider when pricing their services, Huffman said. Pricing based on operating costs and market supply and demand are also viable options for businesses.

However, each has their disadvantages, Huffman warned. Value is difficult to quantify mathematically; overhead does not account for years of experience; and market price makes it easier for customers to shop around.

When using value to price goods and services, business owners should not worry about cost affecting the customer’s decision, Huffman asserted. “People can always afford what they want,” she said. “If someone wants or needs what you are selling, it has value.”

When implementing value-based pricing, Huffman recommended using cost analysis and market research. Some steps business owners should take when determining their perceived value are:

  1. Find out client needs and challenges
  2. Ask the importance of fulfilling the needs
  3. Understand the benefits of fulfilling needs / negatives of not fulfilling it
  4. Convert benefits into a dollar figure to quantify service

Failure to understand the value you’re providing, or the value your customer really wants, is a recipe for disaster, Huffman warned. “Just remember: It’s not worth doing unless the price is right.”

Angeline Huffman is the founder of HFS Associates, LLC, an accounting and business advisory services firm, providing cash flow and bookkeeping management to small business owners.

GBC Emerging Business Council discusses small business challenges and strategies

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Greater Baltimore Committee news story

The Greater Baltimore Committee held its first Emerging Business Council meeting on May 22. Members of the newly formed council and representatives from Maryland’s Department of Business and Economic Development (DBED) and BB&T Bank discussed small business challenges and strategies to help better prepare for success in the Baltimore region.

Samuel Lloyd, DBED assistant secretary for small business, explained to members the new role the state will take in supporting small business throughout the region. Brant Standridge, senior vice president of BB&T Bank, addressed the challenges of emerging business from a financial perspective.

“Our goal is to bring real value by connecting small businesses with existing government resources,” said Lloyd. The new small business division was created by the state this year with the goal of becoming the focal point for connecting businesses to both public and private sector resources.

However, the state does not want to compete with existing business resources within the community, Lloyd asserted. DBED will be assigning small business associates throughout the state to establish a critical link between incubators and small business.
The state will also provide guidance and counseling on issues such as acquisitions and mergers, strategic planning and succession, finances, workforce planning and educational development. The DBED small business division plans to be fully staffed in three to six months.

From a financial perspective, BB&T’s Standridge emphasized that emerging business success relies on having a strong attorney, CPA and banker, along with a quality business plan.

Several other important issues for small business managers include attracting and maintaining a quality workforce and coping with the rising costs in health care which are sometimes overlooked. If these issues are not handled properly, it can negatively impact a business’ success, Standridge warned.

The GBC’s Emerging Business Council provides assistance through development programs, networking opportunities, regular meetings, and a resource guide to small businesses and entrepreneurs who are members of the GBC. In order to be a part of the Emerging Business Council, a company must have fewer than 50 employees, or have been in business fewer than five years.

Motivation enhances employee performance, expert says

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Greater Baltimore Committee news story

Being a great motivator inspires employees and gives companies the performance they want, according to Joni Daniels of Daniels & Associates, a national personal and professional development consultancy firm.

Daniels highlighted four ‘keys’ to being a great motivator and discussed the impact motivation has on a company and its employees with GBC members at an April 24 Breakfast Briefing. Daniels referenced several motivational theories from prominent psychologists to support her argument.

Four keys to motivating employees include talking, listening, asking questions, and awareness.

Daniels stressed that open, transparent communication, acknowledging comments and suggestions, gaining feedback through questions, and awareness of employee perceptions are all vital to employee performance and retention.

A company’s message, vision and initial impression also affect current and prospective employees. The message and vision needs to be exciting and supported by everyone, Daniels explained. Providing the necessary programs and resources to new employees is also very important. “The way we start out makes a big impression,” Daniels said when discussing company orientation.

However, there are other motivational factors outside of the company that management must recognize. According to Daniels, employees are intrinsically motivated in three different ways – achievements, affiliation and power (D. McClelland – High Needs) – referred to as preferential styles.

Other obstacles include self image and self esteem. Employees have a particular perception of their strengths and weaknesses built on years of feedback from peers and mentors; some of which dates back to adolescence. Daniels warns that these perceptions can be very difficult for managers to reverse.

Daniels also referenced well known management theories, such as Herzberg’s theory of motivation and Maslow’s hierarchy of needs.

Unfortunately, there are some employees a manager cannot motivate. “Some employees, no matter what you do, it will not work,” Daniels explains. “Sometimes it’s necessary for managers to say, ‘okay, I can’t find the key to this lock.”

Daniels & Associates specializes in personal and professional management training and development programs in speech, conference, keynotes and seminar formats.

Alternative energy preview: Solar power

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Greater Baltimore Committee article on alternative energy ahead of GBC’s 2008 Business Outlook Conference

Solar power is a clean, renewable energy that is an effective supplement for existing power sources and ideal for harnessing electricity in remote locations, according to its advocates.

Solar energy, or photovoltaics, is an abundant renewable resource that produces no pollutants or greenhouse gas emissions. According to the United States Environmental Protection Agency, using solar power to supply a million homes with energy would reduce CO2 emissions by 4.3 million tons per year – the equivalent of removing 850,000 cars from the road.

Solar power is an excellent energy source to provide remote locations with power, according to the Solar Electric Power Association (SEPA). The technology is highly reliable, requires little maintenance, and is more cost effective than laying the required high voltage wires for fossil fuel power plants.

Photovoltaics are also a smart solution for small or intermittent electricity needs. Many areas in the U.S. have already invested in solar energy to pump water, power communications equipment or highway construction signs, and a myriad of other small electrical uses that traditional power grids are unable to reach, SEPA says.

In a residential and small business environment, solar power can help reduce electricity costs. The power created by solar panels offsets utility-supplied energy consumption, and in instances when the system generates more electricity than being consumed, homes and businesses can accrue credit from utility companies.

The increased use of solar energy as a supplement for existing power has provoked construction manufacturers to begin developing roofs, canopies and windows with photovoltaic technology to help ease the integration of solar power in homes and office building, SEPA reports.

The government is also increasing its support for solar energy. With the Energy Policy Act of 2005, homeowners and businesses who install solar energy systems will receive a tax credit worth 30 percent of the system cost (homeowner tax credit is capped at $2,000). Maryland currently offers grants that cover 20 percent of solar power system costs. The grants are available to residents, businesses, and local governments.

Solar power is not limited to individual applications. Large-scale solar thermal technology, known as concentrating solar power (CSP), converts the sun’s energy into high-temperature heat which is then channeled to an on-site power plant and used to make electricity through heat-conversion. Solar thermal plants are capable of generating more than 300 megawatts of electricity.

Other technological advances in solar energy include replacing silicon – the material used to absorb sunlight and convert it into electricity – with a thin film of copper, indium, gallium and selenium (CIGS), which would reduce material costs. With newer technologies on the horizon, engineers expect solar energy to be price-competitive with fossil fuels within 20 years.

However, despite advancements in research and technology, costs today remain significantly higher than other existing power sources, say opponents of solar energy. According to experts, solar power costs 25 to 50 cents per kilowatt-hour – as much as five times more than conventional fossil fuel-based electricity. Current average U.S. residential power prices are less than 10 cents per kilowatt-hour.

For more information about solar power and its applications, visit the Solar Electric Power Association’s website.

Alternative energy preview: Hydropower

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Greater Baltimore Committee article on alternative energy ahead of GBC’s 2007 Business Outlook Conference

Hydropower is a proven technology for electricity production, capable of generating large amounts of renewable energy with no CO2 emissions, according to its proponents.

Hydropower represents the world’s single largest and most well established source of renewable energy, supplying nearly one-fifth of the world’s electricity, according to the U.S. Hydropower Council for International Development. More than 20,000 MW of new hydro capacity is being installed each year.

According to the National Hydropower Association (NHA), hydropower is the most widely used non-polluting source of energy in the U.S. More than 10 percent – or 77,000 MW – of the nation’s power is supplied by hydroelectric facilities, which is equal to nearly 500 million barrels of oil a year. About 96 percent of U.S. renewable energy comes from hydropower.

Hydropower is the most efficient and reliable renewable energy alternative, according to NHA reports. Its turbines are capable of converting more than 90 percent of available energy into electricity. Hydroelectric plants have the ability to start generation without an outside source of power and can go from zero power to maximum output rapidly and predictably.

New technologies, such as wave, tidal and hydrokinetic energy are also being developed to harness the power of larger bodies of water like seas and oceans.

In a national public opinion survey, hydropower was seen as a viable energy alternative. The 2002 poll by Bisconti Research Inc. found that 93 percent of individuals believe hydropower is important or very important for meeting future electricity needs.

However, opponents to hydropower believe large hydroelectric plants pose a threat to wildlife and the surrounding environment. Hydropower facilities can drastically alter the local environment. Reservoirs cover large areas of land, flooding places usually dedicated to agriculture or forest preserves. Large dams also change watersheds. The quality of water, fish populations and migration patterns, silt deposits, river flow, and vegetation are often affected.

Maryland has two hydropower sources: a micro hydroelectric plant on Deep Creek Lake in Western Maryland, and the Conowingo Dam on the Susquehanna River in Conowingo, Md. The two dams supply approximately 570 MW of power, which accounts for four percent of Maryland’s electricity output.

For more information about hydropower and hydro technology, visit the National Hydropower Association’s Web site.