Whether a product or a service is being offered, Carla Fallone, CEO of Fallone Business Resources, says “all businesses are in business to create wealth.”

One critical element in this equation is value pricing — the difference between what a product or service costs you and what you get for it. But Fallone has found that many small business owners — particularly service professionals — do not know how to price effectively, and often they get in trouble because they do not value their own time properly. “They tend to give way too much of their own time away,” she says.

Fallone will speak on “Pricing Your Products and Services” on Thursday, January 13, at 6 p.m. at the Mercer chapter of the New Jersey Association of Women Business Owners at the Doubletree Hotel Princeton. Cost: $45. For more information or to register, go to njawbomercer.org.

Fallone suggests the following process for coming up with a price that will yield the value it desires:

Establish objectives. Probably the most important decision involving pricing is whether the company wants to offer products and services to a small niche market or more widely. Consider an automobile mechanic who is good at foreign cars and wants to offer service for all different brands.

This decision brings with it others that will raise expenses. For each car type, he likely will have to buy additional tools and analytic metrics. Alternatively, a focus on only Audi or Lexus or Toyota would be cheaper for the mechanic internally. “A lot of small and large businesses don’t want to niche or focus on just a certain market segment, and that’s why they get in trouble regarding pricing,” says Fallone.

Determine pricing tactics. Tactics are the means a company will use to achieve its pricing objective. When Southwest Airlines decided to differentiate itself through price, it built a business model that enabled it to make higher profit margins based on a price.

The company instituted two kinds of internal process efficiencies. First of all, Southwest flies mostly one type of airplane. “If they are using all Boeing 737s, it makes internal maintenance processes a lot more efficient and a lot less costly than another airline running different types of airplanes,” says Fallone. The airline also uses a simple process to book passengers, which does not require a lot of people.

Decide on the exact price. Although it is important to know the going rates, small companies often make the mistake of looking at what their competitors are charging and deciding to charge the same price. Say a competitor is charging $50 an hour for Quickbook services. Unless the small business has done the necessary research, it may find that the competitor is providing services via college students that it pays $10 an hour. If the owner’s time is worth $40 an hour and she charges $50, then her profit margin will be $10. Instead, when going to set a price, an owner might want to ask herself, “Can I offer the same services at $60 an hour but add to it some value?”

Fallone offers an example of how a small business was able to change the perceived value of its services. Because most realtors offer their customers free market comparisons, the perceived value of that market analysis is now zero, because all realtors do it. And if a realtor doesn’t offer it, then customers will think something is wrong.

A client of Fallone’s who had gotten a broker’s license and wanted to focus on foreclosures decided to increase the perceived value of a market analysis by charging $50 per hour to do one. The result? “Within three months, his entire week was booked,” says Fallone. Why? Because people perceived that at $50 per hour they were going to get a better market analysis.

Fallone mentions two other types of information that are essential to pricing decisions: knowledge of customer needs and of the economy. Suppose a fencing company is offering its customers three versions of fencing, black or white metal and picket wood. Then it is missing out on customers who want some type of customization regarding colors and materials and are willing to pay more for it. Another aspect of pricing decisions is the economy at all levels, from municipality to the county, state, and federal arenas.

Fallone was born in Newark and grew up in Warren. At Rider University, she earned a bachelor’s in sociology and political science as well as a master of business administration in finance.

To really understand Fallone’s next career steps, however, requires a look back at her entrepreneurial forebears, who go back three generations on her mother’s side and four on her father’s. Her mother’s family came to the United States from Europe in the early 1900s. They wanted to mine gold and went out to Wyoming by covered wagon, ending up one sunrise at the foot of the Rocky Mountains. Although they found no gold, her great grandfather worked in iron mines there for about five years.

The longer they stayed, the more children they had, and because her husband was not earning all that much, Fallone’s great grandmother decided to become a baker. In 1907 she had some miners help her build a structure near the mine entrance, and she got up every day at sunrise to bake bread for the miners as they came to work.

Fallone’s grandmother and grandfather eventually went back to Italy, but returned to the United States in the 1930s. Her grandfather was a butcher in Newark, and her grandmother did all the baking for the shop.

The entrepreneurship on her father’s side was all in construction, and pretty much all male, except for her grandmother on her father’s side, who made and sold beer during Prohibition.

Fallone’s parents were both involved in the building business, where they spent many years running construction companies.

After she got her master’s degree, Fallone worked for DIA Nielsen, a company based in Dueren, West Germany. When the company set up an office in the United States, it hired vice presidents of administration (including Fallone), sales, and production and gave them a certain amount of startup money. When she left four years later to have a baby, the company had grown from the initial three employees to 91. “It was my first experience at growing companies and being entrepreneurial,” says Fallone.

Next Fallone fell back on her family traditions and opened an Italian bakery in Hillsborough, which she ran for nine years. “I think I wanted to follow in the footsteps of my ancestors, the strong female entrepreneurs,” she says. “I have always loved to bake. It’s something I learned to do with my grandmother. She was the master baker, and taught me many amazing things.”

When the 4 a.m. to midnight hours got to be too much, Fallone sold the bakery and “went into semi-retirement, but that lasted only a couple of months. “Being an entrepreneur, you don’t usually retire,” says Fallone, “so I started a consulting firm.” She began in 2002 by running financials for small businesses, and then began to market herself as a small-business consultant.

In 2002 Fallone launched Fallone Business Resources. She has consulted internationally on business development and product placement, conducts entrepreneurial training for the state, counseling entrepreneurs and small businesses for the Small Business Development Centers as well as clients for the New Jersey Economic Development Authority. Fallone is also an adjunct professor at the College of New Jersey, where she teaches entrepreneurship and small business development.

Fallone’s interest in small businesses has also led to a four-decade hobby: analyzing local businesses during vacations she has taken around the world. Looking at businesses in China, Japan, Australia, New Zealand, Russia, Egypt, Peru, and Ecuador, and Europe, she has learned an important lesson: “I firmly believe that we here in the United States as a melting pot need to embrace all cultures and ethnicities,” she says, “and I believe it makes me a better business consultant if I learn how small businesses run in all those countries.”

In the Amazonian jungle she learned about the network of bartering done between villages. In Provence, she visited Chateauneuf-du-Pape and its many vineyards. The wine tastings were actually in the caves where the wine was stored. “The owners will not sell you a bottle of wine unless you taste it and love it,” says Fallone. And she was willing to buy, even though their prices were high.

“We paid them because there was so much care. They have a true and deep passion for their wines, and it is important to them that their customers love their product.”

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