Unless your business is mature, you have free time to kill and you already have all the money you want, stop handing out hook-ups. Budding entrepreneurs are approached by many (friends, family and then some) to share their work, time and resources as a “favor.” These freebies may seem innocent at first, but they can destroy the business you are working hard to build. There are many reasons to avoid hook-ups like the plague. These are my top four:
A hook-up isn’t really a hook-up, it’s shifting a real cost from them to you: Often a hook-up comes in the form of a discount. You own a business selling a product or service. A friend or family member wants to buy from you, but they want a discount. You don’t want to be pegged as selfish, greedy, arrogant or a tight wad, so you cave. This is the ultimate self-swindle because somebody has to pay the cost of that hook-up–and it’s going to be you. Let’s say you pay $10 for your products and sell them for $20. You give a discount to a friend or family member so they pay only $15. If you collected $20 as you normally would, you would be able to buy and sell two more of the product, doubling your revenue. But since you gave a hook-up, you can now only replace the one you sold and have $5 left over. You’re thinking, “Well, it’s not so bad. I recouped my cost and I still have $5 left.†A business is a self-replenishing entity. The business should be paying for itself and paying you. Since you just gave away $5, you now have to cut back somewhere else to make that money up so you can re-stock your inventory. A measly $5 may not seem to matter but if you give one hook-up you’ll probably give others and it all adds up.
Ralph Lauren was recently on Oprah and she asked if his children get free clothing. He said, “No, they don’t get free clothing. Ralph Lauren is a publicly traded company.†(Eye-opening moment!) Ralph Lauren, who is on the Forbes list of 400 wealthiest Americans with a net worth of $5.8 billion, doesn’t give his own children free clothes. Why should you hand out discounts?
Word-of-mouth is the most powerful form of marketing and people looking for hook-ups refer more people looking for hook-ups: No matter what you sell, at some point, if it’s a quality offering somebody is going to ask one of your customers where they got it from or how they have achieved an outcome. If you’ve given out hook-ups you have doomed your business because that’s going to be the word-of-mouth message passed on about your company. The conversation will go something like this:
- Admirer: Wow, I really like your website. Who designed it?
- Your Customer: Oh, Sharon created it. She is amazing. Really great work.
- Admirer: I see. I haven’t been able to find anyone reliable enough and talented enough to do my website. For what I want to pay (as the admirer powers off her brand new iPad and places it in her Louis Vuitton bag) I haven’t been able to find anyone who can create a design I like. How much does Sharon charge; is she expensive?
- Your Customer: Well, her regular rates are a little pricey, but she’s worth it. But I was in the same position as you and she’s really cool. She understands how it is; she’ll work with you–she helped me out.
- Admirer: Oh good. Can I have her number? Girl, I’m on a budget (as the valet pulls up in the Admirer’s leased BMW).
Though you may understand the struggles of other business owners or people who want to buy from you because you have struggled at some point yourself, giving a hook-up to help them out is a sure way to keep struggling yourself or send you back in that direction.
First, people can usually afford what they want; it’s often their priorities that are out of balance. Second, that person is going to want a hook-up every time they do business with you. Third–and this is the biggie–it’s not so much about that one person and that one hook-up, it’s about all the other strugglers and hook-up seekers they’re going to drag to your feet.
If you want to offer a lower price point, come up with a product or service that costs less to develop, acquire or make–then you can help people and manage your business professionally at the same time. This is why a lot of luxury brands now have lower cost sister brands. They won’t give you a hook-up but they will give you an amended experience. Follow suit.
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Hook-ups are a negative ROI for the time, energy and money you have invested in developing yourself: Entrepreneurs with service business are especially at-risk for subtle hook-ups: The kind that sneak up on you. Has anyone ever asked to just “pick your brain,†“ask a quick question,†or take you to lunch or dinner?
If you oblige any of these requests, be aware of what you are doing. If you are deliberately taking a little time to mentor someone or be helpful, then wrap up the conversation after a few minutes of lending your advice and only share basic information. Just as in the case of a product business, there is a real cost to giving someone a hook-up in this situation.
You have paid with your time, energy and money for the education, insight and experience that enable you to whip out those answers with lightning fast speed. You see it as “no big deal†because you do it so easily, but there is a value associated with your time and knowledge, and you should bill for it. Every time you take 30 minutes or an hour to consult with someone whom you’re not mentoring for free by answering all their questions and pouring out ideas, you are taking time away from a paying client or your time to market to paying clients. This creates a negative Return On Investment (ROI). You are not gaining value for your current activity; in fact you are losing value.
Hook-ups are a detrimental action that signal to your sub-conscious that you don’t have a real business: Have you ever gone to meet someone you had never seen before, but you somehow knew who they were once you were at the meeting place? Have you ever begin singing along with a song that you can’t re-call ever having heard but you somehow knew the words or at least the beat? Or, have you ever had “a feeling†that something bad or good was going to happen and it did? That was your sub-conscious. Our brains and sub-conscious are incredibly efficient and informed as a result of years and years of cognitive processing based on input from many different experiences and environments, some of which we are aware of but most of which we are not.
Every one of us has dealt with a “real†business. We know how they operate. We understand the difference between sales, coupons and specials versus hook-ups. We understand this on a conscious level but also on a sub-conscious level. Since you have dealt with serious or “realâ€
businesses before, you know whether you are operating one. As I am referring to “hook-ups,†I am not talking about strategic marketing tactics like trial offers or complimentary upgrades as a customer service perk; I’m talking about freebies or gratuitous discounts. Every time you give someone a hook-up your sub-conscious is registering the difference between the feeling at your business compared to the feeling at a real business.If you’ve done this over time and you now feel less motivated and more irritated, and you have begun to question why you started a business or whether you made a mistake, this has a lot to do with why.
I know it can be a challenge to avoid hook-ups because you love your friends and family. You don’t want to turn someone away and you don’t want to seem mean and selfish. But you must set clear parameters for the difference between doing business and giving back. Yes, help out loved ones when you can afford to do so, schedule community service and give charitable contributions. But at all other times when you are working to create a lasting business, take the FREE sign down.
Are you an entrepreneur who has struggled with saying “no” to the hook-ups, or have you found a way to politely let people know that you’re in the business of making money? Leave you comments below.
Felicia Joy is a nationally recognized entrepreneur who created $50 million in value for the various organizations and companies she served in corporate America before launching her business enterprise. She is the author of Hybrid Entrepreneurship: How the Middle Class Can Beat the Slow Economy, Earn Extra Income and Reclaim the American Dream and has appeared on CNN, FOX and in other national press. Felicia operates Ms. CEO Inc., a company that helps women entrepreneurs achieve more success, faster–as well as Joy Group International, LLC, a business development and consulting firm. Follow her on Twitter @feliciajoy and see her entrepreneurship columns each week on BlackEnterprise.com.