Supply and Demand – Flail and Fail or Make it Work for You

Most of us have  heard of ‘Supply and Demand’. A few of us have reached the point of our own businesses being simultaneously  ‘overworked and underpaid’. So isn’t it time to apply  the theory and improve things for ourselves and our customers?

Let’s do a quick refresher on supply and demand. You can check the full description Wikipedia, but here is a translation:
If you have more work and more opportunities in your pipeline than you can easily handle, then the demand exceeds the supply. You are overdue to change something. You have 3 choices:

  1. Flail and fail: Continue to price your services at a point where you cannot cope with the inbound work. You will be exhausted and your customers will be disappointed because running long distance on empty does not work!
  2. Increase supply: Not so easy when ‘your’ services are the primary product. Scaling up may be some people’s dream, but others (like me!!!) were happier to see the back of their employees than their bosses when they left corporate life.
  3. Increase prices: Now there’s an idea! This should lower the demand to a point where you can meet it.

Assuming that your choice is to raise prices, be aware that some of the ‘opportunities’ in your pipeline will choose not to pay the new prices. And that is OK. That is, in fact, very OK It is even the whole purpose of this exercise – some will go but enough of them will choose to pay to keep you busy. Busy enough, but not too busy.

Benefits for you:
–    More time to concentrate on fewer clients.
–    Better compensation for the time you are working.
–    Choice of whether to hire more and share the benefits of your business

Benefits for your clients:
– Better service from your business
– Better quality in the services purchased
– More reliable service since the business will be more ‘available’

suppl,y and demand curveYou know how this works on the famous little graph, right?
1. You were, at some point, producing Quantity Q1, at price P1, which satisfied the market demand, D1.
2. Demand went up to D2. Sweet! People liked your product!
3. So either you get to increase the Quantity or increase the Price, or… sell more than you can supply and flail in the gap.







If you are lucky enough to find yourself overworked and underpaid, I hope that you have the courage to cross that gap and make a change. I am. And when it comes to that famous little graph, I am excited to finally apply with my actions something that I learned with my mind decades ago and 6,000 miles away in high school. Won’t that be something?


7 replies
  1. Rana Shahbaz
    Rana Shahbaz says:

    This is the so important point to earn more and work less. Once I was listening to Jack Canfield (Author of Chicken Soup for the Soul) and he said the same thing along these lines when some one asked him, how to get the more quality time.

    He just said double the price what you do and he explained, when you do that few people will left out but often at the end of the day you will be working with less people and earning almost the same amount.

  2. Gazalla Gaya
    Gazalla Gaya says:

    Wow, reading that article took me back to school days where we learned about demand and supply and I
    have sadly not applied these principles to my real working life. Thank you for your insight. I agree with you that this would apply to new clients as you still want to reward the old for staying with you.

  3. Karen Taylor
    Karen Taylor says:

    Interesting spin on the pricing topic, Abigail!

    When I launched my administrative consulting business in 2011, two of the decisions I made were: 1. offer retainer packages instead of charging by the hour, and 2. set my prices based on what I needed to bring in after taxes and at a level that I would not have to increase for at least the first two years. A couple of potential clients chose not to schedule a free consultation with me after I answered their questions about cost. I knew they wouldn’t, though because when a person asks about cost right off the bat, s/he isn’t my ideal client if that is the primary concern. Part of my ideal client profile is that s/he is successful and financially solvent, and wants to have an ongoing collaborative relationship with his/her administrative consultant. The cost is at the bottom of the list for them. 

    I think it is important for solopreneurs to put a lot of thought into their pricing structures and ideal client profiles. It will help them to stay true to their business models and values when they come across a few persons who will balk at their fees.

  4. Frederic Gonzalo
    Frederic Gonzalo says:

    Abigail, this post is a riot! I love it, bringing back theories from micro-economics (or what is macro?) to serve the purpose of a dilemma many solo entrepreneurs are facing. Indeed, there is a delicate balance that needs to be reached, as a price increase must be justified by added value, or inflation. Loyal customers who purchase your services won’t understand a jump of 25% in service fees, but perhaps this increase can be applicable to new customers (I say 25% as matter of example, but you get my point).

    Many consultants, specially in the early stages of launching their business, won’t want to put prices too high, by fear of losing potential customers. Makes sense. But if you’ve been running the business for a while, and as you say, demand exceeds what you can provide, then opting for fare increase is a viable solution. Of course, there is always the possibility of hiring resources, but that’s a whole different topic… 😉

    • Abigail Gorton
      Abigail Gorton says:

      Thanks Frederic, micro economics methinks, but it has been a long time… This does apply more to new clients than to existing ones. And maybe the next post will be talking about the added value. In web development, social media and SEO, those of us working in it learn more every month. So rather than being able to build a site faster than a year ago, we find ourselves knowing more and wantiing to build it deeper… I have believed for years that software is like a piece of art – there is always one more thing we could do and it is never complete – we just have to pick the right moment to let go and walk away.

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