Pricing – would you like an easy £1,000?
Pricing is a tricky subject for business owners, and many shy away from increasing prices for fear of losing customers. The thing is, a small increase in prices can have a HUGE impact on the bottom line of a business.
If you don’t review your prices you’re not only leaving money on the table, but you’re also limiting your own growth.
During an OutsourcedFD call with a client earlier today, we discussed pricing, and there was a definite ‘lightbulb moment’. He wanted to improve his cash position, but hadn’t reviewed his prices for well over a year.
With inflation at 2.5%, he had effectively REDUCED his prices over that time, while his supplier costs have increased. Thus profits have been squeezed at a time when the goal was to improve them.
That should be enough for any business owner to reconsider their pricing structure, but there is more!
Given that the current turnover in the business is £400,000, a small increase of 3%, to take account of inflation and a little rounding, adds £1,000 every single month to his profit figure.
And there’s next to no effort required…
So, I have to ask the question – when did you last review your pricing?
Yes, if you drastically increase your prices, you may lose some customers. Most businesses though need to lose far more than they actually will to negate the benefits of a price increase.
Earn more from every customer, and you need less of them, so less activity is required to service them. Reducing the pressure of processing huge numbers in a business can make a huge difference to everyone involved within it. You’ll need less leads to keep the wheels turning too.
There is always of course a more selective approach.
You may choose to increase your prices for new customers, or around a certain product or service only. Or perhaps for those customers who you perhaps wouldn’t be devastated to lose, as a way of testing the process. There’s no law that says everyone has to be on the same pricing structure.
We had a client within our former business for whom pricing was a constant source of pain. Her business was profitable, but could have been so much more so, if she could only have had the confidence to increase her prices. Reducing the numbers of customers she was dealing with could have enabled her to reduce the hours she was working in the business, reduce the pressure on recruitment and development, and on the lead generation too.
Sadly it took her a very long time to adjust her pricing, but when she did, she started to appeal to larger customers, and the business experienced the growth she’d been chasing. The opportunity cost in terms of the extra hours worked and the strain of juggling everything would have been considerable.
Our existing client is going to review his pricing having realised that he can add a chunk to his profit every month for such little effort. If you’re unsure of your pricing position or the impact small changes may have, please get in touch to chat things through. We can take your numbers and show you the positive and negative implications that a potential change will have on your bottom line, which may inspire you to go ahead!