Is your business operating at peak efficiency? Is your revenue down?
Is your pricing strategy efficient?
Rock bottom prices can “jumpstart“ sales, but more often than not, they prevent a business from sustaining profitability. If you are caught between passing costs along to your customers or watching your profits fall and putting your business at risk, it’s time to take a hard look at your costs and your pricing structure. To make an informed decision, examine management, your fixed and variable costs, the marketplace, the quality of your products and services, and your value proposition.
Raising prices is not the only way to increase profitability. Consider operational management improvements that may boost the bottom line immediately and provide long-term profitability to your business.
Examine your business operations and look for inaccurate billing and time keeping, high accounts receivable, workflow bottlenecks, high employee turnover, poor cash flow predictions, and other indicators. Every one of these will negatively impact your business.
Calculate your fixed and variable costs.
Know your costs and price accordingly. The price of your products or services must reflect a realistic calculation of your costs. The cost of everything from rent to energy has climbed significantly. If your costs have gone up but prices have not, you’re working just as hard for less money. Examine the costs of labor and overhead and make sure your pricing reflects today’s reality. What margin do you need in order to make money?
Research – a must!
You may not have to increase all your prices. Be judicious in your choices. Compare yourself to your competitors. How do your prices stack up against their prices? If yours are significantly lower for a product or service of comparable value, make an adjustment.
Develop your selling proposition and how your brand is seen.
What differentiates you from your competitors? Add value. Always. Point out the advantages of your services, your products. Be prepared to point out the advantages of your services and products to justify an increase in price.
Raise your prices?
Price increases are a fact of life, a legitimate response to increases in costs or innovations in quality. Reasonable customers will understand. Depending on the nature of your business and your relationships with certain customers, you may want to provide advanced notice of a price increase. If you do notify them in advance, explain the reasons for the change.
Plan to Market the new price and your brand quality
Remember, there’s always someone cheaper. Clients looking for lower prices can find them. Remind clients that they cannot find the same level of quality, service, and dependability elsewhere at your price.
If increased costs or improvements in quality justify a price increase for your business – do it. Chances are that it will be more significant to you than to customers.