Professional Accountants in Gravenhurst & Barrie, ON
BusinessPRICINGMODEL – pricing the right way to build your dream business
Business owners love to talk business – the interesting customers they have, the deals they get from their suppliers, other business owners who have innovative business ideas, their “aha” moments – but turn the subject to pricing and there’s a lot of ducking and diving. Why is that? This has always been a mystery to me because price is the key driver of profit and quite frankly if you want the freedom you thought owning your own business would give you, then you MUST HAVE PROFITS. So why is price not the hot topic of discussion at every business networking meeting?
There are over 40 different pricing strategies a business owner could adopt, but many business owners don’t really pay any attention to how they arrive at their prices. I find there are typically one or more of the following three pricing strategies used:
- find out what my competitors are charging and charge a price somewhere in the middle or even worse charge less than lowest price
- calculate your direct costs and charge a mark-up on costs - often discounted every time the customer winces
- charge the dealers recommended price
These methods of pricing are guaranteed to keep you in negative cashflow territory and on the treadmill of working harder and harder with no visible improvement in your lifestyle.
Tell a business owner that they need to increase their prices and usual response is “I can’t do that, I’ll lose all my customers”. Many of my clients will tell you that they took a leap of faith and were surprised that they lost very few customers. I think part of the problem is that back in my parents’ day (which was a very long time ago) volume meant increased profits and many business owners are still using this old fashioned thinking. The reality is that with every sale that loses money you dig a bigger hole for your profits to disappear into and therefore the more volume you have the bigger your deficit and the faster your freedom disappears.
The BusinessPRICINGMODEL is customised for your unique business to give you the customers you want at prices that will make your business profitable. When your business is profitable, you can build the business of your dreams that provides the freedom to do the things that are important to you.
Here’s how it works:
- We meet with you and carry out a price diagnostic to assess your pricing environment today.
- We then take you through a pricing strategy exercise that examines the pricing options for your business. We will be crunching numbers in this session so that you can be comfortable with how each strategy works. Through our structured approach, we then look at which pricing strategies will optimise the profits in your business. Then starting with a blank piece of paper, we create the pricing model that is best suited to your business and will attract more top tier customers.
With pricing strategies in place, customised specifically for your business to optimise profits, the obstacles to building your dream business are blown away.