I’ve said this before, but it’s worth repeating: as a business owner, you control your pricing. It’s the most powerful lever you possess.
Especially now, with plenty of people talking the economy down.
Let’s be honest. While the economy has softened, some sectors are feeling more pain than others. Discretionary spending has taken a hit. So retail brands, car dealerships and hospitality are struggling right now.
But for most of my clients, chaos equals opportunity. Here are ten smart tips to maximise your profits and your cashflow in uncertain times.
- You think your pricing is dictated by the economy? Sure, it has an effect. But ultimately your pricing strategy reflects your self-belief and your self-esteem. Downgrading your prices as soon as you encounter some headwinds betrays a lack of both.
- If you’re a commodity, you’ll be hunted on price. Ask yourself this: can a potential customer purchase the exact same product or service from half a dozen different vendors? If so, you’ll soon find yourself embroiled in a discounting war. So differentiate your offering. Make it unique. That way, there’s no contest.
- Sell outcomes, not time. Most professionals charge an hourly rate. They sell their time in six- or fifteen-minute increments. This incentivises inefficiency—the longer they spend, the more they bill. And no client in their right mind wants an inefficient accountant.
I prefer to sell outcomes. I offer all my financial concierge services for one flat fee. This incentivises efficiency—making me even more valuable to my clients. It’s a virtuous cycle.
A flat fee for service is irresistible to clients if it’s pitched correctly. Clients love fee certainty and improved value. With a flat fee, they know exactly what they’ll be paying, with no surprises when the invoice lands on their desk. Plus, they know I’m maximising my value to them at every turn. That’s a win/win, in my books!
- Listen to the 98%, not the 2%. Anytime you raise your prices, a couple of clients are sure to gripe. Maybe 2% of your client base. Rather than giving them a platform, listen to the other 98%. What do you hear? Crickets. Because the vast majority won’t whine about a justifiable price rise.
- Be careful not to give your frontline staff too much leeway on pricing. Some of them may develop the habit of offering discounts. Maybe they fold too easily, maybe they want their clients to like them. So make sure they’re following your pricing strategy, rather than playing Mr Nice Guy.
- Measure your input costs. As the economy softens, some business owners trim their usual markup on inputs. This stabilises their pricing—but reduces their profit margin.
If you’re unwilling to maintain your markup, use the current uncertainty to your advantage. Shop for a better deal on your inputs. Buy in bulk. Offer more favourable terms. Yes, some input costs might outpace inflation. But there are always deals to be found if you know where to look.
- Review your prices regularly. Don’t allow inflation to eat up all your profits. If you let five years drift by without increasing your prices, you’ll never regain the ground you’ve lost. While clients will swallow five small rises, they won’t cop one giant price hike. In fact, refusing to lift your prices during inflationary times undermines your credibility. It tells your clients that you don’t value your products or services enough to price them fairly.
- Tailor your price increases to your individual clients. If you understand their personal values and how they prefer to communicate, you’ll minimise the risk of any misunderstanding.
- I offer a 10% discount for payment up front. About two-thirds of my clients take up the offer. Otherwise, I’ll negotiate payment terms—but I won’t negotiate on price.
- We all make mistakes. I’ve overbid and underbid for work at times. Sure, I’ve kicked myself afterwards. But then I pick myself up, analyse my misjudgements, and vow to never make the same mistake again.
So if your pricing strategy needs a revamp, let me know. It’s all part and parcel of my financial concierge service!