IF YOU TRIPLED YOUR PRICES… 4 ROADBLOCKS TO MAKING MORE PROFIT.
Businesses can do better- can earn more, owe nothing and be less stressful -but for some nagging problems. If you can solve these 4 problems, you can live the dream. Heck, solve 2 of them and have a better business.
If you tripled your prices tomorrow would you lose all of your customers? If the answer is YES, then your company has not carved out a niche for itself in the marketplace. You have no brand and you are just one of many in the industry, scrambling for the same buck and always in danger of losing to your competitors. Have you spent any time turning your Unique Selling Proposition into reality for your customers?
A few years ago, Burberry raised the prices of their iconic overcoats. The company wanted to regain its exclusive status and that price increase kept their coats on the backs of a chosen few. Few companies have enough strength in the marketplace to do this. How well do you market your advantages in the marketplace? If your “edge” is low prices, you are doomed to languish in the lower quartile.
Can you borrow money at any time from the bank and are you their favourite customer? If not, put on your banker glasses and take a look at your company and its financial statements. Are they rosy or rocky? Are you heavily indebted and could you survive an increase in interest rates? Will a minor business downturn cripple your company when it struggles to meet debt obligations? If the answer is yes, you have identified a source of great stress to you and a great weakness in your company.
I have reviewed nearly 150 companies, and many business owners cannot read the financial metrics provided by their financial statements. Even an hour a month spent crunching some numbers would result in an action plan to deal with the long term roadblocks in the company. Most are in the balance sheet and not related to the P&L where most owners feel they have a handle on the metrics.
drowning in Paperwork
Is your administration a pain in the butt? Is there just too much paperwork, and not enough paying work? When will you turn your administration into a support function to the company instead of allowing administration to dictate when and how and how much?
A company I used to own was a service provider to a giant box store. The payment for my services passed through 12 hands before it got to the mailbox. How much would be saved by a thorough review of the steps taken to process paper?
The Profit Waterfall
Are your profits pouring into someone else’s pockets? Are you and your salespeople giving away “free stuff” like delivery, extended warranty, and technical support that you should be charging for? .
There is a history of companies unbundling their services and now charging for something that was originally free. One look at the history of Microsoft Office Suite shows it all. Originally the Access database programme came as part of the suite. Now it is a separate item charged out at $368. Without changing costs, Microsoft added more to its bottom line.
Not Living the Dream
Business used to be fun and now it isn’t. Every day is problems and paperwork, long hours and weekends at your desk. What happened to the dream of being able to run your business on 40 hours or less a week?
If this is you and you don’t have the answers ask someone who has worn those boots and found ways to step on the problems. Is it easy? NO. Is it worth it? That answer is your call.
Andrew D. Gregson is a licensed financial professional who holds a Master’s degree in Economics. Mr. Gregson is a former business owner, writer on business matters, published author “Pricing Strategies for Small Business”, entrepreneur, former owner of 2 franchises and 5 start-ups and has worked as a Chicago based business consultant.