The new year is fast approaching, and for many, that means that it’s time to take a good hard look at your business and what changes you need to make to take it to the next level over the next 12 months. I have said this time and time again to my business coaching clients. And as we enter 2020, the advice still holds true. So today, I want to share with you the 1 thing you must at least consider doing as a business owner in 2020.
Raise Prices (Or At Least Think About It)
When was the last time you took a good hard look at your pricing structure? Too many businesses base prices on their costs, or even worse, they price based on their costs way back when they started their business years earlier. Now some owners have implemented small, incremental increases over the years but it often isn’t in sync with their true cost of doing business.
Rarely does the average business owner sit down and fundamentally rethink their pricing model. Yet, you are constantly being bombarded with increasing material costs, higher wages and increased benefits costs all which have a profound effect on your profit margin.
Other Factors to Consider
You certainly want to cover your costs, but there is more to pricing than just breaking event.
What about your competitors?
The most successful companies take both their own costs and their competition into consideration, but they also price in relationship to the cost of the status quo for their customers.
For that you want to think about how much is the problem that your product or service solves already costing them?
What is the real value of your product or service?
What is the “frame of reference” you could give your customers that would help them immediately see your product or service as both logically sound and emotionally satisfying solution? The more you are able to provide your market with solutions that other companies can’t, the greater your ability to price in relationship to the true value of your solution instead of the race-to-the-bottom commoditization that so many businesses suffer from.
How To Get Started
So, let’s say that you reviewed your costs and that of your competition and have taken into consideration the real value of your product or service. And you decide to increase your prices accordingly. How do you get started? The easiest way to get started is to start with new clientele. Leave your current customers on a grandfathered price point and update your website and marketing literature to reflect your new pricing. After a while, if you choose to, you can then roll out the new price point to your existing clientele as well.
2020 is full of promise and possibility, and with these tips you can make sure that your pricing is in alignment with your business and will allow you to increase your cash flow and really take your business to the next level by increasing profits.
Written by David Finkel.
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