Did you ever do any economics at school? If not don’t worry I’m not going to start a blog on economic theory. But when I did a bit of it in Modern Studies and later as part of my accounting qualification I was taught all about price elasticity and the main theory is if you put your prices up demand will go down and you’ll sell less.
What they don’t tell you is that it’s rarely linear. For example if you put your prices up by 10% and your gross profit percentage is around 70% you would need to lose 12.5% of your customer base to keep the profit you had before you put your prices up.
On the other hand if you put your prices down by 10%, with the same gross profit, you would need to increase your customer base by 16.67% to have the same amount of profit before you put your prices down.
I don’t know about you, but I don’t fancy being nearly 17% busier for the same amount of profit? What do you think? If you put you prices up by 10% what are the chances you will lose nearly 13% of your customers? Very slim indeed, over the years I’ve seen hundreds of business owners follow this advice and not one has lost more than 1-2%. But even if you lost 5% of your customers you would be 5% less busy and still have extra profit there.
The reason I speak about this is not to encourage you to overcharge for what you do, but to price your products and services based on the value and great service you give to your customers. Invariably when I speak to business owners I find they are not charging enough for what they do and struggle to make a living because of it. So if that’s you, look at what you’re charging and don’t fall into the mistake I made when I started my business – charging the same as my competition. I was giving my clients much more than the average accountant and I just wasn’t making any money, no matter how many hours I worked.
Once I changed my pricing strategy I began working less hours and building a good sustainable business where I can continue to give a great service to my clients. If you want me to have a look at your pricing and show you how it could affect your profit I’m giving 3 Business Potential reviews (worth £350 + VAT) away for free to the first people to ask for one in the comment’s box so please be quick.
Email email@example.com or if you can’t wait call the office, ask for a Business Potential review and we’ll get you booked in.
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