Nearly every business leader I meet is keen to tell me how good they are at what they do, and how much their customers value them. That’s great, but often that value is not reflected in the financial results for the business for one simple reason.
You don’t charge enough
In the speaking world, I advised a speaker to charge almost 3 times as much for an event as some of my colleagues thought she should. Her message to me was “I went for it. But only because you gave me the confidence to do so”
If you don’t ask for it, you won’t get it
It’s probably obvious that if you are a speaker or a business advisor what you charge is fundamental to how much you take home.
In every business, pricing can make a really significant difference to the bottom line. Imagine a high volume, low margin distribution business that has a turnover of £10m and a net profit of £1m. (I am keeping the numbers easy!)
If that business could increase its prices by 10% their profits would increase by £1m. Their profits would double.
You may be saying “I can’t put my prices up by 10%, I’d lose too much business” but I’d encourage you to think carefully about that and take a look at your model.
If my distribution business is making a 20% gross profit now, that means every £1 of sales generates just 20p in gross profit. When they put their prices up, the 20p becomes 30p so you would have to lose an awful lot of business to be worse off
If 10% is too much for you to risk, how about 2%? Increase your prices by 2% every year and the effect on profitability is amazing in a very short period of time.