The Hidden Thief In Your Business - Your Price?

The very thought of increasing your price typically brings on for most business owners the gut-wrenching worry of losing customers, losing sales and ultimately losing money.

But at the same time most business owners I meet also feel they are too cheap for what they provide their customers.

They mistakenly feel powerless as if they have a gun to their head and have no choice but to meet the market's expectation with their pricing, when in reality they are literally robbing themselves. Before I continue, consider this:

Sales Income = 100 items x $10/item = $1,000
Minus Expenses = $900
Net Profit = $100

Sales Income = 100 items x $11/item = $1,100 (Price increase 10% from $10 to $11)
Minus Expenses = $900
Net Profit = $200 (10% Price increase creates a 100% Profit increase)

Does that sound like a good reason to read on?

So how do you increase your price without in turn reducing your sales?

In a previous life, I helped multitudes of SME's increase their price by a relatively minor percentage that made absolutely no difference to their customers and yet made a significant difference to their own bottom line profit. And I am still regularly surprised just how many small businesses, who think they are similarly priced to the rest of the market, are actually under-priced for a variety of reasons. So this strategy does work, but it is a flawed, once-only, short-term boost to profits. And there is a far better way.

So, more importantly, how do you increase your price and achieve increased profits sustainably, year after year?

The answer is relatively simple.

Price is a direct reflection of “Value”, so the higher the value you get from a product or service, the higher the price you are prepared to pay…and conversely, the higher the price, the greater the expectation of Value. For example, I shop at a local organic shop. The big supermarket chains down the road are more convenient and significantly less expensive but the value I get from knowing my food hasn't been sprayed with chemicals means I am prepared to pay a lot more despite that the cost makes a significant dent in my weekly budget and means I have to sacrifice in other areas. And on a side note I've noticed recently a significant hike in their prices...and yet, for me the Value still exceeds the cost.

If you can’t get comfortable with increasing your price then:

- It is possible that this is because you believe your Value to a customer is not discernibly better than the Value they would get from one of your competitors. I've never seen a business that didn't have the potential to provide something uniquely valuable to their customers though I've seen many who didn't realise what they had.

- Perhaps more likely, you just don’t believe your customer or prospective customer will be able to understand and differentiate YOUR Value compared with the Value they might believe a competitor would provide them.

- Or most likely, you are convinced that most customers are not LOOKING for something different, just a cheaper price.

While all of these concerns are understandable, they are by no means insurmountable. There is a way to change this perception of Value from the customer’s perspective but it is NOT the customer’s responsibility. They are not just looking for the cheapest option...and if they don't understand the Value we provide, that is not their fault, it is OURS. It is OUR responsibility to firstly discover and then define our value in a way that enables a customer or prospective customer to make an informed decision. Make it clear the Value that you provide compared with your competitors.

In every business there are examples of customers who in spite of our inability to clearly convey our Value do actually get it and are happy to pay the price for it, but they are the very few who we celebrate loudly and often, because the vast majority of customers in most businesses simply remain with us through apathy until we either disappoint, or until someone else offers a better price or less likely, greater perceived value.

We can choose to keep these customers tied in through understanding the Value we provide, through delivering that Value consistently and through clearly conveying the Value we provide compared with everyone else in our industry. And we can attract more of the right customers at the right Price, a higher price that recognises our Value.

If you need some help to create a valuable difference in your industry, or If you already provide greater value but need some help clarifying the value in your difference, why not get in touch or signup to receive future articles.

 

I Have Something To Confess...I'm a Failure!

Talking about failure is never easy for anyone, let alone someone whose life and business are focussed on helping others achieve success for themselves. And while it's widely acknowledged that anyone who has achieved and sustained success in life, in work, in business, has also accumulated a lot of failure along the way, we still do tend to steer away from admitting failure, or from associating with someone who we know has failed...let alone seek their advice on business success.

Yes, I’ve had a lot of success in my life, in my career, as a CFO, as a GM, as a business owner, as a business fixer and as a business coach.

But I’ve also had my failures.

And it is one of my biggest failures that taught me the biggest lesson of my life…and why today I feel completely confident and comfortable as a Business Coach, helping others to not just succeed, but to Make a Difference.

A few years back, a client asked me to step in to “right” his business after he had tried unsuccessfully, on 2 occasions, to hand over the reigns of this 40+ year old family business to a professional General Manager. On both occasions the appointments had proved unsuccessful and so he asked me as a trusted adviser to step in to reverse the fortunes of the business and rescue it from near financial collapse.

I did, and together we turned that business around. I was ready to leave and told the owner as much (3 times over a number of months), but my ego got the better of me when he asked me to stick around and grow the business. And here is when things became unstuck.

I was successful, I was a “Directive” leader , someone who was studied and experienced in business, in what worked and what didn’t. Highly analytical, I prided myself on deeply understanding every aspect of the business. And so, “I knew best”.

Technically, and to this day I remain confident, I was right.

But the funny thing about business is that “Technically” is only a part of the challenge. There is a minor technicality that can get in the way of the best laid plans…a minor thing called PEOPLE.

Even the very best laid plans are worth zip, zero, zilch, if the people who are a part of putting the plan in place are not on board. Maybe they don’t understand the plan, maybe they don’t agree with the plan, maybe they don’t feel motivated to work for you or the plan, maybe they have an ego too, maybe they aren’t just not on board but perhaps they even want the plan to fail.

There are so many possibilities when it comes to OTHER people.

And that was my mistake. I genuinely believed that if the plan made sense, could be logically argued, if everyone could have the opportunity to meet and discuss and challenge the plan and have their concerns and challenges answered, even have their suggestions considered, that everyone could be brought on board and the plan could be executed.

WRONG!

No matter how hard I tried, and regardless of the position I held as General Manager, some of the key players simply were not in any way even remotely interested in supporting the plan. In fact, some even worked actively to make the plan fail. And I could look to them as the problem…and for a time I DID consider them the problem…and no doubt they were A problem. But the real problem lay with me…as it so often does with most businesses, lay with the owner or person in charge.

Needless to say, when I had finally had enough of trying to turn the tide. When I decided I needed to take some time out to figure some things out for myself, on my fourth attempt to leave, the owner agreed. Funny that.

So I took a 6-month sabbatical to figure out “Who I Am and What’s Important to Me”. In fact that is exactly what I told my wife I wanted to do and to my complete amazement and surprise, she agreed instantly that it was the right thing to do and she supported me wholeheartedly.

That’s a lesson in itself. If your partner can be that supportive of you and it surprises you (because you don’t expect unquestioned agreement) even though it shouldn’t, then you’ve got a pretty good partnership happening.

But that’s not the moral of the story.

Turning Failure Into Success

I immediately went out and found myself an office. I rented the space and for the next 6 months, I went into that office, every work day most weeks, for anywhere between 5 to 12 hours at a time. And I slogged away at those 2 questions:

Who am I?
What is (truly) important to ME?

I didn’t really know where to start to answer these questions, nor have any guidance to help me, or even what to do with my findings, so I won’t go into the detail of that very long and difficult journey figuring things out. But it was what I learned here that has made all the difference. To me, to my life, to my business and to my clients’ businesses.

I figured out what made me tick…I found out what made other people tick. I found out WHY people do the things they do, even when sometimes it is the opposite of what makes sense and what stands to benefit them the most. I found out why people…business owners, staff, customers, suppliers and everyone else in the community…why they behave the way they do and most importantly what motivates them to leave things the way they are and what motivates them to change.

Everyone knows (don’t they?) that PEOPLE are what will make a business successful or a complete failure. Whether it’s the business owner, management, staff, suppliers, customers or even community, at the end of the day every business is, like it or not, about PEOPLE and the best laid plans are nothing if they are not focussed around PEOPLE.

Suffice to say. Once I was a good business person, a successful business owner and manager, because I understood how BUSINESS worked. I understood the numbers and what drives them. I understood how to turn the numbers around, I understood business process, systems and much more.

Now I am a great business person, because I understand how PEOPLE work.

I understand why they often DON’T DO what we as business owners WANT them to do. Why don’t Customers rush out and buy our great products/services. Why don’t Staff follow the process but also think for themselves and make good decisions when necessary.

I also understand why they WILL DO what we as business owners WANT them to do. Customers WILL rush out to buy our products/services. Staff WILL follow our processes when needed but will also think and make good decisions when they need to.

But only when WE understand what makes US tick, what makes THEM tick, and when we commit to refocussing in the right place, delivering value for PEOPLE. It just so happens that what I figured out is also the key to INNOVATING, no matter what the business, no matter what the industry.

I now coach businesses to change the way they DO business, to understand WHY we do things that are unhelpful to our own cause, to refocus on PEOPLE and use VALUES as their motivation to INNOVATE. Most importantly, to not just Make Money but Make a Difference and enjoy long-term, sustained success as a result.