Many business owners spend lots of time trying to work out how to improve their profits, and some have even worked out convoluted ways to try and eke out another pound here or there and increase their bottom line. However with any business there are two ways to improve your profit:
- Increase your prices or
- Decrease your costs
There is no other way.
The challenge for the business owner is to step back and look at the numbers within the business and work out whether you can increase your prices, reduce your costs or both.
Let’s look at pricing first.
The level of your pricing will dictate the type of customers you will get, the type of people who want to work for you and your position in the marketplace. There is a desire in every market for a range of prices – think about cars. You can spend hundreds of thousands on a Rolls Royce, or several thousand on a second-hand Ford Fiesta. Both command a price relevant to the perceived value of the product (and effectively both do the same job of getting you from point A to point B), but do you think the owners of Rolls Royce are concerned about their price being higher than the Fiesta? No. They know they won’t sell as many as Ford will, but they will maintain their pride and positioning within their pricing structure.
You are the experts of your service, and providing you are delivering quality, and especially if you offer a solution with a unique selling point (USP) that is not comparable in the market you should be confident that you can increase your prices. Yes, it may reduce your customer base, however you will recover some of the loss of business in the increased charge to the customers who remain, and it will also free you up to bring customers in at the new price level.
So don’t feel concerned about raising your prices.
When it comes to cost, you need to be tough, but realistic in how you spend your money. Can you acquire the same supplies or service, cheaper with the same quality (and maybe the same supplier) just by asking for a discount, whether that is as a one-off, or due to the volume you buy?
Look at everything you spend money on and see if there is the equivalent offer but supplied cheaper – you’d normally change your phone or fuel tariff if you knew it could be cheaper elsewhere so think like that on the costs to your business.