Wow. You’re scoring customers and contracts galore, with your products selling like hot cakes.
Problem is you’re exhausted, overwhelmed and not actually making a profit. Are you underselling your business with rock-bottom prices that simply don’t reflect the real value of your products, or the costs that go into producing them?
Let’s look at some of the signs that you’re marketing your goods and services too cheaply.
- Sales are up but profits are stagnant or down
It’s no good selling heaps of products if your profit margins don’t reflect this increased activity. If profit is failing to keep up with sales, chances are your pricing points are too low.
It can be hard to work out your pricing, especially if you’re starting out in a new business or trade. But it’s essential you get the right balance between attracting new customers and ensuring you’re appropriately rewarded for your labours.
- You feel as if you’re on a treadmill
It doesn’t matter how hard you work, how many products you roll out or how many service calls you make. Your business just scrapes by, and your accountant is not happy.
If your prices are too low, all the exertion in the world won’t cover ever-increasing costs and make your business profitable. You’ll just end up exhausted, stressed and irritable because your efforts are coming to nothing.
- You’re drowning in customers
This sounds like a great problem to have, right? Wrong. It’s proving impossible to cope. Deadlines are being missed, you’re failing to respond to enquiries and complaints, and your customer service is becoming non-existent.
It’s great to be drowning in customers if they’re paying you what your product or service is worth. If your business is only scoring customers by rock-bottom charging, your health and motivation – and ultimately your business – will pay the price.
- You win all the contracts you bid on
Again, this might sound like a good problem to have. It probably means, however, that you’re pricing your services way too low. Gratifying in the short term, it will become increasingly difficult to cover your costs and keep your business afloat – let alone make any kind of sustainable profit.
- Your customers are cheap but not cheerful
You’ve got lots of customers, but they’re the wrong sort. They’re demanding, haggling and never satisfied no matter how much value you give them.
These are the kind of customers you end up with if your pricing point is too low. Don’t be fooled into thinking your customers will love you forever if you keep their charges bargain-basement. Bargain prices attract budget clients who will constantly expect ‘extra value’ even when you’re practically giving it away.
So, what can you do about if you recognise these signs?
Review your pricing
It’s important to review your pricing from time to time, taking into account such variables as:
- Complete range of business costs.
- Realistic goals for revenue and profit.
- What your competitors are charging.
- Whether you charge by the hour, service or completed project.
You might be amazed to discover a significant gap between revenue and spiralling business costs.
Provide the right customer experience
Quality customers are generally prepared to pay higher prices for their goods and services. In return, however, they expect a quality business experience.
If the experience your business offers is low-end, cheap customers are the only ones you’ll find. It’s vital to make sure your business practices are keeping up with changing times – get cloud-based technology, make your website mobile friendly, and consider setting up an 1800 number so customers can call you free of charge.
Don’t soldier away for nothing. Let your prices reflect the real value of your products and services, and reap the rewards.