We get it. Running a small business can sometimes feel overwhelming and even a little lonely.
You've got your hands full with managing employees, dealing with customers and keeping the lights on. But amidst this 'daily doing' , have you ever stopped to wonder..
"Am I making enough profit?" 🤔
Chances are your answer is NO?
So, here's 5 quick and easy tips from Purple Accounts Isle of Man to help you and your business .
Tip 1: Get Comfortable with the "P" Word
Profit allows you to reinvest, grow and keep your business thriving. So, embrace the "P" word for starters and establish what it means to you for your business goals and your life.
1) How much do you want to make?
2) When do you want to make it by?
3) What is stopping you?
4) How can you make it happen?
Tip 2: Understand why business owners don't raise prices (and why they should)
Now, let's address the elephant in the room: why don't more business owners raise their prices when it's so beneficial?
Here are a few common reasons:
Fear of Losing Customers: Business owners worry that raising prices will drive customers away. While some may be price-sensitive, many are willing to pay more for quality.
Competition Concerns: In highly competitive markets, business owners fear that raising prices will put them at a disadvantage. However, if your quality justifies the increase, customers may well perceive it as an upgrade.
Lack of Confidence: Some entrepreneurs lack the confidence to increase prices. They worry they're overvaluing their products or services.
Avoiding Confrontation: No one likes delivering news of a price increase. It can be uncomfortable, but with the right approach, it can also be an opportunity to strengthen customer relationships and build in 'stickiness'.
Tip 3: The Benefits of Raising Prices
One effective way to boost profit is to reconsider your pricing strategy. Don't worry; we're not suggesting anything drastic. But a well-thought-out price increase can be transformational.
Benefits of Raising Prices:
Increased Profit Margins: Higher prices can mean more revenue for your business, especially if your costs remain stable. This, in turn, leads to much healthier profit margins.
Improved Brand Perception: Raising prices can signal quality and exclusivity, attracting a higher-end clientele. Customers often associate higher prices with superior products or services.
Funding Growth: Extra profit can be reinvested into your business to expand your services, hire more staff, or upgrade your equipment.
Tip 4: How to Raise Prices Without Alienating Customers
Now let's discuss the delicate art of raising prices without sending your loyal customers packing:
Segment Your Customers: Identify your most loyal and high-value customers. They're likely to be more understanding of price increases, especially if they've been with you for a while.
Clear Communication: Be transparent about the reasons behind the increase. Explain how it will benefit your customers, such as improved product quality or enhanced services. Transparency builds trust.
Gradual Increases: Small, incremental price hikes are less likely to shock your customers than one big jump. Slow and steady wins the race.
Value Addition: Offer something extra, like better customer support, an extended warranty, or a loyalty program, to sweeten the deal and mitigate the impact of the price increase.
Tip 5: Learn from the best:
Howard Schultz, the visionary behind Starbucks, recognised that the company was devaluing its brand by offering discounts and promotions too frequently. He believed that Starbucks should be perceived as a premium coffee experience, not just another coffee shop.
In 2010, Schultz decided to implement a price increase on some of the menu items, particularly on more complex coffee drinks and certain sizes. While it was a bold move during a challenging economic climate, Schultz understood the importance of maintaining Starbucks' brand value.
The result? Starbucks not only maintained its customer base but also saw an increase in profits. The price increase reinforced the idea that Starbucks offered high-quality coffee and a unique experience worth paying for. Schultz's decision to raise prices was a strategic move that helped the company solidify its premium position in the coffee industry.
Whilst we are not all at Starbucks level, the theory is exactly the same and applies to all businesses, no matter where they are in their growth journey or size.
Final Thoughts:
So, remember that profit is your driving force and in many cases your reason for being in business!
Happy profit-maximising, Isle of Man fellow business owners! 💰💼
At Purple Accounts Isle of Man, we're here to support your journey to financial success.
We're a family run firm of Chartered Management Accountants in the Isle of Man since 2007. As business accountants regulated by CIMA, you can access 5* rated, trusted expert help to support your business' growth profitably and sustainably.
For a no obligation chat with a friendly expert, simply click below to arrange a Pricing Review with David and see how we can help you maximise your profits.
You can also call David on: 07624 336057 or email enquiries@purpleaccounts.com.