In this episode I share with you the one of the biggest reason some entrepreneurs and small business owner do not achieve the level or income they want or deserve.
Hey, Jim! Not only do you offer sage advice, but I gotta tell ya, I LOVE YOUR THEME SONG!!
Care to share?
Obviously if you have a killer products (flash back to Frank Kern with his List Control that costs 2k) there is a likely possibility that you are undercharging for your product if your revenue is what your expected. However, I don’t know if you’ve checked out the Clickbank marketplace lately? There are so many products out there that consist are of such an incredible low quality that they shouldn’t even be sold in the first place. These people really make people wary to buy products that cost more than 49$. So my advise would be to offer your first product at a low price to show your costumers that you are not providing a crappy service and then up your price.
When I think of raising my prices, I break into a sweat! I’m thinking, ‘My clients will desert me!’ and ‘my coaching business will collapse!’ But then I watched your video “The Fastest Way to Profits – Raise Your Prices” – not once but twice to make sure I absorbed your message strong and true. And these are the notes I wrote:
Am I getting any price resistance? No!
Are any of my clients complaining? No!
Am I charging what I’m worth? I have 30 years of experience in my industry, how rare to find a person with such experience! So, now i realize I am not charging what I’m worth, so here goes Jim, a leap into self belief! Now where’s that calculator.
This is one of the most overlooked ways to increase your profitability. Most small business owners set prices mainly on what their competitors sell similar products or services for. Don’t worry about your competitors. Spend your time thinking of how you can deliver a better service or product with minimal increase in cost.
The second most common mistake is to use what someone has told you is an “industry standard” mark-up on your cost. The only consideration is usually fixed costs without considering important variable costs like marketing, quantities ordered and delivery.
What is the number one way to sleep better at night knowing you have raised your price? Work on increasing the perception of value you give. Simple? Usually can be. Perceived value will give you a huge sales advantage as price is not on top of the list of items your customer considers when making a buying decision.
Too many business owners (small and large) have went out of business trying to “buy” market share by lowering there prices. They wrongly think volume will make up for the discounts extended.
Yes, I know some will argue you have to consider establishing or growing your customer base and look at the life time value of your clients. But if you are not careful you can go bankrupt trying to grow your business.
It seems to me a lot of business owners don’t own a calculator. Here is why. Math proves you can raise your prices, lose some customers and still make more money. Substitute your average sale and cost for this simple scenario and see for yourself.
Average price item is sold for is $250 with a 40% margin
100 units sold X $250 = $25,000 less 60% cost = $10,000 Gross Profit margin
Raise your price by 10% without increasing cost and lose 10% of your volume.
90 units sold X $275 = 24,750 less cost of $13,500 = $11,250 Gross Profit margin
We sold less but increased our Gross Margin by 12.5%. I think it is time to go with Plan “B” don’t you?
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