Don’t Take it for Granted

It struck me recently that there are so many people who take their personal talents for granted. I have known some really intelligent people who think their gift is the norm, and so do not value it. I think it is just the same for some people who are very experienced in a certain field, which naturally now seems very simple to them. They often take it for granted that everybody has their level of understanding.

I think this can be true in accountancy. When I look at a set of accounts, particularly when a business has been struggling, the possible reasons for their problems will leap out at me. They get their accounts every year. They sign them off every year. How is it that they cannot see what I can see? The reason is the same as why I would not try to run their business, whether that be retail, hospitality, engineering or whatever. I lack that level of understanding that comes from the appropriate training and working in that environment over an extended period.

Many people who venture into self-employment do so without the appropriate experience behind them. After all, how difficult can it be to operate a shop, a B&B etc? It looks simple enough. But we see the accounts and those who really know what they are doing will do very well whatever the business. Newbies will struggle, and many will give up.

These days one of the most important aspects of any business is pricing. Now, I know there are five aspects of any business:

  • A product or service that people want
  • Marketing so they know what you are offering
  • Sales so they actually pay you money
  • Fulfilment or how you deliver the goods or services in such as way that people want to buy from you again.
  • Accounting, so you know that you can and that it is worth your while to, continue.

These are the fundamental principles of any business. So where does pricing come in? Well, it’s part of the whole process. None of these five principles works in isolation. Pricing therefore affects marketing and sales but probably the place where you really see its significance is in the accounting and these two important questions.

  • Have you made sufficient profit from the trade and have sufficient cash to continue?
  • Have you made enough to compensate you adequately and therefore you want to continue?

In the last two years with costs rising and margins being squeezed, everybody is increasing their prices. There are always those who will object and you may even lose one or two customers and so you must be courageous. Now, you always have to be mindful of your market but you may not actually want to be the cheapest. It’s a matter of product, marketing and sales.

However, get it wrong and the answer to one of both of the questions above will be a resounding “no” and you will be you out of the game. I know it is hard, but the alternative is much less palatable and could be final. So, how do you know what prices to charge? Don’t ask me, we make these judgements in our own business all the time, but that is based upon our own experience. I may not know enough about your market to make that decision for you.

One tactic that I  have shared over the years is incremental pricing. If you are uncomfortable putting up your prices overnight to cover 5%, 10% or more accumulated inflation, then do it gradually. You could put up your prices monthly by just a fraction of this increase, an almost imperceptible rise, but over a year or 18 months will achieve your desired outcome. Yes, there will be some people who notice and comment, but most will not.

Pricing is one of the Black Arts of being in business. You have to steel yourself. The alternative may be to get a job with somebody else who did manage it.

 

Alan E Long

The Long Partnership

07770 738770

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