I’m going to talk to you today about how to increase prices without losing sales.
This is a question I get asked all the time so I’m just going to show you how to do it. I call this Dollar Sign Math™ because when I was growing up my dad used to say that he could do any math as long as you put dollar signs in front of it.
I know for a lot of business owners math isn’t always the most fun thing to do so today we’re going to make it easy and put dollar signs in front of it
First, I want to remind you about my Five-Step Profit Formula:
- More Leads
- More Conversions
- More Transactions
- Higher Prices
- More Profits
The most important thing about increasing prices is to make sure that you’re demonstrating value. When your product is more valuable than other people’s (all in the “eye of the prospect!”) then you don’t have to compete on price. So the easiest way to increase your profitability is to raise your prices.
A lot of businesses have never raised prices partly because they’re afraid they’re going to lose customers. The danger of that, of course, is that if you don’t raise prices as you go, you fall further and further behind and end up with a whopping big price increase. Your customers are going to be really mad at you and many will start looking around. Most people can handle a little bit of a price increase – we all deal with that every day so focus on small, regular price increases
Let’s take a look at an example with nice round numbers because it’s Dollar Sign Math and that makes it easier…
If we sell something for $100 and we have a 30% margin it means that we get to keep 30 dollars of every sale and 70 dollars goes toward the purchase of the item. If we increase our prices to $110 – just a 10% increase then your profit jumps to $40 and you get to keep the additional $10. That extra $10 profit is a 33 percent profit increase
If you want to make $1,000 in profit and the sales price is $100 each you would need to sell 33 1/3 of your product whether it’s widgets or hours. But if you increase your price by 10% you only have to sell 25. $1,000 divided by $40 means that you have to sell 25 of them
It also means that you would have to lose 25% of your customers over this 10% increase and you’d still be at break even. That’s not going to happen.
You may lose some people and, hopefully, those are the people that are already taking up a lot of your time or causing customer service problems. Your very best customers are probably not going to leave because of a 10% price increase. And when you do increase your prices, you want to demonstrate your value again. You want to remind them of all of the things they get when they work with you.
Discounts are Dangerous
Now, let’s talk about what effect discounts have on your bottom line. Most businesses will do discounts at least once in their business life! Let’s do the Dollar Sign Math on discounts.
If you sell your the widget for $100 with a 30% profit you’re going to keep $30 and you’re going to pay out $70. But, if you discount it by 10% and you sell it for $90 you still have to pay $70. You’re only making $20 in profit instead of $30. It’s hard to make that up just with selling more.
As we saw before when you want to make $1,000 at $100 you have to sell about 33 widgets or 33 hours but if you discount it by just 10%, you have to sell 50 widgets or 50 hours. Those of you that are working by the hour would have to sell 50 hours in order to make that $1,000 which is a 50% increase over the 33.
Hopefully, you can see the danger of discounting even 10%. However, even if you discount by 10% it doesn’t mean very much anymore. Most people won’t pay attention until you start discounting 20-40%. If you discount that much, you’re creating a false sense of what is a real price. If people know that they can always get it at 20-40% off, that becomes your new price.
Think what that does do to your bottom line! How many more hours you would have to work if you discounted 40%? We’re not going to do those numbers because I don’t want you to even think about discounts like that.
The key to increasing your profitability is offering more value than your competition so they’ll pay twice the price. If they believe they’re receiving a lot more value, you won’t need to use discounts or destroy your margins. If you’ve discounted before, you probably know you won’t necessarily increase your revenue and you’ll often get the people who really just want the discount. This is the “curse of Groupon” – discount your core product and that becomes the new price.
Remember, if you discount even just 10% you may have to sell 50% more to break-even.
If you’d like to talk about Dollar Sign Math and your business or see if I have anyone in my network who could use your services schedule a short call with me and we’ll see if we can get you hooked up with some people, get your prices and profits going up so you’ll have more money to take home!
Let’s hear from a small business owner who uses FreshBooks Time Tracking Software. Make sure you read this entire post because it’s a game changer:
No one believed me until I started picking up my kids from school in the middle of a workday. Now they want to know my secrets!
There I was, pulling another all-nighter. I was slammed the entire day, as usual, dealing with clients, putting out fires and losing track of precious time with all the distractions.
This wasn’t what I signed up for when I decided to take the entrepreneurial leap. I’d been fed up with the 9-5 routine, working a thankless job for a lousy boss, and coming home in the evening for a couple hours before turning in for the night and starting all over again the next day.
The thought of being my own boss was so tempting I couldn’t resist. So I put in my notice, said my goodbyes and was on the path to bigger and better things as an entrepreneur.
But 2 years in and those 60-hour weeks had become all too common, and I didn’t have all that much to show for it. Oh sure, the money was good at first but as I got busier, I didn’t have time to prospect for more clients, so my earnings stopped increasing and I started thinking I might have to go get a job.
I had become “chief cook and bottle washer” and the things I was doing all this for, to have more time with my family and more money in my bank accounts, just weren’t happening.
There must be a better way, I thought. There must be something, somewhere that would be a way out so I could start to leverage, to scale and to really make this small business something to be truly proud of.
And then it happened.
It all started when I read about a breakthrough new way to track your time. This was always a challenge for me because I had some serious issues with time management, since there are so many distractions, so much to do and so many time wasting habits (social media anyone?).
Plus I’ve tried time trackers before and they were all duds. There’d be glitches in the software, or complicated directions, or I’d screw something up, it’s almost like just figuring out the time tracker was taking up too much of my time!
But this time I discovered something completely different.
It’s FreshBooks Time Tracking Software, and let me just tell you, this has completely revolutionized my business and my life!
For example, let’s say I’m keeping track of time on a task I’m doing for a client and I have an interruption (and I get those a lot!). All I have to do is click one button in the program and it will pause the timer. And when I’m done dealing with the drama, all I to do is click it again and the timer resumes.
And, since I’m one of those multi-taskers I can even use more than one timer and I can toggle back and forth tracking all my time on all my projects!
One of the best parts of this is that the timer will automatically enter the hours into my timesheet so the dreaded human error element is no longer a thing and invoicing at the end of the month is a breeze.
So by now you’re probably wondering, OK so how did I increase my revenue by 33,468? Easy.
You’ve heard the old saying “time is money” right? Well, here are 3 ways my revenue and profits have increased as a result of using this software:
1. I started saving multiple hours of time in my day, which freed me up to start prospecting for more clients, and with my reduced stress and overwhelm, my sales call results started to skyrocket! Cha-ching!
2. The increased revenue is also allowing me to invest in some advertising that I couldn’t do before which is generating more business. I’m scaling up, creating my empire, and I am NOT looking back.
3. Before FreshBooks Time Tracking Software I didn’t realize how much I was undercharging. Making this change allowed me to increase both the hours per project and the price—finally I’m earning what I’m really worth!
As for the personal side of my life, well let’s just say that things have never been better. I’m able to pick my kids up from school every day now (which was supposed to be one of the original perks of working from home!). They much prefer my face to the bus driver’s.
And with all the activities they’re involved in, I’m now free to take them to and from baseball, band practice, you name it. We’re even planning a vacation that we’ve been dreaming about for years but could never afford until now.
From a business perspective, FreshBooks Time Tracking Software is perfect for entrepreneurs or small biz owners who want to take back control of their time, get more done and increase cash flow.
Tracking billable hours is a breeze with this, and even putting a quote together is easier because you can go into the software to see exactly how long it took you to do the same task in the past. No more guessing games.
I’m planning to hire employees this year and I will know how long a job is supposed to take, feel confident that I’m paying them for hours worked and know they’re being productive. I’ll be able to spot potential danger zones before there’s a big problem. Having this information will also help me prioritize what needs to be done to keep on deadline and within budget.
Oh, and since I also use FreshBooks for my accounting software, it’s really a seamless way to add this on and still enjoy all their great support and customer service, which has always been top notch.
Look, I’m not a time management guru or anything, far from it. But when something works, you stick with it. And this software works for me on many levels.
It has allowed me to find an average of 8.75 more billable hours a week and reduce the hours I spend working, too. No more all-nighters. No more bus rides for the kids. And no more stressing about overcharging or undercharging for my services.
So if you do the math, and you consider how much you bill clients for an hour of your time, how much more do you think you could make every month if you found 8.75 more billable hours every week?
Personally, I charge an average $75 an hour for my services. My extra 8.75 hours saved a week comes to $656.25, which is $2,789.06 every month and $33,468 a year, all because I made a tiny investment in the FreshBooks Time Tracking Software.
This powerful product gets my highest recommendation.
The first thing you need to do is to identify who you would like to create a Joint Venture with and then create a list of those organizations/people you would like to contact. You can then do one of four things:
- Phone them
All business owners should be interested in improving their business. By picking up the phone and making an appointment you can then create an opportunity to talk face- to-face.
Be brave enough to simply drop in and speak with your prospective Joint Venture partners if possible. They may not have the courage to make contact even though they like the idea of forming a Joint Venture. Don’t hesitate to approach other businesses you feel would be a good match and do not by myopic and only joining forces with local businesses. The internet is Global so take advantage.
- Direct mail
Send a letter inviting them to a meeting or industry night to discuss potential Joint Venturing. This is a great method of introducing yourself and your company to a group, especially as many business owners are often busy during the day but may be prepared to come after hours to a seminar or workshop.
Why not place an advertisement in your local paper or industry journal seeking out potential Joint Venture partners? You can reach a wide cross-section of people at once and it can prove to be highly cost-effective.
If you’d like to find out how Joint Ventures could help you grow your business, get in touch with me.
The important thing to remember when considering a Joint Venture is to make sure that the relationship will definitely be a win-win for both parties.
If you want to enlist another person or organization to help sell your products/services and there is no direct benefit for them, then it probably won’t work long term.
Have a look at what other products or services might be purchased in conjunction with your product or what might be required after your product or service has been purchased.
- Small Business publication
- Networking Group
- Public Speakers
- Business Coaches
- Graphic Designers
- Event Organizers
- Health food shops
- Fitness Centers and Personal Trainers
- Chamber of Commerce
- Hair Salons
- Travel agent and luggage store
- Real Estate agent
- Furniture stores and Carpet stores
- Carpet cleaners
- Garden suppliers/nurseries
- Lighting/electrical companies
- Pool cleaning companies.
- Wedding Planners
- Advertising Sales Person
If you’re interested in seeing how a Joint Venture could help your business grow, get in touch with me.
A lot of business owners are so busy trying to build their business by themselves that they often overlook the opportunity to have someone else help take their business to another level. The idea of working with another business (an Affiliate or Joint Venture Partner) in order to grow both businesses at once is not new. In fact, it has been happening for a long.
Sometimes ‘super affiliates’ (a person with a large suitable list and the ability to drive lots of traffic) will earn 100 to 125% of the first time order. The reason behind this is clearly the customer is worth far more than the initial purchase to someone that understands how to ‘monetize data’.
A traditional JV is simply a relationship that two businesses have for purposes of mutual benefit.
Joint Ventures are normally created in order to financially benefit both parties and are often formed in order to share assets, intellectual property or to provide improved economies of scale.
Joint venturing is not difficult and the best way to begin to formulate a JV is to start to look at your sales and marketing through a funnel not a tunnel. This means, look at who else is currently selling other, non-competing (sometimes competing is ok too – for instance other business coaches that do not have a membership site) products or services to the same people who are currently buying a product or service from you.
Joint venturing can be the single most important strategy for generating new sales and clients.
For more information on how a Joint Venture could help you grow your business, get in contact with me.