It varies across the board, some business owners are experiencing bone crushing increases in the cost of production or the delivery of services because of increased fuel costs, increased costs of food ingredients, for example and others will be brought to their knees this winter by a huge increase in heating costs….what is the best response to these issues?
Other business owners are feeling the significant reduction in revenues as an indirect result of these issues, as people now tend to go out less, stay closer to home, travel less and thus spend less in the restaurants hotels, and other destination businesses…what is the best response to these issues.
Some say its inflation and must be absorbed, a natural but temporary swing in the market. I say baloney, its permanent and we must make permanent adjustments.
I hear all the time, “but if I increase the price I will lose my market position, my customers will go elsewhere”.
Let them go since if you do not reflect the increase in your costs they will be going no where as you and all your competitors who refuse to acknowledge the increase and reflect it in your pricing will soon be out of business anyways. So why the indecision?
Here is the deal, the real issue.
If you were appropriately tracking, monitoring and controlling your business parameters, you would know exactly what the effect is on your business these increases are having, as you would be naturally aware and responding appropriately to such market swings constantly.
If you are deluding yourself thinking its a momentary blip on the screen then perhaps you can overlook it, but it is not a momentary blip its a permanent change or at least will be long enough to warrant immediate adjustment and recognition, and second how can you afford to run your business unprofitably for any amount of time?
As a consumer I am now seeing an added cost to various invoices labeled, fuel surcharge, $2.00. Just had that happened. I grumbled but understood its meaning and appreciated it and paid it willingly. Had the store owner simply raised the price I might have reacted differently as it wold seem unfair. It makes sense however, as I understand the pure nature of cost increase that we are all experiencing and thus I can tolerate this adjustment as it stems from a good reason.
But thats a marketing decision as well as a business decision. As a business owner we must all learn to operate profitably and that requires a firm grasp on your numbers so you can adjust accordingly and a brave soul as you make the important marketing decisions required to make certain you are yielding a profit.
If you are not…raise your price. If you loose your share of market then market more effectively, create a niche specialty, expand your geography, use the Internet, do something but do not hold your price and do business as usual, thinking that you have to preserve your revenue, remember its bottom line not gross revenue we are fighting for.
Pretend its here forever and now make appropriate decisions…or get out of the business all together while you still have a chance, or do a workout on debt to reduce break even, or buy your competition and increase your share of market while decreasing your overall overhead and controlling your market presence.
Do something as doing nothing is a short path to self destruction.
Were you a well tuned business operating with complete knowledge of what your numbers are, and you saw this coming long ago, you would be making the necessary adjustments along the way and monitoring your succesful transition. The consumer will pay more for “perceived value” SO DELIVER IT.
The consumer will pay more if he believes its fair and just, so explain it. Raise the price to where it has to be, to earn a reasonable profit.
The point:
1. You must be monitoring your business under any circumstance, but in changing times its even more important as that’s when it proves its worth.
2. If you are monitoring your business you must identify weaknesses and control your costs, including payroll, overhead, cost of goods, marketing and other factors.
3. You must make the bold but necessary adjustments to your pricing to maintain an acceptable profit margin, why else be in business? Market effectively and aggressively.
4. Do pre-emptive debt workouts, it may be the one factor you can control that will keep you in business.
5. If it doesn’t work and you cannot fix it, close the doors while you still have some capital.
Call me, I can help you navigate these tricky waters, we all need help in making these difficult decisions. 413-549-2966 Norm will arrange a no obligation teleconference.
