You might have heard this mentioned before – your magic price. But most clients we speak to don’t understand what this means.
So have a look at this graph:
If you’re to the left of your magic price, you can increase your price, lose customers and still make more profit. So your price increase will more than offset the customers you lose as a result of that increase.
Sounds attractive doesn’t it? Less work, more money.
And even better, which customers do you think will defect to your cheaper customers? Yup – your BMWs – Bitchers, Moaners and Whingers.
But what if you’re to the right of your magic price? Well, if you increase your price, you’ll lose customers and your price increase won’t offset the effect of those lost sales. So your profit will start to decrease.
Something you won’t want to happen.
So how can you find out what your magic price is?
Well, the first step is to understand what profit you make on each sale. And to do that you need to understand what each sale costs you – your direct costs (also known as cost of sales). If you don’t know that, you’re dead in the water.
And then you need to test. Most business owners we speak to are on the left of that graph. So they can increase their prices and still increase profits.
How do we know? Well, our clients have access to a very clever bit of software. What’s it do? It shows you the effect on your profits if you increase your prices. And it shows you how many customers you could afford to lose before your profits went down.
If you’re like most business owners you’ll be shocked. You’ll have had no idea you could lose so many customers and still make the same profit.
And of course the software can show you what will happen if you decrease your prices. How many customers you’d need to gain. That’s normally a wake up call. Decreasing your prices is often the kiss of death to your business.
And if a client wants to give increasing their prices a go?
Well, all our clients have access to the Business Growth System It’s packed full of ideas as to how to raise your prices and not lose a single customer.
A plan with no drawbacks.
So go on, make sure you know your magic price and start increasing those profits now.
And if your accountant isn’t giving you this help, why not give us a call?