The Huge Pitfalls Of Reducing Your Price & What To Do Instead!

As the economy struggles to recover, and competition gets more and more fierce, we thought it was important to bring to your attention the problems you encounter by reducing your prices in the hope that this will bring you more sales.

One of the most common and most costly traps business owners fall into has to do with the perception that the quickest way to increase cash flow when sales are down is to have a ‘sale’.

On the surface, the concept itself seems to make sense. We need more sales, so we lower our prices.
Lower prices will attract more buyers who will purchase more of our products at the reduced prices. And we’ll make up for the money we’ll lose with the lower prices by the increased number of sales.

But the reality is, rarely is this strategy a success.

Having a sale, reducing prices in order to attract more customers, can often be the kiss of death for businesses unaware of the bigger picture.

In reality, there is rarely a good reason to reduce your prices. No matter what you think, most people do
NOT buy on price and price alone. In fact, research over the last 6 recessions has shown that only between 5% and 20% of people buy on price. Most people think it’s the other way around! So let’s take a look at the effects of reducing your prices...

Let’s assume, for illustration purposes, that your business operates on a 30% margin and you want to reduce the price to increase sales. If you lower the price just 10%, you’ll need to increase the number    of sales you make, or the number of customers you sell to, by 50% just to maintain the original profit.

Don’t believe it? Let’s walk through the numbers…

Let’s say that you sell an item for £100, and that your total costs to acquire that product and get it out the door comes to £70. That leaves you with a net profit of £30 on that item.

Now, let’s say that you reduce your price by 10%. You now sell that item for £90.

You didn’t do anything to reduce your product costs or your expenses. All you did is reduce the amount you charged your customers.

If you subtract your £70 costs from the £90 sale price, you net £20.

Now, if you subtract this £20 from your previous profits of £30, you end up with a £10 difference. Divide the £10 by £20, and you get 50%.

So to get back to the same profit level that you were enjoying before you lowered your prices, you’ll have to sell more items  or the same number of items to 50% more customers.  Now, here’s another problem most businesses fail to take into account. No one knows you’re having a sale unless you tell them about it.

So you need to advertise or send something out to let everyone know you’re  having a sale.

And if you expect to attract more customers and sell more goods, you may need to beef up staff, salespeople, delivery, packaging, money processing, accounting, stocking, signage and any number of additional things that you may not initially consider and all of which further increases your costs.

So when you look closely and carefully at having a sale, you may have to sell considerably more than the 50% to even come close to breaking even.

IMPORTANT
REDUCING PRICES IS THEREFORE SOMETHING YOU NEED TO THINK VERY CAREFULLY ABOUT. REMEMBER, VALUE AND PRICE ARE LINKED – SO PROVIDE MORE VALUE AND YOU’LL STILL GET THE SALES!

The Value Of Increasing Prices

In our estimation, we believe that 90% of ALL businesses charge too little for their products and services.

Often people are scared to increase their prices, and business owners rarely test different price points (do you?). 

But having carefully targeted your prospects and customers (like we always advise you do), you are in a position to charge premium prices because you are seen by the market as THE go-to company for their specific requirements.

And there is no quicker way of increasing your profits and the success of your business than by increasing your prices. Let’s take a look...
Using the same 30% margin as in our previous example, instead of decreasing prices by 10%, you raise them by 10%.

The result?

You can now maintain the same profit margin with a 25% reduction in sales volume… either in the number of items sold, or in the number of customers sold to.

You could actually lose one out of every four customers and still make the same money.

Now, let’s compare two identical businesses which sell exactly the same products. Business A lowers prices by 10% and Business B increases prices by 10%.

As was pointed out, Business A has to sell 50% more, and Business B can sell 25% less, and they’ll both make the same profits as before.

While the owner of Business A is working his/her tail off just to break even, Business B owner is cruising along without all the stress, worry and other problems, and yet is making the same net profits.

Furthermore, what is often surprising to business owners is that when they do increase their prices, the opposite of what they expect actually occurs. Instead of losing customers, they actually gain more customers.                                   

Why?

Because the higher prices are met with the perception  that your products or services are worth more and therefore this perception of ‘added value’ gives the business a welcome influx of sales it would previously never have received.

We have numerous examples of this. For instance, a photographer was charging just £450 per day for his wedding service.

With very little change to the way he carried out the service, he increased his prices to over £3,000 in three months.

A restaurant owner increased her prices by 20% and saw an immediate increase in bookings .

A jewellery store increased prices 15%, resulting in an increase of £25,000 a month in sales.

These are not isolated incidents. If you get your target market right and you deliver a good-quality product or service, increasing your prices and increasing your sales is NOT a pipe dream.

So what if you’re selling a commodity-type product or service, whereby people can easily shop for the best price? Well, it’s no different. What you have to do, though, is create a level of service that is unmatched by any of your competitors.

This includes offering superior delivery times, quicker service or using a powerful guarantee which no other competitor offers and creating ‘premium’ products or services that customers will be happy to pay more for.

So even if you’re reluctant to increase your prices, concentrate on giving more value and you’ll still get many more sales.

As long as you create a gulf of value between you and the competition you’ll be able to increase your prices.

Believe us no matter what you sell, increasing your prices is something you should look at doing now.

Of course, don’t just make a wholesale increase right across the business. Increasing your prices is a tactic that should be approached like all your other tactics. Test small and then roll out when you have sufficient evidence that it works.

9 Tips on How to Face Difficult Conversations in Business Avoiding Stress!

We all have to face up to difficult conversations at times that we’d sooner not have. Whether it be an employee, a client, a business partner or someone else, the thought of being the bearer of bad news, facing up to the elephant in the room or handling an error, can lead to many a sleepless night. Here are some tips on how to reduce the stress and get a better outcome.

How To Lower The Stress and Improve Your Outcomes When Discussing Real Issues?

 1. Is the conversation necessary?

This isn’t a cop-out! On occasion, a major issue today may be a lesser one tomorrow. You should decide, without fooling yourself, whether time is on your side or whether this is something that isn’t going to go away. If it’s the former, then schedule a moment for you to revisit it - say, a week ahead - and forget about it until then. If the latter, then let’s carry on…

2. Choose your conduit

Face-to-face discussions are usually going to be best. Telephone or email may seem the easier option but the absence of visual signs depersonalises the conversation and makes misunderstandings far more likely whilst, physically, people remain in their own defensive camps. Practicalities or security may require otherwise but, even then, video and online conferencing can allow a degree
of ‘face-to-face’ benefit.

3. Choose your location

If you are driving the conversation, then you will want to be on your home turf, so that you can control more aspects of the meeting and have the benefits of being the home team. However, if your position is weak - let’s say you are trying to address an error by your firm - then being the visitor can have its advantages. By going to them you are already taking a conciliatory tone. You are holding your hand up. If neutral turf is required, then make sure you’re the one who organises the practicalities, giving you that element of control again.

4. Plan your approach

This does not mean lying awake at night going through imagined conversations. Three areas of preparation should be in focus:

• Be clear with your objectives. What outcomes are you looking to achieve? This is the most important point, as it will help to guide the conversation.
• Do your homework. Make sure you know the history and the facts from your end.
• Consider your options. Be clear what is acceptable to you and have a Plan A, Plan B, Plan C…….

5. Plan your meeting

Nobody likes nasty surprises. Planning an ambush may work in Westerns but is unlikely to result in a positive outcome for you. Arrange a meeting in advance and with at least an indication of the topic for discussion. Make sure that the time requirement is clear so that attendees don’t have an excuse to rush off.
Prepare for your guest's arrival. Make sure that you have everything to hand that you will need, ensure that your location is welcoming and devoid of distractions and make their attendance as easy as possible with a convenient time, clear access instructions and a friendly welcome.

6. Getting into your meeting

Keep your introduction short. After the formalities, explain clearly and briefly what you are together to discuss. Don’t keep your attendee waiting for the topic to come out, it will only add to the pressures. Explain what you intend to cover and ask if they wish to add any topics or points of their own.

7. Style

Your manner and body language is vital throughout. You should be clear, calm and composed and your body language should be open and neutral. No folding of arms, leaning back in your chair or raising your voice. This may be difficult at times but lose control and you lose the meeting.

8. Don’t make assumptions

Don’t assume that you are right, don’t assume that your option is the only one and don’t assume that you know how they will react. Instead:

• be prepared to listen...and do listen
• be prepared to be flexible (within your objectives)
• be prepared for a range of emotions (and don’t assume the immediate reaction is the true one)

9.Sign off properly

The key to such discussions is always to be clear and unambiguous. That applies just as much when you close the meeting. If a resolution or action plan has been reached, then summarise this and follow it up in writing. If the matter is unresolved, then be clear on what happens next, whether it be further discussion, a cooling-off period or a proposal to be made. Again, follow up in writing.
Thank your attendee….it’s just business!

PJ
☎ 020 89310165
☏ 07900537459
✉ pushkar.joshi@apjaccountancy.com

Delegate For Happier Employees & To Reduce Your Stress!

Delegate: To entrust a task or responsibility to another person, typically one who is less senior than oneself.
Sometimes you’ll feel overloaded, and there’s only so much you can do. One hundred things need doing, and unless you’re superhuman, it’s physically impossible to get everything done.

So what do you do? Well, you do something. Anything that makes you stressed can’t be ignored! You weren’t born to place a heavy burden on yourself all the time.

Take action by delegating. The very word ‘delegate’ can send a shiver down your spine. But delegating isn’t a bad thing. It can benefit you and your team.
It benefits you by:

• Saving you time
• Relieving stress
• Employees acknowledging your leadership skills

It benefits your employees by:

• Developing their skills in new areas
• Testing their imagination and how they handle more responsibility
• Retains your hard workers

These are just a few of the advantages. There is, however, a fine line between delegation being beneficial and detrimental to your relationship with employees.

If you don’t delegate properly, you risk employees feeling like you’re overloading them with work. They become stressed, unhappy and feel ill-treated. But doing it correctly actually enhances your employees’ job satisfaction.

There will be a point when you have to delegate with your team because you have new projects, the firm is growing or you need to balance the workload. Change your mindset from thinking ‘I have too much do to and need someone to help’ to ‘How can I challenge my employees so they’re happy and feel fulfilled whilst enabling me to focus on other things?’ 

When To Delegate:

The process should never just be about you. Handing out extra work due to your poor timekeeping will decrease employees' loyalty to you.

But don’t hold a huge weight on your shoulders just because you’re worried about how employees will react (more on how to approach employees later).

Have you considered your team’s workload? Are they in the middle of a huge project right now? If so, it’s not the best time to ask them, or maybe they’re not the right person to ask. Their workload will become too much and the task won’t receive the level of care and perfection it needs.

How To Delegate:

To avoid confusion and unhappiness, tell the person who is completing the work why they are. Explain how you came to this decision, including how they will benefit from it, and why you aren’t taking on the responsibility.
Here are a few points to help:

1. Choose the right people for each task.

In order for it to develop your employees’ skills, dedicate each task to those who will a) Enjoy it, b) Have time to do it, c) Want to develop skills in the area.

2. Be patient.

Your employees will probably have lots of questions and at points will be confused. It could take time before they know exactly what is expected of them.
Not only this, but you shouldn’t approach them one day with a list of things you “need doing by the end of the week”. Allow a reasonable timescale for completion. If that means someone else handling some of the work, then so be it.

3. Communication is key.

Nobody likes to be in the dark. If you think something might change, tell your team. If the deadline needs to be shortened, tell your team.

4. Provide clear instructions.

Right from the get-go, make it clear to your employees exactly what is expected of them.
Could you build a car without instructions? Anyone can do anything if they’re told how.

5. Be aware of their workload.

Do you know what your employees’ workloads are like?
Rather than dropping a bomb on them unexpectedly one day, listen to how much time they have available. You don’t want the project to be rushed, nor your employees to be stressed.
At this stage, you may even choose to reduce their normal activities to prioritise the new work.

6. Give credit.

And when it’s all over, don’t forget to say “thank you” and “well done”. Taking all the credit for something you didn’t do is a sure way of your employees not helping you out again.
If you delegate often, your employees may be thinking towards the end, ‘What am I getting out of this?’ and you need to have an answer.

How Not To Delegate:

There are wrong ways too. When I say ‘wrong ways’, I mean approaching the situation with demands that make your employees unhappy coming into work, which will tarnish their relationship with you.

1. Only delegating when you feel overwhelmed. 

This tells employees that you’re unorganised and unwilling to be a team player.
2. Don’t be a perfectionist.
Perfectionists don’t usually delegate effectively. You’d be right in wanting something to be completed to a certain quality, but not everyone works the way you work. Don’t be too specific in your instructions, or not clear enough. Strike the balance.
3. Don’t keep extending work.

Have you ever done something and then been told it wasn’t needed? If yes, your time and skills were wasted.

Don’t cause confusion by constantly changing what you originally asked for. It’s unfair and stressful.
I could have written pages and pages on how to make this process enjoyable for everyone, but these are the main points. If you don’t make delegation a negative process, it won’t be.

PJ
☎ 020 89310165
☏ 07900537459
✉ pushkar.joshi@apjaccountancy.com

7 Strategies To Capitalise On Your Acres Of Diamonds!

When you’re constantly looking to acquire more clients, it’s easy to forget about your most prized asset - your EXISTING clients. This is a mistake I see often.

In many ways, it’s easy to understand why existing clients are neglected, but it’s no excuse.

Growing your firm is challenging (I don’t need to tell you that). But having strategies to retain existing clients and to maximise profits from them are without doubt the quickest, easiest and most cost-effective ways to grow your accounting firm AND give you the income and earnings you desire.

So let’s take a look at the different strategies you can use right now to capitalise on the relationship you already have with your existing clients… 

STRATEGY #1: INCREASE YOUR FEES ANNUALLY

The best and easiest way to maximise profits is to increase your fees. This is a no-brainer.
Systematically increase your fees by at least 15% EVERY year.
You’ll be surprised how few clients you lose as a result and the ones that do leave are the ones you don’t want anyway (price-conscious).

The reason why price increases are so successful is because YOU’RE NOT CHARGING ENOUGH RIGHT NOW ANYWAY. There’s a significant element of added value which you can capitalise on - and increasing your prices is the easiest way to do this.

STRATEGY #2: WOW YOUR CLIENTS WITH MOMENTS OF TRUTH

One of the best ways to add value, build strong relationships and retain clients is to use Moments Of Truth (MOT). We discuss MOT often in these pages, but if you’re new to AFG, MOT are the steps you take at each interaction with your clients to ensure their experience with you is exceptional.

If you focus on every interaction you have with a client and make this the BEST it can be each time, you will create a world-class service.

You’ll retain far more clients and strengthen the bond you have with them - making them less susceptible to the advances of your competition.

STRATEGY #3: TELL THEM WHAT YOU SELL

I know this sounds almost ridiculous, but guess what? Your clients don’t know what you sell.

How many times have you spoken to a client and they’ve turned to you and said something like, “We’ve just gone to ABC company for XYZ,” only for you to turn round to them and say, “Didn’t you know we do that?”

This is more common than you think. Plus, it also brings into focus that if they don’t know what you offer, they won’t even think to buy it. So making them aware of what you sell will prevent many clients from sourcing this service from other suppliers and also increase the likelihood of them buying the service from you.

There are more, but here are 2 easy ways to do this…

1. Include a list of services with short descriptions in your newsletter (see next strategy). This can either be within the newsletter itself or as an insert.
2. Send a letter 4 times a year making clients aware of the services you sell. A good way to do this is to use a tick-box approach whereby you ask them to tick the services they would like more information on. You then follow up with those who want more information. This strategy alone will yield significant income opportunities for you.

STRATEGY #4: SEND A MONTHLY PRINTED NEWSLETTER

This is still one of the least-used strategies, but sending a printed monthly newsletter to clients is one of the best things you can do. Done right, it can achieve all of the following for you…

• Help to retain clients
• Get clients to buy new services from you
• Motivate clients to buy more existing services from you
• Keep clients engaged with you, strengthening your relationship with them
• Differentiate you from the competition
• And much, much more

To begin with, keep it simple. 4 pages is ample, but your goal should be to increase to 8 pages.

STRATEGY #5: SEGMENT YOUR CLIENT LIST

Segmenting their client list is something that very few firms ever do. Instead, they treat every client in the same way. But, clients are not created equally. Pareto’s ‘80/20 Rule’ is applicable to your client base. 80% of your profit will come from 20% of your clients. 80% of your headaches come from 20% of your clients, and so on. It is vital that you identify who your best clients are, so you can focus on giving them the attention they deserve. Reference our execution plan on ‘A-D Client Segmentation’ for more details.

STRATEGY #6: PHONE YOUR BEST CLIENTS

Now you’ve segmented your client list, you can start to communicate more with your best clients (’A’ and ‘B+’).

Simply picking up the phone once or twice a year and having a general discussion on how things are going will ultimately lead to more opportunities and, therefore, more business for you.

STRATEGY #7: CLIENT APPRECIATION EVENT

Once a year, you should organise a ‘Client Appreciation Event’ either at your office or a local hotel/restaurant and treat your best clients. Once again, you’ll be surprised by how much extra business this generates for you.

There are, of course, many more strategies you can use to generate more and more business from your clients. These 7 strategies are a good place to start.



To know more and be up-to-date, contact us:
☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Creating An Effective Agenda!

Having a printed agenda is one of the important ingredients for creating a successful sales meeting. But you don’t have to restrict the use of an agenda to just face-to-face meetings.

You should use them for seminars, webinars, teleconferences and any other interaction you have with       your existing and prospective customers, clients or patients.

Agendas have become an ‘endangered species’.

They are rarely used today in business, but they have so many advantages and benefits…

• First, they give you control. It’s a little-known fact that   an agenda gives complete control to the person who created it in the first place.
• Second, they show you’re organized and professional.
• And third, they ensure you don’t forget to cover the main points of the presentation.

The example shown below is a template of the style of Agenda we use for our regular meetings.

There’s no ‘rocket science’ when it comes to creating an effective agenda. The fact that you use one is the most important reason for having one.

But let’s just cover the main points that you need to address…

1. GIVE IT A HEADING

Make sure you give your agenda a title. Ideally, it should include a benefit of the meeting and add a sense of importance.

Notice in the agenda opposite the title is ‘Building a Better Business’.

The meeting is therefore structured around this one big promise. Make sure you do the same thing and create a title that gives gravitas to the   meeting.

2. WRITE IN THE ‘LOCATION’, ‘DATE’, ‘TIME’ AND ‘ATTENDEES’

Your agenda is a very effective sales tool, but it also acts as a reminder and a confirmation of your meeting details.

Enter the location, the date, time and the names of the people attending the meeting.

3. ENTER THE MAIN ITEMS YOU WANT TO DISCUSS

Now simply list the high-level items you want to discuss   during the meeting. Make sure you don’t have too many points on the agenda. Half a dozen points are adequate.

You must think carefully about the main elements of the meeting. Don’t just write down what first comes into your head.

Think about the key parts of the meeting and what things are important to the customer or potential customer. (As an aside, you should send the agenda to the person you’re meeting a couple of days prior to the meeting to ask if they want to add anything to it. This is just good practice, so make sure you do it.)

4. ADD A NOTES SECTION

The notes section is more important than many think.

The person you’re meeting will use it to write their thoughts on (it’s always best to have the notes with the agenda otherwise they could easily   be lost).

But equally as important, you should use this notes section to write down important things that will help you close the sale or move it to the next stage of the sales cycle.

Simple. Easy to use, but very effective. From now on, make sure you use an agenda!

 Contact us for all your Business Building & Accountancy needs!
☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com