Have you ever had a situation in your business where despite all the high quality effort and time and service you’re putting into your clients, you’re just not making the profitability that you feel that you should?
If you’re there now, or if you’ve ever been there, I want to share with you a little concept to help you figure out just where you might be going wrong leading to that lack of profitability.
It’s not uncommon for me to come across a business owner or an enterprise that has great quality and service yet
they’re suffering from a lack of profitability.
And when we dig in we often find that they’re over-servicing their clients or, and or, they’re just not charging enough for the great value that they’re bringing.
And often that happens because the founders, they lowered their prices when they got started to get that foot in the door or to open a new marketplace and they’ve attracted price-conscious clients.
Yet they’ve raised their service and quality level, but they haven’t raised their prices.
And it could be a couple of things. They’re getting push back from they’re price-conscious customers that don’t care so much about the service. They just want the price.
Or they just aren’t recognizing the value that they’re bringing because they still have that start-up mindset. They don’t realize that they have got the kinks worked out of their product and service, and they should be charging a little bit more.
So I’d like you to think about this:
It’s called the Value Exchange Triangle. And like any triangle there’s three points on it.
The first point is price.
The second is quality.
And the third is service.
The concept here is you can pick any two. If you’re giving away all three – you have a great price, great quality, great service, you’re probably over-servicing your clients, running around like crazy and not making the money that you should be.
Now, if you want to offer great quality and great service, you have to charge a little bit more.
People will pay for it.
Not everybody.
But not everyone values, quality and service.
Now, if you want to offer great quality and great service, you have to charge a little bit more. People will pay for it. Not everybody. But not everyone values, quality and service.
your target market the people that truly value your service and the quality of product and service that you have.
Then they’re happy to pay a little bit more, because they see you as the default best organization and best solution for the problem that you solve for them.
Now, if someone just wants a great price and great quality, well, they’re going to have to wait.
They can’t get the great service because you’re going to be over-servicing them, and you can’t do that.
Or if they want great price and great service, well the quality might have to suffer.
You just can’t have all three and have equality of the value exchange happening.
So look in your business. Where is it you might be over-servicing your clients. Where might you be undercharging? Or where might you just not be servicing the right target market that doesn’t value the amazing things that you can do for them.
So that’s your homework for this week.
I’d love to hear what you learn about your business, doing that little analysis of where you can raise your prices, and where you can adjust your service offering.
And remember, you don’t have to raise your prices massively. It could be three, four, five, six, eight percent.
It doesn’t have to be a huge number. Just a few percentage points of your gross profit margin will make a massive difference in your cashflow.
If you have any questions about how to figure this out, or where to look in your business, feel free to reach out to me.
I’m always happy to help.
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