Vistage Speaker Doug Butdorf from Boost Profits grabbed my groups’ total attention when he said “revenue is for vanity, profit is for sanity”. Then, he gave us strategy, and execution to be more profitable. Wow! How about this: do you have regularly scheduled meetings to discuss pricing? 2 hands went up. Do you have regular sales meetings? All hands went up. Regular operations meetings? All hands went up.
Let’s get serious here. Sales are starting to slow down for many producers especially for B2C products. (Business to consumer). We aren’t buying to decorate the home we are stuck in – we are going out to dinner or traveling. This may be your last opportunity to raise prices in this business cycle. Should you wait?
As tedious or difficult as it may seem if you have to do this manually, you should segment your customers. First sort could be gross margin versus volume. If you color code by sales person you might find that the low volume, low margin customers might all belong to one sales person.
And, what do you do with those low volume low margin customers? RAISE THEIR PRICES. They will either become profitable customers or fire themselves. Either way you win!!!
And, btw, are your sales people rewarded for increasing gross margin or are their commissions tied only to revenue? There is an old saying “you get what you measure.” It is important to align your incentives around your mission, values and goals. You may need to reassess your incentives as part of your quarterly pricing meetings.
When inflation was running along below 2% for more than a decade, many of us got lazy in our thinking about price. None of our competitors were raising theirs. That time is long gone.
This week get going. Review your pricing and make some profit decisions. You’ve got all the tools you need.
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Image courtesy of Doug Butdorf, Boost Profits, Inc.