Business Coach, Joan Nowak

4 Pricing Mistakes That Cost You Profit January 20, 2012

Is improving your margins and overall profit on your list of priorities this year? Then take a look at your pricing strategies and avoid these four common pricing mistakes.

1. Lack of controls on discounting. Discounts and special offers may have their place, but if used as a standard closing tool, it costs you a lot of profit. Have a strategy and purpose when it comes to offering discounts.
2. Cost-plus pricing. Setting your prices based on a standard mark-up and cost ignores key elements like value and competition. Some products or services end up over-priced; but more often in small businesses, many are under-priced – leaving profit on the table. Know your costs and have a profit margin goal – but raise or lower your selling price based on competition and value.
3. Poor execution on price changes or increases. Changing prices is part of doing business. But how you communicate and implement the changes can make a big difference in retention and new business.
4. Sales versus profit incentives. Sales incentives or commissions based on revenue instead of profit can have a big impact on margins. It tends to encourage discounting and easy sales (lower margin products) – instead of high-margin premium products.

Find this helpful? Then share it with others. For additional resources and ideas to grow your small business, visit my website. While you are there, join my mailing list to receive my monthly eNewsletter and a FREE copy of my eBook, Mastering the 7 Elements of Business Success.