Category: Strategy

How to increase prices, without losing customers.

SMEs make ‘clear move’ towards higher prices for consumers, according to an article on the Irish Times on September 8th, and Behaviours and Attitudes’ report, which detected big increase on firms planning to charge more. This increase is driven, especially, by medium to large SMEs based outside Dublin area.

Although the SME Confidence Index, scored confidence at 65.6 out of 100 in the second quarter, above the pre-pandemic level of 65.2 at the end of 2019, “signs of growing price inflation” particularly in larger SMEs (44%) as well as businesses in the retail and wholesale sector (57%) said they expect to increase prices.

The report also shows encouraging trends that not only business optimism rebounded to pre-pandemic level, but the outlook is strong too.

But what does it mean for Small and Micro Business, especially when remaining competitive, after the last 18 months, is already a challenge?

According to the report, the picture for micro-enterprises is even bleaker, due to lower trading performance and their focus on local market.

So, as it seems almost impossible micro businesses can absorb more costs increases without passing them on to their customers, find below our 10 Tips to increase prices without losing customers.

Price the Increase sensibly

Try implementing smaller, incremental changes, or increasing the price of certain products while minimising the increase on others.

Be Honest About the Increase

The best option is always to be straight with your customers.  It is never a good idea attempting to implement a price increase without anyone noticing. It is possible, of course – if you sell 65kg bags of widgets you can reduce the bag to 62.5kg but keep the bag the same price. Some of your customers may not notice, but those that do will not be happy.

Explain Why You Are Doing It

You should only give your customers as much detail as you are confident divulging, however the more they understand the reasons for the price increase the more likely they will willingly accept it. Examples of price increase justifications that most people will accept include the increased cost of raw materials, or that your business is investing in improved products or services.

Get The Timing Right

Sometimes timing is important when implementing a price increase. For example, retailers can use the seasonal or periodic launch of new products to increase prices. This will differ for every market and industry but getting the right month can make a price increase go much smoother.

Notify Your Customers

We are all struggling, so no one wants to be hit with a price increase out of the blue. Notify your customers before you implement a price increase. Make sure you give them a reasonable amount of time too, especially if they will have to pass this increase on to their customers.

Talk About Value

When discussing the price increase with your customers don’t only talk about price. It is much better for you if the conversation is about value. For example, you can explain how the customer has benefited from upgrades, enhancements, developments, or improvements to your product or service that have not incurred a price increase. Another example is talking about the improvements that you plan to make in the future, and how the customer will benefit from those.

Boost prices through add-ons

Have you ever purchased a piece of electronic equipment and been urged to buy an extended warranty or service contract, batteries, or some accessory along with it? Small amounts can quickly add up if you have add-on products or services that appeal to your target market.

For example, We’ve noticed more and more restaurants offering “extras” like avocado on a sandwich or chicken on a salad—for an extra fee. If you have a €10.95 chicken Caesar salad on the menu, why not replace it with a €9.95 Caesar salad and the option to add chicken for €2, shrimp for €3, or salmon for €4? Now you’re charging €11.95 for the same salad, and maybe even €12.95 or €13.95, depending on the customers’ choice.

Offer An Alternative

Another option you have is to offer an alternative. This works well in many situations, including with businesses that compete heavily on price. It works by telling your customer that you are increasing the price for what they currently receive, but they also have the option to pay what they are currently paying for a slightly reduced service or quality of product. This maintains the value of your product or service.

 People will pay more for something if they believe the value exceeds the price paid.

Eliminate unprofitable products, services, or customers

Review your pricing strategy using the 80/20 rule or Pareto principle and keep the price of your core (20%) services or products the same or with a minimum increase and increase the price of the rest.

This isn’t technically a way to raise prices, but it can have the same effect. Pay attention to your financials, and track which products and services have the lowest profit margins. Unless they’re loss leaders (or basket drivers) that get customers in the door (where they then buy high-margin items too), eliminating these low-margin offerings can make you more productive and profitable by giving you more time to focus on the high-margin parts of your business.

Do you have a customer who’s paying less than you’d like, but demanding more of your time and effort? As your business grows, however, these high-effort, low-return customers drain your energy without contributing much to your bank account. See if you can raise the customer’s prices—but if they don’t agree, be willing to cut them loose.

Allow time to work ON your business instead of IN you business

If you allocate time to work ON your business instead of IN your business, you probably will be better equipped to navigate prices increases. Here some other tips, that can help you

1.     Strategic planning:  Implementing a price increase requires planning. It would not be unusual for the process of discussing a price increase, deciding on that increase, communicating it to customers, and implementing the increase, to take several months. If you are implementing it incrementally it can take even longer, so make sure you plan.

2.     Be creative when developing your price structure. Explore ways to add fees. Deliver extra benefits, provide more value, create multiple price points, etc. These small fees add up. Think about the 80/20 rule.

3.     Customers’ Clauses: Go up on new customers and leave prices unchanged for current ones. Or, set an expiration date on current prices with the understanding that they will go up for everyone at a future date.

4.     Don’t apologise. Price increases are necessary at times. There are several reasons you may need to go up — operating costs, increase in materials, etc.

If you need help to figure out where to start working ON your business, get in contact at hello@bbcs.ie

The difference between working ON versus IN your business, and why it matters

 

As small business owners it’s easy to fall into the trap of spending all your time working IN your business.

You find one or two good clients, and they’re willing to buy as much of your time as they can get. You work for them long hours, maybe 40-60 hours per week.  Then one of them changes tack, and doesn’t want your services anymore.

Suddenly your income plummets, and you have to replace them, fast. You scramble, make lots of phone calls, pay a fortune for social media ads, and desperately try to bring in a new client – but you don’t have any leads, because you haven’t been working ON your business.

What’s the difference working “on” rather than just “in” your business?

We know exactly what working in our business looks like: serving clients, ‘doing the work’ and wearing all the many hats needed to keep the lights on.

But what does it feel like when we’re only working in our business and never on it?

  •  ‘Stuff’ is getting done, but you don’t feel like you’re making progress towards anything big or meaningful.
  • You’re not clear on the big picture, and the ‘why’ or vision behind your business, is fuzzy.
  • You’re on a hamster wheel of busy-ness, stress and being overwhelmed.

Sound at all familiar?

We know, we have to spend considerable time working in the business to have a business at all. But if we’re acting like a full-time employee and never stepping into the role of CEO in order to lead the business, we’re not going to get very far.

Working in and on the business, you have to think of it as running two businesses at once: the business you’re in and the business you’re becoming.

The Problem With only Working IN Your Business

You might say, it is not a problem, after all, things are still running. The problem is:

  • There is also no leverage.
  • There is no long-term planning.  No one is looking at what could happen (or should happen) next year or three years from now.
  • No one is focusing on the big picture. Everyone including the owner can see the woods from the trees.  All the focus is inside the four walls. No one is visiting customers and using that feedback to improve and evolve.
  • No one is tracking the competition to see how they are evolving.
  • The “boss” has no continued professional development and is getting little input other than from staff members. Soon his/her skills and outlook could get stale.

Spending all your time working IN your business will, unfortunately, harm it. Because it’s not about what you’re doing, it’s about what you’re not doing.

Working ON your business means designing, planning, refining your business, but not directly producing revenue.

So what does working ‘on’ your business look like?

These are some of the things you should be doing when working ON your business:

1.    Evaluation of your business performance

According to the Pareto Principle, 80% of results come from just 20% of activity. But if you’re not evaluating what’s working and what’s isn’t, how will you ever know what your 20% is?

Evaluation means sitting down weekly, monthly or quarterly – whatever is needed – and crunching the numbers. To do this, you need to define what success looks like for you and the metrics to measure.

For example:

  • Revenue and profit: Is your business model serving your lifestyle and leaving plenty left over to re-invest in growth?
  • Creative output: Are you doing client work that challenges and inspires you?
  • Quality of life: Does your business support your health and hobbies and enable you to travel and spend time with your loved ones?

Your business should serve your lifestyle, not the other way around, so you need to be able to measure its performance.

2. Being clear on your vision

As the CEO of yourself and your business, you need to know where you’re going and why, and make high-level strategic decisions accordingly. Once you are clear on your vision, you can set relevant goals on the path to get there.

Do you have a vision for your business? 

3.    Business Development

Whatever industry you’re in, we’re all in the relationship-building business. Working ‘on’ your business means looking ahead, nurturing warm leads, and building great relationships with people before you need them.

4.    Figure out & document your processes

You not only need to build your sales lead pipeline long before you run out of clients, but you also have to put in a lot of planning to:

  • Build a process for future employees to follow
  • Hire the right employees
  • Manage their product delivery and their personal growth
  • And worse, scale it fast enough that you can hire a manager to do all this stuff (because technically this isn’t really working ON the business either)

5.    Investing in yourself

Your business or career cannot grow unless you do. Success doesn’t happen because your external circumstances get better, it happens because you get better!

As a business owner and as the CEO of your life, you are 100% responsible for your training, education and personal development. So read books, listen to podcasts, network, go to events and workshops, hire a coach and invest in professional help for any health issues that are holding you back.

An investment in yourself is an investment that will always pay itself back.

Hibernating Or Metamorphosing? That Is The Question…

COVID-19 still dominate almost every conversation, as we head into the last part of 2021 the encouraging news of the vaccination rollout and easing of the restrictions, have injected a shot of optimism. More so than ever before, it really does seem possible to discern light at the end of the tunnel.

The prospect of a return to something like normality raises numerous important questions for many businesses and their employees. Among the most fundamental and pressing is this: which companies will be best equipped to survive and thrive when we finally emerge, blinking, from the pandemic?

All other questions are somehow linked to the above. How recognisable will “normality” actually be? Which of the shifts that have occurred are likely to endure and which are likely to fade away? Will overarching priorities and the basic recipe for success have changed significantly or will they retain a reassuring air of familiarity?

Some firms, most obviously those that have benefited from the crisis, may feel that they already know the answers. Many others, who have suffered amid the turmoil, will need to come up with their own responses very soon.

Innovation versus indolence

COVID-19 countermeasures have sent thousands of companies into the business equivalent of an induced coma. Although the sad truth is that some will never come round, plenty of firms that have made it this far may yet stir anew in due course.

This is because people are liable to resume some of their old habits once the pandemic is under control. While business models geared towards a stay-at-home lifestyle have clearly prospered at the expense of those less in keeping with a mass move to “remoteness” in recent months, some degree of reversion is highly likely. This means that many companies might better see lockdown as a period of enforced hibernation.

The problem is that, in the sphere of commerce – just as in the natural world – hibernation can mean different things. Like a caterpillar, some businesses might regard it as an opportunity for necessary metamorphosis, while others, similar to a grizzly bear, might regard it as nothing more than an epic slumber.

The latter approach is of no use in today’s extraordinary circumstances. The companies most likely to bounce back are those that try to reconstitute themselves in some way. Those that merely bank on waking up to discover an astonishing transformation of their fortunes and the effortless recommencement of “business as usual” are likely to be severely disappointed.

Reaching for the sky – or not

So, what manner of metamorphosis are we talking about? The purest form is internal; restructuring what is already there, with the major investment of time – a commodity normally in short supply. Conventional wisdom suggests that any company willing to invest during an economic shock is likely to fare better than its more passive competitors over the longer term. Not least in the unique instance of the COVID-19 crisis, a crucial goal should be to improve market position in the face of ever-developing consumer choice.

With this objective in mind, a farsighted business might re-examine its costs. It might take steps to reinforce its balance sheet. Maybe most usefully of all, it might embrace innovation with a view to re-establishing its relevance and strengthening its resilience in anticipation of renewed demand for its products and services.

An example of these contrasting approaches and fates are two companies, both big names, and both operate in one of the sectors hardest hit by the pandemic – air travel.

In the words of Tony Fernandes, its CEO, AirAsia “used this downtime to review every aspect of operations”. As a result, it “successfully pivoted from an airline to an all-in-one digital lifestyle company anchored in travel” – thereby preserving a substantial chunk of its revenue. 

Meanwhile, Virgin Atlantic demanded a government bailout, failed to get it, filed for bankruptcy and its future is still uncertain.

 

It pays to pivot

AirAsia’s experience underlines a couple of vital points, the first one: it’s essential to evolveIt always is.Even during the best and most serene of times, no company can expect to sustain by standing still.

The second one, is that normality isn’t going to be precisely what we knew before. It may well be comfortingly similar, but it won’t be identical. Some of the novelties which the pandemic and lockdown have given rise to, are going to stick.

Every business will need to adapt to some extent – and so will employees. Fernandes spoke of a “pivot”, and this is almost certainly poised to be the buzzword of our age.

None of this means that the metamorphosis has to be spectacular in every case: it simply means that staying exactly the same isn’t a realistic option. As ever, implementing change while never forgetting what brought stability, security and growth in the first place is likely to be key.

There is light at the end of the tunnel, so don’t make the terrible mistake of sleepwalking towards it as hibernation at last comes to an end.

Is it time to Ramp up, Restart, Reboot or Rethink?

COVID-19 continues to pose serious challenges for small business owners. Figuring out how to start again in its economic shadow will not be easy.

Is it safe to assume that things that worked before will still work in the coming months and years? Should assumptions about how businesses create value be reviewed? Will ongoing disruption bring opportunities as well as pressures? Might this actually be the best of all possible times to make changes?

Reality bites, but optimism endures 

The results of a recent survey published by the CSO early in June show that more than 70% of responding SMEs reported a decrease in turnover in 2020 compared to 2019. Almost a quarter saw turnover fall by more than half in the year and about 40% saw their turnover decrease by between 10% and 50%.

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More than half of enterprises changed their mode of operation due to the pandemic, the most common changes reported were developing an online presence, increasing operating hours and developing new products.

However, despite the challenges faced, the small business community, business owners and entrepreneurs are confident for summer 2021 and the second half of the year, according to a new report from Small Firms Association (SFA)

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In a different survey when 150 SMEs were asked about the developments they envisaged during the remainder of 2021. Their answers were equally split between Ramp up (I expect to experience strong growth based on pre-COVID-19 operations, strategy, product and service offering), Restart (with minor adjustments. I expect to more or less return to pre-COVID-19 performance, with some adaptations (e.g. social distancing, customer churn, minor reduction in employees, maintaining broadly same product/services, finance etc).) & Reboot (I expect to make significant adjustments outside the scope of pre-COVID-19 strategy/plans (e.g. developing new products/services, reducing employees, divesting assets, seeking new markets and sources of finance etc).

Nobody said that they might need to completely Rethink their strategy, and their answer

Dialogue: a key to successful change 

Extensive research with SME founders has shown how entrepreneurs manage the uncertainty generated by growth, revealing in particular how dialogue can encourage them to adapt to change.

Why is this so? Dialogue helps founders to develop critical self-awareness – to take their blinkers off, step outside their bubbles and hold themselves to account. It exposes personal bias and limitations that risk an unhealthy adherence to outdated assumptions. It identifies new opportunities that can bring increased performance and competitiveness.

With all this in mind, many business owners have shared their post-COVID-19 plans with someone. This demonstrates that entrepreneurs are investing time both in listening and, crucially, changing in the face of “new normals”. Continuing to gather diverse inputs will be vital to navigating the challenges that undoubtedly lie ahead.

From inputs to outcomes

A research piece from the Small Business Charter in the UK, suggests that dialogue is an important but frequently hidden tool that business owners can use to prepare for change. It is likely to be especially helpful as they contemplate their place in a post-COVID-19 economy.

It might not provide quick fixes. It might even prove frustrating initially. But it can give rise to many valuable insights into how to survive and thrive – precisely what is needed as founders try to build better, more resilient businesses.

The bottom line? Amid the turbulence of COVID-19, small business owners must continue to invest their time in sharing their own thoughts and seeking out those of others.

Whether ramping up, restarting, rebooting or rethinking – or exploring a combination of these options – it is good to talk.

How to Grow Your Revenue (Part 2)

10 Strategies To Help To Grow Your Revenue

In the previous article where we used the example of a restaurant and we mentioned that there are only 4 methods to grow your revenue:

  1. Increasing the number of customers
  2. Increasing average transaction size
  3. Increasing the frequency of transactions per customer
  4. Raising your prices

Below we list 10 strategies to help you to increase your revenue.

Reach out to old contacts

Getting in touch with prospects where you weren’t successful in closing the deal can help broaden your opportunities. There is an art to getting it right. If the prospect explicitly said they weren’t interested, then you could be wasting your time. But if it simply wasn’t the right time, it’s always worth another try. Check your old notes and ensure data is up to date, ask lots of questions to gauge what has changed in their business, provide them with updates to the product or service since you last spoke, and share valuable content to remind them why they were once interested.

Customer Loyalty

It is important not to overlook your existing customers when you are trying to grow revenue. Before you commit time and resources to finding new business, build on the relationships you already have. Look for opportunities to sell more to existing customers by offering them incentives for increasing business, upselling and cross-selling opportunities. If they currently buy competitors’ products that you can supply, offer special discounts to secure that business.

According to research, it costs as much as five times more to attract a new customer than it does to keep an existing one. Focus on customer retention marketing, selling product ‘bundles’ that work well together, as well as upgrades, so that every customer gets the best out of your business. Develop customer loyalty schemes, send regular communications, offer help and support, and remain the obvious choice for your customers.

Prioritize your conversion-rate

Measuring a sales funnel is a great way to work on improving your conversion-rate between each stage of the sales pipeline. The top of your funnel is the awareness stage, where your brand is getting noticed. The middle is the consideration stage, where qualification and nurture take place. Finally, the bottom of the funnel is where leads turn into customers. This is a visual reputation of your pipeline conversion-rate. Your business will have more opportunities, or leads, at the top of the funnel than at the bottom. Your goal should be to increase the number of leads that convert into customers.

Expand your market

By increasing the number of leads you add to your sales pipeline, you increase the number of opportunities you have to generate business revenue. So, why not identify markets that could benefit from your products and services that you haven’t yet targeted? Conduct research and look for gaps in the market — consider new demographics, locations or sectors and tailor your marketing and sales approach to meet their needs. Undertake a segmentation strategy to spot smaller industry segments you could reach out to, update your content marketing material, add relevant case studies and dedicated landing pages to your site and create targeted digital ads.

New Customers

Winning new customers is important for growing revenue and for protecting your business against losses from competitive activity or natural wastage. Set up a formal process for contacting prospects. Set targets for sales representatives or telephone sales staff to contact new prospects. If you have sufficient budget, run advertisements in trade or consumer publications that cover your target market. Include a response mechanism in the ad, such as a reply voucher, email address or telephone number, so that you can capture contact details when prospects reply.

New Products

New products help you increase sales to existing customers and open opportunities to earn revenue in new market sectors. Although you should plan to develop your own new products over a period of time, you can increase your range in the short term by sourcing suitable products from other companies. Look for products that complement your existing range. Companies that sell garden tools, for example, can increase revenue by sourcing and marketing garden care products.

Product Variations

You can increase revenue by developing variations of your existing products. Companies that market computer software, for example, offer consumer and professional versions of products such as word-processing or accounting packages. Adding or removing features from the same product is a simple way to create products for new markets without investing in product development. Changing pack sizes can also open new market opportunities. A company selling household cooking products could repackage products in bulk to win business in the professional catering market.

Increase Your Sales Velocity

Sales velocity is a helpful sales pipeline metric that helps businesses measure the effectiveness of their pipeline. It is a simple equation that requires four numbers to work out — the number of opportunities in your pipeline, your average deal size, your conversion-rate, and the length of your pipeline.

Sales velocity = number of opportunities x average deal size (€) x conversion-rate (%) ÷ pipeline length (days)

The result you get is your sales velocity — this is roughly the revenue you generate every day. To increase your sales velocity and, in turn, grow your revenue, work on improving one of the numbers at a time. Increase your top-of-the-funnel opportunities, grow your average deal size, boost your conversion-rate, or reduce the length of your pipeline.

Sales Incentives

With the right incentives, your sales force can help you grow revenue. Structure your incentive programs to concentrate the team’s efforts on making sales to new customers or selling new products to existing customers. If you sell products through retail outlets, offer the sales force incentives for opening new retail accounts. If you use social media and have a website, make sure your digital team have KPIs (Key Performance Indicators) linked metrics such as increasing conversion (more customers), sales growth and frequency of purchase.

Utilise technology

Embracing technology is an investment — but when it comes to growing revenue, it’s all about your ROI. Including the right tools in your strategy from the outset can make all the difference to your pipeline. Whether it’s to align teams, manage data more effectively, automate, improve or streamline processes, innovative technology is a must. From customer relationship management (CRM) software, customer service automation, to website personalisation and lead generation software — there is a perfect tool to help your business generate more revenue.

There are good outsourcing opportunities if you don’t have inhouse expertise to introduce automation technology, in the LinkedIn Group The Beauty of Outsourcing you can find some inspiration.

Time And How To Use It Wisely

In answer to our recent poll: “What Is Your Main Challenge to Continue Growing Your Business?”

52% of small business owners answered they needed more resources, specifically time and knowledge.  

So, this week we want to talk about a limited resource we all need more of: time and how to use it wisely.

As a small business owner, you probably recognise you need to spread yourself thin across so many activities which although needed, are not necessarily contributing to grow your business.

Are you familiar with the 80-20 Rule?

The 80-20 rule, also known as the Pareto Principle, asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event. In business, it means that basically only 20% of what you do each day produces 80% of your total revenue.

The goal of the 80-20 rule is to identify inputs that are potentially the most productive and make them the priority. For instance, once managers identify factors that are critical to their company’s success, they should give those factors the most focus.

At its core, the 80-20 rule is about identifying an entity’s best assets and using them efficiently to create maximum value.

Understanding the 80-20 Rule

The 80-20 rule is a precept, not a hard-and-fast mathematical law and often it is misinterpreted. Business managers from all industries use the 80-20 rule to help narrow their focus and identify those issues that cause the most problems in their departments and organizations.

Although the 80-20 rule is frequently used in business and economics, you can apply the concept to any field—such as wealth distribution, personal finance, spending habits, and performance.

Benefits of the 80-20 Rule

Although there is little scientific analysis that either proves or disproves the 80-20 rule’s validity, there is much anecdotal evidence that supports the rule as being essentially valid, if not numerically accurate.

Performance results of salespeople in a wide range of businesses have demonstrated success by incorporating the 80-20 rule. In addition, external consultants who use Six Sigma and other management strategies have incorporated the 80-20 principle in their practices with good results.

How do I apply The Pareto Principle in my business?

The rule is often used to point out that 80% of a company’s revenue is generated by 20% of its customers. Viewed in this way, then it might be advantageous for a company to focus on the 20% of clients that are responsible for 80% of revenues and market specifically to them—to help retain those clients and acquire new clients with similar characteristics.

There are 5 key areas which should represent that 20% for small business owners globally. If you focus your efforts on these 5 key areas only, you will see real growth in your revenue and profit.

Those 5 Key areas are: Lead Generation, Conversion, Transactions, Prices & Profits.

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Real-Life Example

Let’s say that in 2020 you generated 1,000 leads and you managed a 25% conversation rate. It means you generated 250 customers. Each customer bought from you 10 times in the year at an average selling price of €100, from which you made 25% gross profit. This means at the end of the year you generated €62,500.

If you could increase each of the 5 key elements by only 10%, it would translate in almost doubling the revenue to €100,450 what would it happen if increase a 50%?

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Key Takeaways

  • The 80-20 rule maintains that 80% of results come from 20% of effort
  • Under the 80-20 rule, you prioritise the 20% of factors that will produce the best results.
  • A principle of the 80-20 rule is to identify an entity’s best assets and use them efficiently to create maximum value.
  • The key 20% of time for any small business owner should focus on: Lead Generation, Conversion, Transactions, Prices & Profits.
  • This “rule” is a precept, not a hard-and-fast mathematical law.

If Time, or the lack of it, is the key area holding you back from growing your business, the implementation of this principle will be of great benefit.

However, if you are not sure how to go about it, send us an email to hello@bbcs.ie and we will run a free audit of your business and provide you with a roadmap.