Imagine what you could accomplish if you never quit and always did all that you could do.Jim Rohn
When was the last time you saw ants reach an obstacle and give up with their heads down and head back to the ant hole to relax? Never.
Here’s another question. How much will an ant gather during the summer to prepare for winter? All that it possibly can.
Imagine what you could accomplish if you never quit and always did all that you could do.
I think everybody should study ants and their philosophy—it’s simple, but it’s powerful:
1. ants never quit
That’s a good philosophy. If ants are headed somewhere and you try to stop them; they’ll look for another way. They’ll climb over, they’ll climb under and they’ll climb around. They keep looking for another way. What a neat philosophy, to never quit looking for a way to get where you’re supposed to go.
2. ants think winter all summer
That’s an important perspective. You can’t be so naive as to think summer will last forever. So ants are gathering their winter food in the middle of summer.
An ancient story says, “Don’t build your house on the sand in the summer.” Why do we need that advice? Because it’s important to be realistic. In the summer, you’ve got to think storm. Think ahead.
3. ants think summer all winter
That is so important. During the winter, ants remind themselves, “This won’t last long; we’ll soon be out of here.” And the first warm day, the ants are out. If it turns cold again, they’ll dive back down, but then they come out the first warm day. They can’t wait to get out.
4. ants think “all-you-possibly-can”
How much will an ant gather during the summer to prepare for the winter? All he possibly can. Ants don’t have quotas or “good enough” philosophies. They don’t gather a certain amount and then head back to the hole to hang out. If an ant can do more, it does. What an incredible philosophy, the “all-you-possibly-can” philosophy.
The quickest way for any business to make 10% more profit each year is to put up its prices by 10%, but if it is as simple as that, then why aren’t we all doing it? The reason is that we have a fear that in doing so, we are going to lose our customers.
However, like most fears, when you analise them they are only “false expectations appearing real.” The reality is that in any market you can and should increase your prices, and if you know how to do it properly, you need never be fearful of losing a single customer.
The first thing to understand is that you must know your numbers. If you do not understand your own profit and loss account, know your gross profit from your net profit and what products make money and which do not, then you are right to be fearful. Without this knowledge, you will not know where to start and may well find you are increasing prices in the wrong area of your business and wake up the next morning with no customers at all. So if you are not tracking these important figures and do not have detailed analysis of what you sell and how much it costs you, then stop reading right now, book a meeting with your accountant and do not read any further until you have got the information at your fingertips.
OK, so now I will assume that you are financially literate. Your next step is to understand that if a company making a 30% gross profit were to increase its prices by 10%, it would have to lose 25% of its customers to be financially worse off. Yes, that is right; if 20% of your customers objected to the price rise of 10p in every €1 and went elsewhere, then you would still be better off putting your prices up. Also if you raise your prices by a higher figure, say by 30%, you could afford to lose 50% of your clients. Think of the time and effort you would save!
If you don’t believe me, work it out for yourself, then read on! If you can’t work it out, then go back to your accountant! Obviously if you have higher or lower margins the figures will be slightly different, but the concept will be the same.
I have been working on this one strategy with clients for 7 years and in all that time, the average loss of customers from a price rise is 1-2%. But this could be a hidden bonus for you in this as well. The clients that do leave as a result of a price increase are usually the ones that have always quibbled about price, don’t pay on time, cause you stress and grief and use up time that should be spent with your top clients. By losing your worst clients, you can spend more time on your best clients who will in turn buy more from you and stay longer. And there is a further bonus in that these bad clients that leave you go to your competitors and make their life hell instead! So you really can’t lose.
OK, you still may not be convinced by my argument and think that there must be a catch. Well, for some of you, no, there is no catch. If you only have a few products or services, you really believe in them, you give good value and have a good relationship with your clients; you can put up your prices tomorrow. I helped one service provider client do this and we doubled the profitability of his business virtually overnight.
For those of you with multiple products and services which are more commodity-based, where your clients have little loyalty and there is high price sensitivity and competition, then a more strategic approach than a general price rise is needed. For you, rather than increasing all prices, you need to work out which products and services you should increase and which you should leave alone. As I said above, you have to know your numbers, but this time down to a product line margin basis. Then you need to look for those products that are going to meet one or more of the following criteria:High volume, so that a small increase can have a big effect (e.g. 1p on a litre of petrol)
High ticket price – so that a reasonable € increase is a low % increase (e.g. €5,000 on a new Ferrari)
Highly differentiated – where you can show a real point of difference that will justify a higher price (e.g. Apple’s iPhone)
Low access to knowledge – where access to competitors’ price and offering is harder to find or is confusing (e.g. energy tariffs)
Able to reposition – turn your product/service into a basic/better/best, so the basic competes on price and the others on value (e.g. Tesco’s value and finest range)
Add-ons – have a basic range and charge for extras (e.g. BMW & Mercedes).This list is not exhaustive, but I find with my clients I rarely need to go beyond the basics to make a difference, and what a difference – for every €1 on the price, 100% of it goes straight to your bottom line!
So go on, take ACTION and put up those prices- just warn me first so I can get my order in before you do!
Karl is a Sales Professional with a leading supplier of raw materials to manufacturers. For 15 years, Karl has been using Sales 101 techniques to build strong relationships with clients
He is now in a position to implement price increases for the first time in seven years. Karl doesn’t know what to do.
Like many Sales Professionals in the volatile economic conditions of the 21st century, Karl has never had to communicate price increases to his clients. Lacking experience in positioning a price increase, he is afraid of weakening the strong relationships that he has developed or worse, losing clients by delivering this difficult message. However, for Karl, as for many Sales Professionals, economic growth is making price increases inevitable.
Fortunately, it is possible to maintain strong client relationships in this situation by following five techniques borrowed from Sales 101 for leading a consultative conversation about price increases:
1. know the reason for the price increase
There are a number of reasons for increasing prices. For example:
Your costs (materials, labor, facilities, etc.) have increased.
The original pricing that you established with the client no longer reflects current conditions, and your margins are too low.
The market has shifted upward since you last quoted a price for the client.
Be honest with your client about your company’s reason(s) for the increase, which will help create transparency and build trust.
2. anticipate client resistance
Think through the implications of the price increase for your client, and be prepared to acknowledge these implications. Anticipate in advance how the client will react to the increase so that you are best prepared to address his/her objections and concerns.
3. neutrally position the price increase
As briefly as possible, lay out for the client why you are implementing a price increase, how much the increase will be, and when it takes effect. Do not belabor the point with excessive rationale. Remain neutral and confident. Avoid using phrases like, I know this increase is hard on you … or, I know this increase seems high … which could create a perception that you don’t support your company’s decision.
4. remain silent after positioning the increase
Anything you say after that point will open up room for negotiation in the client’s mind. Do not ask a checking question. If the client raises objections or concerns, use the Objection Resolution Model to address them, but avoid creating the impression that the increase is negotiable.
5. strengthen the relationship
End on a positive note. Thank the client for understanding and for his/her continued business. Express your enthusiasm for continuing to work together.What sales techniques have you used to position price increases? Share them with us in the comments below!
There’s a bit of ego that comes with running a business. After all, if you were smart enough to figure out how to launch this company in the first place, surely you’re smart enough to figure out how to design a logo. Or manage your finances. Or tell everyone else what to do. Unfortunately, the more micromanaging you’re doing, the more harm you’re probably doing. Entrepreneurs know the things they excel at, and outsource the things they don’t. The most successful entrepreneurs do only the things that only they can do. Anything else can almost always be outsourced more efficiently.
What to Do About It: Get out of your own way. Think about those tasks that take you far too long to do, or result in shoddy work (that logo that took you 18 hours to design still doesn’t look as good as what a professional could have done in an hour), and outsource it. If you’ve got staff, trust them to do what you hired them to do. If they aren’t doing it correctly, fire and re-hire. Focus on what you do best: running your company.
6. you can’t handle growth
You started small and didn’t expect to burgeon overnight. Just ask any business that’s ever been the recipient of the “Oprah Effect” or even the “Groupon Effect” and then had a flood of sales the next day: rapid growth isn’t always a blessing. If you’re not prepared for the strain your servers will experience, the number of sales to process, or the flood of customer service calls, you risk seriously harming your brand’s reputation.
What to Do About It: Overall, rapid scaling should be a good thing, but you need a plan to quickly hire more staff and train them, as well as how you’ll manage more website traffic, phone calls, and customer service requests. For a great read on scaling up properly, see “Eleven Lessons For Scaling Up.”
7. you don’t have business savvy
While it’s not imperative that you have an MBA to start a business (or even a college degree), a solid understanding of finances, management, marketing, leadership, and sales will take you far. If you’ve mixed your personal and business finances, have trouble managing staff, or are just throwing your hands up at running your business in general, your risk of failure is multiplying by the minute.
What to Do About It: Consider whether you truly want to be an entrepreneur. Many business owners start a business because they want to “do what they love.” That’s respectable, but without a CEO that knows how to run a successful business, any business is doomed. And to be honest, many business owners get far away from the actual thing they love doing once the business takes flight; focus shifts from fulfillment work, and toward running the business. If you’re committed to sticking it out, invest time in classes, workshops, and resources to beef up the skills you’re weak in.
Take these as warning signs that things need to change for your business. Then start making changes that will positively change the direction your ship is sailing. Have you successfully recovered a failing business? What were the warning signs? Leave a comment and let us know!