When Business is slow you need to increase your sales and get money coming in the door, so price reduction is a good incentive – right?

Wrong!

Price reduction – reducing the selling price of your merchandise or expertise – can come at a greater long-term cost to your business. Why? It costs you money, in more ways than one.

Discounts provide clients with the impression that your ordinary prices are too expensive. They may either hold off on a purchase waiting for a sale, rather than purchasing now. And if they do purchase with your reduced prices, you are losing money.

For example, if you purchase a dress for $60, and sell it for $100, you are making a 40% profit. If you then offer clients a 20% discount, the price will be reduced to $80, reducing your profit to a 25% margin.

You are losing a greater percentage than the percentage of your original discount.

Similarly, if you market your business as “quality service and quality products at a quality price”, then offering a discount would be counter intuitive to your claim, indicating that your retail price really isn’t your ‘best price’. Loss of credibility will quickly follow.

So, what’s the alternative?

1. Add more value.

Offer a free add-on, such as a car-wash or branded air-freshener for a mechanic, a daily spend tracking template for an accountant, or the first ten minutes free for a transcribing company. Something that is of specific value to your clients.

2. Provide an incentive for your customers to send you clients

Offer a free box of chocolates, a scratchie or a gift voucher for every new contact they send you that becomes a client.

3. Cut costs.

Regardless of the size of your business, one of the best ways to make money is by saving it. Reducing costs is difficult – increasing competition and paper-thin profit margins make it challenging to shave any excess, but you can do it.  A great option is doing more with less. Use free tools and templates. Identify your core competencies and increase your efficiencies. Identify non-core functions and consolidate them, reinvesting that energy into critical elements of the business. Outsource where it is financially viable. Develop smart buying habits.

All of the above is as crucial as savvy selling, and will deliver you not only a far greater return on your time in the short-term, but also extensive long-term gains across the business.

Consult An Expert.

Ready to take control of your business and maximize your profits? Don’t miss out on this opportunity to thrive in the industry! At CFO@Call, we understand the challenges you face, especially when it comes to managing costs and maintaining profitability. Our experienced team of business advisors specializes in guiding business owners towards financial success. Whether you’re looking to navigate through a price reduction strategy or need assistance with overall financial management, we’ve got you covered. Take the first step towards growth and profitability by reaching out to us today.

Let’s work together to transform your business and achieve the success you’ve always envisioned. Contact CFO@Call now and embrace a future of greater profit margins and financial stability!