Assumptions about pricing can kill your business.
Recently I talked to a printer who sold half his business. The unprofitable half.
“What led you to this point?” I asked.
Ten years, he said, of making pricing assumptions without backing them up with facts. Ten years!
IT WAS OUT OF CONTROL.
“I was operating in a world of unreality,” he said. “We were discounting. That was our go-to strategy. We’d figure out the cost, and cut it in half. Forget markup.”
He thought he was fine. He was covering overhead and providing jobs for his employees and family.
“Our building and equipment was paid off, so we assumed everything else was gravy, right?”
Assumptions. Will. Kill. Your. Business.
I reviewed this printer’s company financials, and I could see it on the bottom line.
Yes, the cost of materials fluctuates. Paper is up. It’s expensive to hire and train. Customers take forever to pay. Health insurance is a stab in the back. Yadda yadda.
You can’t control that stuff — you can only manage it.
Pricing you can control.
You’ve heard me say it hundreds of times:
“You live or die by your pricing.”
Show me your income statement, receivables, and cash flow, and I will tell you where you’ll be in 5 years.
How you manage risk, costs, compensation, contracts, taxes, capital investments, and credit… It’s all there.
If you can’t manage the rest of your business, you probably make faulty assumptions when it comes to pricing.
Blunt but true.
The printer I am coaching wants to go forward with a fresh approach to being profitable. With the changes he’s made in his business, he is well situated to do so — if he can get the pricing under control.
Before delivering a quote, first, you must:
Replace assumptions with facts.
Ditch loss leader pricing. You rarely “make up for it” on future jobs.
Avoid break-even pricing except as a well-informed business strategy.
Determine if the client will freak out at a higher price. This takes a sophisticated sales approach.
Create a pricing tier for customers who prefer extra support with files and customer service. On the other end of the spectrum, create a tier for discount hunters and sell them your most profitable jobs at a low cost. Continue to run the numbers on these scenarios to see if they are worthwhile. Some customers will never be profitable, and that’s the truth.
Have a voice conversation with the customer. Address distractions, such as: when will the current invoice be paid (yes, there is something to be said for having the talk before you accept more work from them); is there wiggle room in the job’s delivery time or date; which specs can be altered to get the project in line with the budget; and will the customer “trade” or concede something important in return for preferred pricing.
Don’t operate in fear of OPP (other people’s pricing). Your competitors’ prices could be built of straw. If you want to know if competitors are truly profitable for the long haul at those prices, the truth is out there. Don’t assume.
Become a lean, mean operational fighting machine so your profitable estimate will be in the ballpark.
I know most estimates are delivered without a salesperson ever talking to the customer. Like the tides, queries come in and estimates go out. To save time and discomfort, assumptions lead to pricing concessions that may be completely unnecessary.
Don’t let profit be sacrificed for…expediency, fear, illusions of control, “courtesy” to the customer’s time, assumptions, assumptions, assumptions.
To take control of this game — and put profit back in your pocket — do this:
Learn professional selling, estimating, and business management practices. Hire experts who understand the world and today’s customers as they are right now — not 10, 20, or 30 years ago.
Assumptions will kill your business.
Control what you can control.
Strive to be profitable.
Your future depends on it.
[Agree? Disagree? Comment below! Read more from Sandy here.]
Sandy Hubbard has been an author and contributor at Print Media Centr for 10 years. She is an expert Marketing Strategist, specializing in the Printing Industry. She consults with owners of print, media, and platform businesses of all sizes — building visibility and increasing sales using solid techniques and a proven marketing methodology.
Connect with Sandy on LinkedIn and find her on Twitter at @sandyhubbard every Wednesday at 4 p.m. ET, leading or co-hosting #PrintChat with Deborah Corn of @PrintMediaCentr. Join the fun at social media’s most popular and influential chat for the global print industry!