98.7% of B2B products and services are underpriced.

It’s real money business owners are leaving on the table.

Today we’re going to talk about:

• The importance of positioning
• Signs you’re likely undercharging

But first, our sponsor.

 

Thanks ​BisonCFO​ for sponsoring this issue.

We got you

More than 50% of business owners say they wish they knew more about their financials.

And those are the ones who admit it!

While it's easy for me to sit in my CFO seat and say how dare you, I'll admit something to you: when I first started, despite all the formal training, I felt ill-prepared just like you.

Mike Tyson once said "Everyone has a plan: until they get punched in the face."

And holy smokes, how true is that?

And that's what business is. Getting hit in the face time and time and time again.

So, that's where we come in.

Need a strategic sparing partner? We got you. Growing quickly and don't the next steps? We got you. Never took an accounting class and don't have a clue? We got you. Need a budget and/or forecast and never worked a spreadsheet? We got you.

A good Fractional CFO isn't about the deliverables you get.

It's about the peace of mind we provide. We want to help you sleep a little better each night.

We got you.

Yes, we do all the typical Fractional CFO stuff. We:

1. Establish goals
2. Identify KPIs
3. Manage your cash
4. Create a budget & forecast
5. Be your translater with bankers, CPAs, etc

But more than this, we're a part of your team and act as the strategic partner who helps you achieve your goals (personal or professional).

So, if you feel like you're leaving money on the table or just think your business has so much more potential, jump on a call and we'd be glad to talk through it with you.

We'll look at your business and provide our expert advice and some recommendations, even if you don't hire us.

Don't go another sleepless night.

Schedule a call today.

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Are you underpricing your product or service? Yes, you are

When Steve Job’s returned to Apple in 1997, he wasted no time changing the business completely. He slashed product lines, revamped others, and ultimately launched the iMac.

The iMac was priced intentionally higher than its PC competitors. Steve and Apple wanted to send the signal that Apple was a premium brand, delivering unmatched quality and design.

But he didn’t stop there.

As we now know, Steve and Apple completely changed the trajectory of the technology market by launching the iPod, iPhone, and iPad. Each product, unsurprisingly, carried the same premium positioning.

The results are undeniable, no matter what you think about their products. Market Capitalization went from $2 billion in 1997 to $350 billion in 2011, at the time of Job’s passing. Today, Apple remains one of the world’s most valuable companies, with a market capitalization of well over $3 trillion.

So, what made Apple different with Steve Jobs?

It was all about positioning.

Positioning your business

When looking at positioning, you can break it down to 2 levers:

1. Price
2. Quality

Steve was a master at communicating how they were different than the competitor and creating a culture around the product.

Apple, in turn, captured the high-price, high-quality portion of the market.

Other computer brands, like Dell, positioned them as high quality but low price, or as the value brand.

Still, others chose to become a utility… we’ll help you get done what you need to get done at the lowest price.

Positioning is evident in every industry.

Just think about an industry and ask who is the:

1. premium option
2. low cost option
3. value option

You can likely name them and name them pretty easily.

When businesses don’t have clear positioning, it’s hard for consumers to know where to place them in their mind. You can’t answer the question “what problem am I solving?”

Walmart’s tagline is “Save money. Live better.” They’re being very clear who they are: the low cost leader in the market.

But what happens if Walmart raises prices? They’d likely lose much of their customer base to lower-cost options.

If looking for high quality, premium products, you’ll choose a Whole Foods. If buying the “general” items, you go to a Walmart.

This isn’t just for grocery or computers. This happens in all markets.

And just as consumers would leave Walmart if they raised prices too much, we have to understand positioning to understand pricing.

Positioning informs your approach to pricing.

So, before we can discuss pricing, we have to ask: how are you positioning your business?

If you’re positioned as the low-quality, low-price option, you will always have downward pressure on your prices. That downward pressure determines which pricing actions you can take.

But for most, this low-quality, low-price option is not our positioning.

And statistics show you’re underpriced by an average of 5.6%.

What does that mean? For a business with $5 million in Revenue and a 15% Profit Margin, that increases your profit by $280,000 to 20.6% Profit Margin.

Correcting underpricing can completely transform your business, so it’s important we get it right.

Today we’re going to look at some signs that could indicate your pricing is too low.

Then next week we’ll offer some price increase strategies and a step-by-step method for communicating them to customers.

16 signs your pricing is too low

1. You have low profit margins, especially when compared to your competitors.
2. You have a backlog of work that you can’t fulfill.
3. You’re priced lower than your direct competitors (do pricing research).
4. You’ve increased prices in the past and lost little to no customers.
5. Customers aren’t engaging your product/service as you expect, unveiling a low perceived value to the offering (raising the price will get them to take it more seriously and follow through).
6. You’re delivering more than is being paid for (scope creep).
7. Lack of funds for growth (inventory repurchases, asset replacement, new employee hiring, etc).
8. You’re getting the wrong customers who aren’t aligned with your ideal offering (you’re attracting too low-end of a customer).
9. Your costs are increasing and you haven’t raised prices yet.
10. You’ve gained more experience, which translates to a better product and/or service.
11. You have no room for advertising, marketing, or research & development (word of mouth alone shouldn’t be the ultimate goal).
12. You can’t afford to pay your top talent more (Top performers can produce 5-10x more than the mediocre or good ones, so you have to be willing (and able) to pay them to stay).
13. You can’t afford to offer discounts (though this shouldn’t be your first move).
14. You can’t seem to get a financial cushion (cash is always strapped).
15. Your proposal win rate is too high.
16. Most clients are charged hourly (it caps your earning potential and values all services the same, even those with higher returns).

If you can’t find one of those 16 that applies to you, you aren’t trying enough.

I’ve never walked into a business that couldn’t raise prices in some way.

It’s inevitable and an extremely important part of a business.

Without mastering the skill of raising prices, you’ll naturally be accepting lower profit margins which will erode further over time.

Don’t be that guy/gal.