Pricing Decisions: What Should My Price Be?

The pricing decision you make is part of your business’s marketing mix.  It can differentiate your product from the competition.  Here are eight major pricing methods and strategies. Which applies to you?

 

  • Cost Plus: This is the simple method of taking your costs and adding a desired profit margin.  It is the crudest  method and  most ignorant of what is happening in your market place.

 

  • Penetration Pricing: A company will use this to grab market share and control a market as the low-cost producer.

 

  • Perceived Value to the Consumer: Here your customers believe that they are getting good value from your products or services.  The pricing of replacement parts is an example where this is applied.

 

  • The Price/Quality Relationship: The perception of quality in a product sometimes dictates it price – for example, the pricing of luxury items such as jewellery or perfume are based on attributes of style and workmanship.

 

  • Skimming: Early in the life cycle of a product, companies can often charge a high price. They then skim high margins from a new and novel product or service. The extra benefits will recover the initial development costs of the product.

 

  • Price Based on the Price Elasticity of the Buyer: Sometimes a pricing policy needs to be aware of the sensitivity to price of consumers. Some products are more price elastic than others. For example, tobacco users often absorb price increases than forgo their habit.

 

  • Meeting Competition: This is a decision to employ a pricing strategy to match or beat the prices of competitors. This is to gain or retain market share in a competitive market.

 

  • Meeting Profit Goals Based on the Size of the Market: In a tight market, a price has to be set to justify the marketing and manufacturing effort. The alternative is to find another marketplace!

 

Eight Steps to Good Financial Management of Your Business

Are you really on top of your business’s financial management?

Surely one of the major jobs as a business owner is to ensure that your business keeps on course and out of trouble to achieve your financial objectives. With strong financial management in place, a company can confidently build its business and weather the storms when they arise.  Without it, businesses become vulnerable to attacks on it from general business conditions, the wrong decisions and unscrupulous employees or business partners.

So here are eight objectives you must set yourself to ensure that the finances of your business are in order:

  1. Money for starting your business

You need to make sure you have the right amount of money to start your business; you need to have the cash to get the right assets in place to get your business off the ground.  A great idea needs to be realised and the monetary requirements understood.  Get this clear at the start and you can build the business with confidence. Your business plan needs to be clear how much and when you require this starting capital.

  1. Making a profit

Sounds ideal – but the best companies make adequate profits on a consistent and predictable basis. With this, businesses are in control and can plan for the future.  You need to be confident that you have strong business cases for your ventures and that you know when and how much profit you will make.  A strong business case and a good budget and forecasting system will allow you to measure your performance.

  1. Controlling the cash

We believe that good business manage their cash from profits in such a way that they can keep all their options open.  Remember a sale is not a sale until you have a satisfied fully paid up customer willing to buy more and/ or recommend you!  You need to keep a constant eye on your debtors and their ability to pay you.  Have a good invoice and credit control system in place and remember to control how you pay your creditors!

  1. Minimise threats of fraud and other losses

Watch out for the bad guys! – they could be poor payers, fraudsters, either internal or external – not everyone is as honest as you, and you need to have systems and controls in place to highlight issues and act fast when you see them. Control of your business assets means that you do not generate waste and there is leakage of the profit you business should be earning.

  1. Be tax efficient

You need to do this for the business, its owners and it employees – this is not about evasion but efficiency and there is nothing wrong with this objective.

  1. Understanding the cash needs of your business

You may have great plans ahead, but if you don’t have the cash in place to realise them they are merely dreams. Understand what cash you need for your ventures and how that fits in with your business patterns. A strong understanding of the cash low of your business will prevent you getting into difficulty by overspending at the wrong time, and ensuring that you know when is the best time to move your business forward.

  1. Keep in good shape and out of trouble

We mean your financial condition here – good cash position, good customers and reliable suppliers and protect your business assets! Always question have I got the right customers and the right products and services to maximise profits and can I improve contracts and services I receive from my suppliers?

  1. Know what you are worth!

So how do you know what price you are worth if someone wanted to buy your business! What value is your business at the present

Well, do you have the basic skills and knowledge for the financial management of your business?

 

What is interim management?

Interim Management – Bringing flexibility

An interim executive, with relevant experience and a good track record, can be the answer to a company’s prayers. Interim management is a relatively new industry with great potential for making the most of today’s fast-moving business climate. The concept was created by the Dutch in the 1970s as a way of injecting much needed flexibility into the market place. At the time, companies faced long notice periods for employees, so changing their most expensive people – the management – was difficult without incurring large costs. The model was adopted enthusiastically in the UK during the late 1980s.

Interim Management - Bringing expertise

Today, we operate perhaps the most sophisticated interim management services in the world, with executives and managers covering a wide variety of roles at different levels of expertise and within various technical areas. These include:

  • adding new skills on a part time basis
  • plugging a gap created by a sudden departure;
  • managing acquisitions;
  • project management;
  • effecting culture change;
  • setting up new businesses and closing down old ones;
  • mentoring and team development;
  • crisis management;
  • turning round an ailing business.

The best exponents of interim management are already proving that, used effectively, they can be worth their weight in gold.