Sometimes the best way forward is so obvious that we often overlook it. This is true with companies wanting to increase their revenues and to become more profitable (of course the two are not necessarily synonymous...)
They look at new markets, new products, new partners, complicated sales promotions, advertising campaigns and so on. All of which can be effective but can be hard to execute, difficult to track and can take a very long time to impact.
But there is a very simple way to dramatically increase your revenue and your bottom line. It is so obvious that many people overlook it.
The silver bullet is to simply raise your prices.
With the cost of a few key-strokes you take 100% of the price increase right into your EBITDA.
And not only can you do an across-the-board increase, if you have multiple products, configurations, customizations, extensions and so on, you can do so selectively. As an OEM sales manager, I inherited the pricing process of my predecessor. Every six months using steel cost increases as justification, they would increase all their prices by 3% for example. The result was an 3% revenue increase. However, by increasing the prices selectively based on high and low volume products we could introduce an average 3% price increase but realize a 5% increase in our actual revenue. I am sure you can do the same.
We often under-estimate the actual value clients are obtaining from our products and services. There has been so much change over the last year that it is inevitable that your clients’ value equations have changed too, so if you are not getting significant pushback on pricing – you are likely not charging enough. Your sales team will likely say you will lose clients if you increase prices, but is it possible you have outgrown those clients anyway?
I encourage CEOs to talk with their top three or four clients and have a pricing conversation to understand the value they get from you (and their relationship with you). Based on this you can start to move your pricing.
Let me know if you’d like help developing your price increase strategy.
In the meantime, you might want to read Andrew’s 5 Golden Rules of Pricing.
See you next time,