price for profit
What Doesn’t Work Simply doing anything with anyone else’s price list. The first step for many start up shops is to use the average of the prices of their competition, but come in with a small percentage pricing point underneath. That is a recipe for disaster. Here’s why. Because it does not take into consideration all of the unique costs and challenges to your own business. A few years ago I was coaching a shop that had over a million dollars a year in sales. They were an extremely busy two automatic shop, but at the end of the year there wasn’t any profit for the owner. He couldn’t understand why. Digging into the challenge, I asked a few questions and the main problem was the fact that his pricing was based on using an average of some nearby competitors. His rational was that he had to compete on price to get the business. What he failed to take into consideration is that these other shops have entirely different ways of working. Their overhead was different. Labor, consumables and equipment were different. Not to mention one of the shops he used in his average went out of business. It is flawed thinking to consider that pricing from shop to shop is an universal way of making money. Are you really trusting that your competitor knows what they are doing? Do you really think that everything about their shop is exactly equal to yours? Don’t Take Shortcuts Longevity in this industry is entirely predicated on profitability. If your business isn’t profitable, you won’t be around long. This can be a hard business for some. Where do you think the inventory for those used equipment dealers comes from anyway? Write and implement a solid Business Plan . Have an incredible Marketing strategy that aligns with your customer base. And, you guessed it, have a pricing structure that is based on your reality. Your costs. Your profit goals. Your math.
Which, frankly is hard to do. Because it takes time and effort. But hey, that’s what you are here for, right?
Next up are the sections that will walk you through how to develop a pricing strategy that works for you. Get your pencil ready!
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