Business owners struggle when they take on the task of pricing their product or service. Many times, they will set the price too low, thinking that a lower price will increase sales. Lower margins on products or services can affect cash flow, which in turn affects the ability of the business to grow.
Pricing is one of the most critical aspects of any business. Business owners may think that lower prices will generate more sales and at a faster pace, especially if the business is a new start-up. Often, business owners don’t realize the worth of their product or service and what the market will bear. Business owners sometimes fail to consider the costs, including operating and long term costs involved in delivering a service or product, the most critical being a steady cash flow.
Here are some signs that you have underpriced your product or service:
- Inventory cannot keep up with demand. While this might seem to a be great problem to have, if production cannot keep up with incoming orders, pricing may be too low. Production and labor costs need to be considered, especially for a growing company. Research prices of your competitors. You might be leaving a lot of money on the table by not being able to produce the product or service due to low, non-competitive pricing affecting cash flow.
- You may have lots of customers, but not much to show for it. This happens more often in the service business. When selling a product, the costs are fairly easy to calculate. In the service industry, changes are likely. It is important to calculate all the costs in any change order, including your margins, and have the customer sign off on the change.
- One of the reasons entrepreneurs go into business is because they see a need for a particular product or service. Business owners want to satisfy their customers by being able to meet their needs, but satisfying your customers does not mean you give away your product or service. Charging a competitive and fair price that covers your costs, provides for you and your employees, and for the long term needs of your company. will boost your brand and your sales.
American Receivable has provided a factoring service at competitive prices to companies that do not qualify for a bank loan due to credit problems or lack of required time in business. Many companies are offering alternative financing in the market today. Most of these alternatives come with high fees restrictions. We offer low fees and individualized programs for each client and have been ranked #1 nationally nationally for the past 9 years. Call today or complete our quick online application form to find out how American Receivable can put your company on the road to success.
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