A small tweak that gets you big results13th July 2017
A business owner I know was struggling with his time management.
He felt that his days were taken up with long, dreary meetings, leaving him with very little time for productive work. Sometimes he held so many back-to-back meetings that he didn’t have time to eat, catch his breath or really absorb anything that had been discussed.
It felt exhausting and unsustainable.
So a couple of years ago, he instituted two changes.
First of all, he decided that he wasn’t going to hold any meetings on a Thursday. Ever. And second of all, he stopped allowing people to book 60-minute meetings with him. From now on, the longest meeting he would hold would be 45 minutes.
The result? He now has valuable time to work uninterruptedly, with a clear head, and when he does have back-to-back meetings, he has some breathing space in between. He is much more productive and relaxed at work.
The changes he made were really very tiny, in the scheme of things. But they had out-of-proportion results.
In business, we very often think that in order to have a big impact, we need to make big changes to the way we work. That is not always true.
Often, small changes can be revolutionary.
According to a 2009 study, when hospitals used a checklist before surgery, the death rate dropped by 40%.
That same year, HMRC managed to significantly increase the overdue taxes they collected compared to the previous year, simply by adding one line to the letter they sent out, telling recipients that most other people were paying their taxes. (That’s social pressure for you.)
And we know from our own experience that when you make it easy for employees to record their expenses, for example through a mobile app, your accounts become more accurate.
It’s a similar story when it comes to changing what you charge.
Raising your prices is by far the quickest way to become more profitable. Yet many companies resist, preferring to spend months and years trying to find ways to cut their costs, which is a much more difficult route.
The reason? They imagine that to seriously impact their profitability, they need to raise their prices by 20%, 30%, 40%, and are afraid of a rebellion from their customers.
It’s not true, though.
Very often, even a tiny change in your prices will have an out-of-proportion impact on your profitability.
Let’s do the maths together.
Say that you sold a £100 product, of which £10 was profit.
If you raised your prices by just 5%, each sale would now bring in £105.
For the consumer, that’s just a tiny increase. They probably wouldn’t even notice it.
But your profits have jumped from £10 to £15 – that is, a 50% increase. Your expenses have not increased at all, so every penny of that extra £5 is pure profit.
Now imagine you applied that across the board. A 50% jump in profits, year-on-year, wouldn’t look too bad in your year-end accounts, would it?
Now, obviously the ‘real’ maths, when applied to your business, will be more complex than that. But the principle remains the same: You do not have to raise your prices by a frightening amount in order to significantly impact your bottom line. A small rise will make a big difference.
If you’re still afraid, why not test a price rise with your least profitable customer, or one product line. See what happens….
And of course, if you would like help determining the best pricing structure for your business, let's talk. Making your business more profitable is what we are all about.