by MHolland | Jan 24, 2025 | Business Tips, Cash Flow, Selling Tips, Systems
Every business faces the delicate task of raising prices…
Whether it is due to rising costs, inflation, or a desire to increase margins, increasing prices can feel risky. Who wants to lose customers?
The truth is, when done thoughtfully, a price adjustment (great word, adjustment, isn’t it?) does not have to send your customers running. It can even strengthen your relationship with them. Here are ten steps on how to raise prices while keeping your customers loyal and your business thriving.
Step 1 – Understand Your Value
Before making any changes, take a step back and assess the value your business delivers.
What makes your product or service unique?
Why do customers choose you over competitors?
If you are confident in the value you provide, it will be easier to communicate why the price change is justified. Use metrics like customer satisfaction scores, testimonials, and retention rates to solidify your confidence.
Step 2 – Evaluate Market Conditions
Research competitors and industry trends.
Are others in your market raising prices? What are the current customer expectations?
Understanding the market context will help you set a price that is competitive yet profitable. Tools like cost benchmarking and competitor analysis can provide useful insights.
Step 3 – Segment Your Customers
Not all customers are the same. Segment them based on factors like purchasing frequency, loyalty, and price sensitivity.
By understanding which groups are more likely to accept a price increase, you can tailor your approach and messaging to reduce pushback.
Step 4 – Communicate Clearly and Transparently
When it is time to announce the change, clarity is key. Be upfront about why you are raising prices. For example:
- “We are committed to maintaining the quality you expect, and this adjustment allows us to keep delivering exceptional value.”
- “Due to rising costs in materials and operations, we’ve made the difficult decision to adjust our pricing to ensure sustainability.”
Express gratitude for their loyalty and frame the change as part of your commitment to long-term excellence.
Step 5 – Add Value Alongside the Price Increase
Customers are more likely to accept a price change if they perceive added value. Here are some ways to do this:
- Enhance your product or service offerings with additional features or benefits.
- Offer loyalty rewards, exclusive discounts, or upgraded support.
- Bundle services or products to create more value for the price.
Step 6 – Offer Advance Notice
Whenever possible, provide customers with enough time to adjust to the change. A 30-day notice is widespread practice. This demonstrates respect for your customers and gives them time to budget for the new pricing.
Step 7 – Pilot the Change
If you are unsure how customers will react, consider testing the price increase with a smaller segment before rolling it out to everyone. This can help you gauge the response and refine your strategy as needed.
Step 8 – Train Your Team
Your employees are the face of your business, and they need to be prepared to address questions or concerns from customers. Equip them with the right messaging and tools to explain the value of the price change with confidence and empathy.
Step 9 – Monitor Customer Feedback
After implementing the new pricing, keep a close eye on customer reactions. Monitor sales data, feedback forms, and social media comments. If there’s significant pushback, consider offering temporary incentives or reevaluating certain aspects of the change.
Step 10 – Celebrate Your Wins
If your price increase is successful, take the time to celebrate! Share the results with your team and reinforce the importance of delivering consistent value to your customers. Positive outcomes can boost morale and set the stage for future growth.
In Closing
Raising prices does not have to mean losing customers. By understanding your value, communicating effectively, and delivering exceptional service, you can maintain trust and loyalty while improving your bottom line. Price increases are an opportunity to reaffirm the strength of your brand and ensure the long-term success of your business. So, take the leap confidently—your customers may even thank you for it!
Thank you for reading…
by MHolland | Jan 17, 2025 | Business Tips, Cash Flow, Systems
The Ming Vase – A Symbol of Rarity and Value
Imagine I give each of you, as a business owner, a priceless, one-of-a-kind, Ming Vase…
At first, you are speechless. You marvel at its rarity, its delicacy, its beauty.
You treat it carefully, tenderly. You show it off to your friends and family.
It becomes the centrepiece in your living room.
Gradual Neglect – Losing Sight of What Matters
Then, gradually, imperceptibly, over time something happens.
You notice it less and less.
You no longer see its rarity and pricelessness.
You find a new home for it – your daughter’s bedroom. She uses it as an umbrella stand.
It never gets cleaned. If you look closely, it has a small cobweb or two,
The Ming Vase – The Symbol of Your Business
So, what is my point?
This Ming Vase is a symbol of your culture.
Your business was never just a means to make money. It was a creation, a culture, that you built from nothing, and returns you money. It also returns you gratitude, love, respect, joy, purpose, and fulfillment.
Are You Treating Your Culture Like a Priceless Treasure?
Do you treat the culture in your business like a precious Ming Vase? If not, why not?
And here is the thing, a culture is as difficult to form, shape and build as a Ming Vase. And equally as delicate.
A takes a lot of work to build it. And nothing to destroy it.
How Cultures Break – Neglect and Compromise
We know how to break a Ming Vase. Stop caring for it. Drop it.
What about a culture?
The building block of culture is relationship. And how does relationship get built?
Words. The creative word.
The Power of Creative Words
Creative words communicate more than the time of your next meeting. Creative words edify, lift up, empower, inspire, and motivate.
Over time these powerful words build your business culture. They are the oil of relationships – with your customers, your Team, your suppliers – everyone.
And, as I have repeated many times, how you do one thing is how you do everything. You cannot build a culture saying kind words to your customers and then yelling at your Team. That does not work.
The Strength and Fragility of Culture
Over time your culture will be as strong as tensile steel and as delicate as a Ming Vase. It has both qualities. How so?
It has the strength of tensile steel over time because your words, and the words of your Team will become second nature. People stepping into the culture will act out the values of the culture. The culture becomes who they are, what they say, the actions they take. It becomes, as the cliché says, like water to a duck.
On the flip side, this precious culture can be destroyed with a few misplaced words, actions, or worse…
Compromise – The Silent Destroyer
Over time, you stopped seeing the preciousness of your culture (like the example above). You let spider webs creep in. You compromised the culture.
You took shortcuts. (It takes longer to write texts and emails using softeners to maintain your culture). Over time, you, and your Team stopped taking the time to write in this creative way. You saw that your customers, suppliers, and the general business community did not care about culture like you do.
So, you compromised, and over time a degradation seeped in.
And, one day you woke up and realized that your business was ordinary, like everyone else’s. It was no longer a thing of rarity, of preciousness. It was cracked…
Rebuilding a Broken Culture
What to do?
Simple.
Start again. Go back to the beginning and start using words wisely. Speak and write and think with softeners. (“I wonder if you would be so kind to…” … “Thank you for sending me those documents so quickly” ….” Kindly find attached your reports for the month”).
You can rebuild your culture and shape it according to your values.
And, remember this, it takes ongoing care, and awareness to keep your culture going.
Oh, and lastly, what does this have to do with creating a successful, profitable business?
Everything. Everything. Because you are not creating a money-making machine (that is the result). You are creating a magnificent life!
Thank you for reading….
by MHolland | Jan 10, 2025 | Business Tips, Cash Flow, Cloud-based Accounting, Systems
Profitability and cash flow—two terms often used interchangeably—could not be more different.
And yet, countless businesses that report strong profits find themselves scrambling to pay bills, meet payroll, or keep the lights on. How is this possible?
Let us unravel the mystery behind why profitable companies still go broke—and, more importantly, how you can avoid this financial trap.
The Profit vs. Cash Flow Dilemma
At its core, profitability is a measure of what is left over after all expenses are deducted from revenue. It looks great on paper, but it does not guarantee cash in the bank. Cash flow, on the other hand, is about liquidity—the money you have available to cover day-to-day operations.
Here’s how things can go sideways:
Timing Mismatches:
-
- Imagine sending out a big invoice for a completed project, but your client takes 90 days to pay. Meanwhile, your suppliers want their money yesterday. Profitable? Yes. Broke? Also, yes.
Overexpansion:
-
- Growth is exciting, but rapid expansion can drain cash reserves. Those new hires, bigger office spaces, and fancy equipment do not pay for themselves overnight.
- These are all Fixed Costs that you must have the Gross Profit to cover.
- For every new Fixed Cost planned take the monthly amount and divide it by your Gross Profit Margin.
- Let us say you want to hire a new operations manager; The cost is $7,500 per month. Your Gross Profit Margin is 30% (the amount left over after direct Cost of Goods Sold are deducted from your sales, expressed as a percentage).
- $7,500 divided by 30% equals $25,000. You need at least $25,000 in new sales to cover that new operations manager.
- Do this with every new Fixed Cost to become aware of how much you need to cover this extra cost in your business.
Poor Inventory Management:
-
- For businesses dealing with physical goods, tying up cash in slow-moving inventory is a surefire way to squeeze liquidity.
- I once coached a business (not a client; I did it as a favour) that was profitable for 35 years. They could not figure out why they showed great Net Profit and yet were struggling to pay their bills.
- On examining their Balance Sheet I quickly discovered that the bookkeeper had been recording some of the Cost of Goods Sold as inventory purchases. Thus, their expenses were understated and Net Profit overstated.
- The inventory on the Balance Sheet was not real inventory that could be sold.
- The owners were not amateurs; they were just overfocused on the Income Statement and ignoring their Balance Sheet.
Debt Overload:
-
- Interest payments on loans or lines of credit can quickly eat into cash, especially if revenue is not rolling in as planned.
- Especially, also when interest rates go up exponentially when debt is up for renewal.
Ignoring Hidden Costs:
-
- Costs like taxes, employee benefits, or unexpected repairs often catch businesses off guard, draining available cash.
How to Prevent the Cash Flow Crunch
Now that we have pinpointed the culprits, here are practical steps to prevent your business from becoming cash-strapped:
Forecast Your Cash Flow:
-
- Regularly track and predict your cash inflows and outflows. Tools like Xero, ApprovalMax and Fathom can help you stay ahead of surprises.
Tighten Payment Terms:
-
- Do not let clients dictate payment terms. Consider incentives for early payment or use tools like Plooto to automate and streamline collections.
Build a Cash Reserve:
-
- Aim to keep at least 3-6 months of operating expenses in a savings account. This buffer can shield you from unexpected shortfalls.
- Most personal financial planners recommend this, yet too few businesses follow this same advice.
Control Growth Pacing:
-
- Grow strategically. Before making big moves, assess how they will impact your cash flow over the next 12-24 months.
Review Debt Regularly:
-
- Consolidate or refinance high-interest debt to lower your monthly obligations. Be mindful of the balance between leverage and liquidity.
Monitor Metrics That Matter:
-
- Keep an eye on key metrics like Days Sales Outstanding (DSO), inventory turnover, and operating cash flow. These will give you an early warning of potential problems.
Stay Cash Flow Confident
Remember this – a profitable business is different from a healthy one. By focusing on cash flow, you will ensure your company not only survives but thrives.
Want to dig deeper into your financial metrics or get a handle on cash flow management? Let us talk. We specialize in helping businesses like yours bridge the gap between profitability and liquidity—so you never have to worry about going broke while turning a profit.
Thanks for reading…
by MHolland | Jan 3, 2025 | Business Tips, Cash Flow, Systems
Is a 1% improvement really worth the effort?
Absolutely. In fact, tweaking your margins by just 1% could send your profits soaring by 10%—or more. It is not magic; it is math.
And for businesses with tight margins—like construction companies, property managers, and flower growers—it can mean the difference between barely scraping by and thriving.
Here is how small changes can lead to big results.
Why Margins Matter More Than You Think
Your profit margin is not just a number—it is your business’s pulse. Margins tell you how efficiently you are turning sales into actual profits. When margins are thin, there’s little room for error. But when you tighten them up—even slightly—the ripple effect on profits can be dramatic.
Imagine this: You are running a $2 million business with a 10% net profit margin. That is $200,000 in profit. Increase your margin to 11%, and now you are pulling in $220,000—a $20,000 bump without adding a single customer or working extra hours.
The 1% Fix in Action
Where do you find that magical 1%? Here are three quick wins:
- Raise Prices Strategically
Do not panic—this does not mean scaring off customers. Even a small price increase (1–3%) can have minimal impact on demand while significantly boosting margins. Communicate the added value your business provides to justify the bump.
- Cut Costs—But Smartly
Focus on expenses that do not directly impact quality or customer satisfaction. Negotiate better supplier terms, switch to more efficient tools, or streamline processes to lower labor costs.
- Reduce Waste and Errors
Errors and inefficiencies can quietly drain profits. Automate billing, optimize inventory, and double-check quotes to avoid costly mistakes. Every dollar saved goes straight to your bottom line.
The Hidden Multiplier Effect
What is so powerful about the 1% fix? It is scalable. Once you start thinking in terms of incremental improvements, you will spot more opportunities. Trim expenses by 1%, increase prices by 1%, and boost efficiency by 1%, and suddenly you are stacking gains.
For example: A property management company cutting vacancy times by 1% while raising rents slightly could see profits snowball over a year. Similarly, a construction firm reducing rework by 1% while negotiating better supplier rates can watch margins grow without adding overhead.
Check Your Numbers—And Keep Checking Them
The key to making this work is knowing your numbers cold. Regularly review your financials—especially gross and net margins—to track progress. Look for trends, red flags, and quick wins.
Better yet, work with an accounting partner (like us) who can highlight opportunities you might miss and help you implement changes that stick.
Ready to Boost Your Profits?
Small changes drive big results. Whether it is tweaking pricing, streamlining operations, or cutting waste, the 1% margin fix can deliver the 10% profit boost you are after—without overhauling your business.
Thanks for reading…
by MHolland | Dec 27, 2024 | Business Tips, Cash Flow, Systems
Budgets! That word can imply a lot to many people—extra work, restrictions (who wants limits in business?!), confusion (where do I start?), and procrastination (who has time at this time of year?)
With all that in mind, for those of you ready to create a budget for 2025, here are some simple guidelines to get started.
Know Your Fixed Costs
The starting point for all budgets is your fixed costs. Review the general expenses on your Income Statement for the past 12 months.
These expenses recur every month, regardless of sales volume, and include items such as:
- Rent
- Insurance
- Office and management salaries and wages (production wages can be treated as part of your cost of goods sold)
- Telephone
- Bank charges
- Vehicle expenses
- Marketing (discretionary, depending on goals)
To determine budgeted fixed costs, analyze your expenses over the past 12 months. Either calculate a monthly average or allocate costs by the month they occur (e.g., $3,000 for June insurance).
Take time to review each expense. Ask:
- Are we getting good value?
- Can we switch suppliers to save money or gain more value?
Know Your Other Balance Sheet Costs
Include additional costs not on the Income Statement, such as:
- Capital expenditures for vehicles, equipment, and technology.
- Principal portions of loan repayments.
- Dividend distributions to owners.
Know Your Gross Margin
Gross margin percentage is critical for determining your break-even sales.
Formula:
- Sales – Cost of Goods Sold (COGS) = Gross Profit
- Gross Profit / Sales = Gross Margin %
Example:
- Sales: $100
- COGS: $40
- Gross Profit: $60
- Gross Margin % = 60% ($60 / $100)
How Much Profit Do You Want to Earn?
Next, determine your profit target for 2025.
Example:
- Fixed costs: $120,000
- Additional costs:
- Dividends: $60,000
- Loan repayments: $10,000
- Capital expenditures: $20,000
- Retained cushion: $60,000
Total costs = $270,000 ($22,500/month)
With a 60% gross margin, break-even sales = $270,000 / 60% = $450,000.
Prove It! Work Backwards
Sales: $450,000
- COGS (40%): $180,000
- Gross Profit (60%): $270,000
- Fixed Costs: ($120,000)
- Net Profit: $150,000 (33%)
Subtract other costs:
- Capital expenditures: ($20,000)
- Dividends: ($60,000)
- Loan repayments: ($10,000)
- Cushion: ($60,000)
- Net: $0
The Final Number – Break-even Sales
Break-even sales are your “magic number.” Allocate monthly targets based on seasonality or divide evenly across 12 months.
Share this target with your team! Post it in meeting rooms and make sure your sales team knows your goals.
In Summary
- Determine fixed costs ($120,000 in this example).
- Add loan payments, dividends, capital expenditures, and cushion ($150,000).
- Know your Gross Margin % (60%).
- Calculate Break-Even Sales ($450,000).
Your break-even sales are your success threshold. Maintain consistent gross margins and control expenses to ensure a healthy business in 2025.
Thanks for reading—here’s to a prosperous 2025!
by MHolland | Dec 20, 2024 | Business Tips, Cash Flow, Selling Tips
Growing your business one customer at a time in the cold marketplace is expensive and slow…
Want to reach more customers and grow your business? Partnering with associations and non-competing businesses is a smart way to do it.
These alliances can expand your reach, boost credibility, and create win-win opportunities.
Here is how to make it happen…
Why Strategic Alliances Work
Alliances let you tap into existing customer bases. For example:
- Associations: They have large, engaged networks. Partnering gives you direct access to their members.
- Non-Competing Businesses: They serve the same customers but offer different services. Together, you can provide more value.
Think – a landscaping company teaming up with a property management company to offer bundled services.
Find the Right Partners
Not every business or association is a fit. Focus on those with similar goals and values. Ask yourself:
- Who already works with my ideal customers?
- Do their services complement mine?
- Are they respected in their industry?
For example, a church accounting service could partner with a non-profit software provider. Both serve the same audience but solve different problems.
Create Mutual Benefits
Successful alliances benefit both sides. Your proposal should show what is in it for them.
- Revenue Sharing: Offer referral fees or profit-sharing for leads.
- Customer Value: Combine services to create a better solution.
- Shared Marketing: Split the cost of campaigns to reach more people.
For example, a customs broker partnering with a logistics company for seamless cross-border shipping.
Leverage Associations for Credibility
Associations are gatekeepers. They can boost your credibility fast.
- Attend their events to network.
- Sponsor conferences to highlight your expertise.
- Offer value, like workshops or webinars for their members.
A flower grower might team up with a horticultural association to offer tips on sustainable farming. It is a win-win.
Use Technology to Collaborate
Digital tools make partnerships easy.
- Shared CRMs: Use systems like HubSpot to manage referrals.
- Co-Branded Content: Create joint blogs, emails, or social posts.
- Virtual Events: Host webinars or live Q&As together.
These tools save time and amplify your efforts.
Build Trust and Stay Connected
Strong partnerships need trust.
- Communicate often. Keep your partner updated.
- Deliver results. Do what you say you will do.
- Review and adjust. Check in to ensure the partnership works for both sides.
Happy partners stick around.
Measure Success
Track results to see what is working.
- How many leads or referrals did the alliance bring in?
- How much revenue came from the partnership?
- Are customers responding positively?
Use the data to refine and grow.
Final Thoughts
Strategic alliances are powerful. They open doors, create opportunities, and strengthen your business. Start by identifying the right partners and reaching out.
Thanks for reading…
