As we all know, businesses exist for one main reason. To make money. Therefore, it is important that all businesses are set up in a way that enables them to grow and increase their market share. In order to grow, you need to ensure that you’re making enough money to accommodate for these changes. Your pricing is a very important aspect as you need to be able to remain competitive while also generating an increasing profit. This is where you need to consider inflation.
10 years ago, you could send an employee out to do a job. You could pay the employee £4.50 an hour, and charge the client £10 an hour, resulting in £5.50 an hour profit, minus expenses. Due to inflation, and changes to minimum wage (see our previous blog: Coping With the Changes to the National Living Wage in the Care Sector) your prices will have to change. With this example, you will have to charge your clients £12 an hour and pay your employee £7 an hour. Your profit per hour has now dropped from £5.50 to £5.
The above is just an example of course, but it points out the trends in relation to minimum wage, inflation and business growth. You’ll need to up your prices to be able to continue generating profit, but you also need to be priced competitively. In 2020, when the minimum living wage is £9 an hour, if your prices remain the same at £12 an hour, then your profit per hour has now suddenly dropped to a measly £3 an hour. So how can you ensure that you remain successful as a business?
The most important part of maintaining profit within the current economic climate is your pricing. Yes, you could put your price per hour up by £5, but then what’s to stop your clients finding somewhere else where they can get it cheaper?
You need to consider your main competitors. See how much they’re charging. Perhaps see how much they’re paying their staff. If you can’t match or beat their prices while still maintaining a nice profit, it’s not the end of the world. Think about where you think your pricing should be, regardless of your competition. Why should a client pay that price for your products and service? What are your unique selling points that should encourage people to buy your products and services? How can you improve your unique selling points?
If you’re still unable to keep to an adequate profit, or are struggling to find business growth, then you can perhaps take a look at your expenditure. Yes, it’s nice to put as much money into your business as possible, but if the amount of money you’re putting in isn’t resulting in more money coming out, then is that really feasible business practice? Take a look at your systems you have in place. For example, are you spending money on hundreds of licenses for Microsoft products when you only need, say, 50?
If you want to save time and money, while keeping your costs down in regards to software, why not check out the products that was can supply? Whether you’re a business of 5 people, or 500 people, we have the product that can help you run your business efficiently. Check out our products here.
It’s not hard to work out that business isn’t easy. It’s a tough game to get into, but with the correct motivation and ambitions, you can ensure that you are a cut above the rest.