One of my new food clients was struggling. He had made it through the first three years with his business but was still unprofitable.
“If I could sell more, I’d be profitable.”
Nope.
He needed to take off the blindfold.
Financial Makeover
As we reviewed his financial statements and records together, it was clear what the problem was and what he needed to do. With the help of a new accountant instead of his 22-year old nephew, things started to make sense.
- His financials were too general. He lumped all sales together.
- He didn’t segment by product his COGS (cost of goods sold) but just dumped into one bucket.
- He needed a more robust financial system to track income and expenses. His inadequate accounting system was apparent.
- Selling more. The advice he got from others was wrong. He needed visibility to his financial situation. Being unprofitable meant he had limited visibility to critical data.
- Without having his financial house in order, he couldn’t be strategic to achieve his goals.
Finance for Marketing
Beyond helping him get a better system, the other root cause problem was a common mistake around pricing.
He based his pricing on what his competitors charged, not the value he offered. Without understanding the value, he delivered to customers, he was underpricing out of fear of reducing revenue.
Over six months, by raising prices and focusing on the value proposition we developed, he recognized that being priced like the competition was a mistake. Instead, he found several ways to offer something different, meaning, and value that customers would pay for. His new communications focused on value delivered.
In six months, his business went from being unprofitable to becoming profitable, and he had a clear growth path.
What’s Your Product or Service Worth?
When you take your costs and triple it to arrive at a price, you might as well be blindfolded. The amount someone is willing to pay is in direct relation to the problem (value/promise) you offer.
Price is a signal of value. If your service or product is worth more than the competition, for a reason that will matter to customers, your price reinforces the value.
Which is more valuable – a $5 wine or a $20 wine.
Most people assume the more expensive wine is better made with higher quality grapes and, with greater winemaking expertise. Price signals value. Of course, if the $20 wine takes like plonk (cheap wine), you’ll only make one sale.
Without a solid financial reporting system, and a crisp value proposition, you are marketing blindfolded.
Do you understand how to price for value?
I can help. You can set up a time chat with me about your marketing challenges using my calendar. Our initial conversation is free. You talk, I listen. Email me jeffslater@themarketingsage.com or call me. 919 720 0995. Visit my website at www.themarketingsage.com. Let’s explore working together today.
Photo by Dollar Gill on Unsplash
