Many businesses often have trouble finding the right balance of price value and profit. When deciding how much to sell an item for or charge for a service, sometimes the set value is too high or too low. Both can affect your cash flow. When a business has been having cash flow problems, often they need to take a closer look at their value pricing. Mark Dicus & Company will share how adjusting their value pricing can help improve cash flow.
Cash Flow Forecasting Model
When first starting a business one of the hardest decisions the owner needs to make is to put a price on their product or services. A business will fail if its cash flow is not reaching its proper amount to keep the business profitable enough. To determine how much cash flow is needed, it is important to know how to properly cash flow forecast. It is recommended to look at thirteen weeks of financial statements in order to properly forecast your business’s cash flow. Forecasting can help bring peace of mind or allow enough time to create a plan to help get you through slow periods. When your clients or customers run into financial hardship it is important to see that. You still want your customers to spend money at your business. However, during the hard times that come, and everyone is struggling, it is important to make necessary adjustments. During this time of COVID-19, many businesses have been shut down. Even with the reopening of businesses, there is still about 50% of Americans without a job. With this in mind, it helps to make adjustments to your services or product pricing. However, if you decide to reduce the price of your product, it is important to do the math and make sure you will still be able to pay the bills.
Limited Time Deals
When you decide to decrease your prices you will want to advertise that it is a limited time deal or your future customers will expect the same price from now on. You can do a seasonal reduction or offer deals through different days of the week. Depending on your business, weekly deals is an amazing tactic. Look at fast food; some fast food places have taco Tuesday night where they offer discounted tacos. Some may think they are not making a lot of money doing discounted food. However, the lines are full each Tuesday. Sometimes less is more and you can draw in a crowd increasing your cash flow a few days a week or for a season. Finding the right fit is important for the nature of your business.
How to Raise Prices & Not Lose Customers
However, there are times where you may need to increase services. It is important to raise prices without any push backs. This can be very tricky as people right now do not want to be spending more money. When you need to raise your prices you have to throw in something to justify the influx. Sometimes you can add a small service or product to go to make customers feel like the value is still there. For example, restaurants can provide a free appetizer or increase the volume of the meal slightly. However, you cannot lie about the value of the service or product. The value must still meet proper cost.
Accounting, Bookkeeping & More in Menominee Falls, Waukesha, West Allis, Racine & Greater Milwaukee, Wisconsin
If your cash flow is suffering during these hard times or you need help making proper adjustments to your value pricing, or require the aid of accounting, bookkeeping services or more, contact Mark Dicus & Company today.