Value Pricing is about coming up with a price that your customers are willing to pay. But it takes time to work out and it involves customers feedback.. Pricing is the most important aspect of your business. Pricing is a process that utilises data to eliminate as much doubt as possible for customers to make a decision.
Customers don’t care how much something costs you or your competitors to make or deliver, they care how much value they’re receiving at a particular price.
A recent question was raised at the Business Exposure Group meeting.-Can you consider Value Pricing – if we are in a recession. Is there too much resistance? Is the timing wrong? Is it too risky or disruptive?
Start by exploring your competition which will help understand your USP. Taking on a buyers perspective will help you discover what clients are looking for in your solution which raises perceived value and results in a higher price.
To increase the value of your products you can either add benefits or reduce the perceived risk factors rather than resorting to reducing your price.
It is important to find how high a price can be before the product or service is priced out of the market.
So ask yourself….. ‘What costs can we afford to incur on this project given the price obtainable from the customer and still earn a good profit’.
Try Value Pricing on one product first, celebrate a quick win and then multiply around other products or services. This approach can change the company’s culture and overcome any internal selling resistance.
Ask yourself how much sales gains would be required to profit from a price cut? and how much sales loss would be tolerable to profit from a price increase.
The cost plus model is outdated. Short term pricing reductions may win business but it is not a winning strategy for long term growth.
As we all grapple with ever increasing prices many of our members throughout the discussion, felt that now was a great time to switch to Value Pricing, and have the confidence to charge appropriately for a quality product or clever solution.
It is a question many business owners struggle with, especially those who don’t have a dedicated HR department.
Below are some of the points raised by members of The Business Exposure Group at a recent meeting.
- Most people are paying the market rate, notwithstanding that a business should have a budgeted percentage of business revenue allocated to employees salaries.
- Covid has changed salary expectations and increase demand for significant salary increases are widespread. However working from home has an average saving on personal expences of £5114 per year. Worth thinking about before offering a wage review. Frame the discussion to focus on the total rewards package.
- Set pay expectations several months before they are delivered and communicate industry and business conditions.
- Important to have a set salary range which is in line with current staff pay.
- Showing appreciation to employees is a crucial part of cultivating a productive and positive workforce. One of the most obvious methods of acknowledging and rewarding an employees achievement is by increasing their salary, but it can be difficult to know when to do this and how much is appropriate.
- One of our members retold the position he faced when he paid more than the market rate to secure a candidate. “I paid over the top to attract an employee. He performed well in the first year and got a rise. Another year passed and he expected another rise, but it was not given because the business was flat. He was paid too much at the start. By year 3 the employee was furious that his pay had still not changed. I hinted that a pay rise was round the corner, but it never happened. The employee lost motivation….. The problem was not the level of pay, but it was the employees pay expectations. He did not realize he was paid above average, or that the business had deteriorated.”
Therefore beware of the trap of paying beyond what your business can realistically afford!
If your employee is hired at the top of your pay scale, you have no where to go.
Many business owners aspire to growth, but only a small percentage actually achieve growth. Research shows that the main barriers to growth for SME businesses are
1. Lack of realistic business plans
2. Muddled marketing
3. Wrong objectives, based on sales
4. Running business in the same way when the market has changed
5. Meddling and misspent time
6. No financial strategy and poor controls
Some of the other suggestions put forward by the members of the Business Exposure Group included:
- Putting up with inefficient systems, processes and procedures
- Lack of demand
- Lack of management time
- Access to finance
- Lack of skilled staff
- Employment legislation
- Size of premises
But less obvious is the ability of the business to grow must be influenced by the willingness of the owners to devolve decisions to staff.
The discussion confirmed that companies don’t fail because they grow, but they fail because they don’t plan their growth. So, to achieve sustained growth – invest in ‘safe bets’ and identify strategies with a probability of success. Start with your core business and eliminate non-core products or services on a regular basis. Change how you are servicing your customers in the light of the 2020/21 restrictions.
Some of the members thought that a business has a better chance of success if you come from a big business background or at least employ someone that does. Yet, big companies are not great innovators and become bogged down with reporting and bureaucracy.
The overriding feeling amongst the group was that growth for any good company is not markets, technology or products, but our ability to attract and keep the right staff.
Every business has skills gaps and it is vital that those gaps are plugged if you want to move up a level.
Yet many owners felt that the main barrier to growth was lack of confidence brought about by the last 15 months and fear of losing what has already been achieved. Many members are now overwhelmed with orders since the lifting of lockdown restrictions, and are grappling with the sudden shock of suddenly having a large influx of new business and struggling to cope.
Be mindful of the 2 typical characteristics of failing to achieve growth. 1) inadequate consideration of the opportunities and 2) infrastructure that cannot support.
Now is the time to put 45 minutes aside each day devoted to thinking about growth. Do that and you have found half a day a week to work on the business and not in the business.
Brand is the personality that identifies the product/service and the company, yet 55% of brand creators say that businesses fail to consider their target customers when developing a brand, and with face to face meetings still several weeks away, it is now more important than ever to reflect your businesses personality across all interaction.
It was agreed by all the attendees at the Business Exposure Group meeting that the true value of a brand identity lies in the view of the target audience, and that the only way to build a robust and financially viable business in today’s market is to build a brand. One that gets your business to stand out and emphasizes what you have that your competitors don’t. Yet it was no surprise that considering the importance of brand, that most of the attendees at the Business Exposure Group meeting failed to discuss brand at their usual team meetings.
This led the discussion onto a question posed by Rachel Greaves ‘Does a brand even exist among SME’s businesses, or is it just a large company issue’. Perhaps the answer is that the word ‘brand’ within the SME world should be replaced with the word ‘reputation’.
Clearly people prefer to buy goods and services that they feel familiar with, and the suggestion around the table, that in tight economic times, that it was not wise to bolster your brand, saying it was more akin to spending money on a high end stereo for a vehicle that doesn’t run well, was firmly rejected.
It was agreed by all that a brand should be developed and tweaked in parallel to the business plan. Starting with value for money, being ranked as the number one priority for SME branding, followed by reliability and trust. The business brand must take into consideration all the lessons learned during the pandemic, and reflect the way customers now want to receive our goods and services.
A brand positions a business in its niche, and if continually enhanced will become one of the most valuable assets of your business. So, don’t underestimate the value in obtaining legal protection of all your intellectual property and ensure that any outsourced creative input has been transferred to your ownership on completion. Otherwise, at worst your business valuation will be greatly diminished and at best the ‘creative’ will hold you to ransom when they realise the value of the brand and your need to get your ownership in order. Quite simply, after each outsourced brand initiative, box off the ownership issue when no-one yet realises its potential value.
The above were just a selection of the comments taken from a round the table zoom discussion during a recent Business Exposure Group meeting.
Businesses have spent much of the past 10 months scrambling to adapt to extra ordinary circumstances.
Customer behavoir has changed significantly. Spending across most industries is down, purchases have shifted from in person to digital channels and safety has become a top priority.
We will look back and say pre covid and post covid, just like we say pre war and post war.
As businesses step into the post coronavirus future, assuming the vaccines deliver what we hope, businesses need to find a balance between what worked before March 2020 and what needs to happen to succeed in the next normal.
We need to take advantage of this chaos, because in chaos there is opportunity.
Will 2021 be the year of recovery or can we only really consider this in the second half of the year.
I’ve spoken to many business owners in the last month. Most have got their head around their business situation, but what is clear is that not everyone is singing from the same hymn sheet in how to move forward, during all this uncertainty. With daily changes by the government which impacts on all our daily lives not least on our businesses. This uncertainty is waring many of us down, even though in our own micro world’s things don’t look too bad.
Now more than ever, people need extra information, guidance and support to navigate a novel set of challenges. Being able to sense check your thought process against others at the moment is really worthwhile and reassuring. That’s why the Business Exposure Group is so valuable!
Attendance at the Business Exposure Group meetings have all been on Zoom this month because of lockdown restrictions.
Nevertheless, The Business Exposure Group continues to provide valuable support for circa 150 SME MD’s and Business Owners.
The pandemic has reinforced just how much we rely on staff as we rebuild our businesses to reflect the changing circumstances.
Where benefits were previously not always important to employees, there is now an opportunity to consider their new found interest.
Now that so many have experienced a financial shock, there is great scope for employers to use benefits as a tool to motivate and secure staff. However, many SME business owners mistakenly believe that they cannot afford to offer benefits.
Lockdown has impacted us all in several ways. For many it has meant juggling an already busy life in closer surroundings than ever before. Our homes have become offices, schools and leisure spaces. We are more at risk of anxiety and stress at work (wherever that is) and so ensuring your employees well being is paramount to a company’s overall value proposition.
Some of the members of the Business Exposure Group are offering a selection of the employee benefits below:
Home Office Allowance
On demand videos and articles about wellbeing
Confidential employee health assistance programme
Employee discount arrangements amongst local retailers
Cycle to Work schemes
Leisure and lifestyle benefits including Gym memberships, wearables and nutrition advice
Overall companies need to address the requirements of a multi-generational workforce comprising 20’s -70+ age groups.
Is your employee benefits strategy fit for purpose post Covid-19?
With every passing month it becomes increasingly important to separate your business from the competition. Gone are the days of copying and undercutting. You have to get out of the commodity business and shout about what differentiates you from the rest.
So, how do you do this or has your mind gone blank with all the Covid uncertainty. This was the subject for discussion by members of the Business Exposure Group at our recent meeting.
One of the big differentiators at the moment are those businesses which pursue the face to face meeting in a Covid safe way. Many larger businesses are following business rules which prohibit meetings and demonstrations etc, but many SME’s are able to take advantage of those businesses on hold, and provide what the customer wants. It’s a great time to steal a march on competitors.
Equally take a look at your current customers, is there a common element among your best customers. Interview them and ask why they choose to work with you, why they stay and why they refer others. Study your competitors to establish what you could do better and what don’t they offer.
Focus less on traditional marketing and more on customer experience. Get personal with your customers, get to know their life story and find out the real reasons why they buy your products. Build a relationship with them so they move from being account number 2367 in your ledger to customers with whom you have a real relationship.
7 months into this Covid pandemic. It is now time to act not react!
Its going to be turbulent. There is a lack of certainty. Do you need to rethink your business finance?
Since Covid 19, financial arrangements are facing an unpredictable response from high street lenders, even when the relationship has been historically strong. Fearing the worst, many businesses are shying away from proactively communicating with their banks.
But don’t abandon the hunt for funds if the bank declines to help. Don’t become part of the “ discouraged borrower syndrome”
The key message is that it is time to rethink finance and seize the opportunities created by a changing market place.
Rethink your business finance taking into consideration recent Government help, Challenger banks such as Metro, Aldermore, Shawbrook and Redwood. Brokers can steer you in the right direction. Consider also Business Angels, Factoring, Asset Finance, Peer to Peer lending, Crowdfunding and Grants…….. Below are a selection of current grants available. These can be a nice add on!
Its important to make time to research the options to assist with funding your business during these strange times.
REGIONAL FINANCIAL ASSISTANCE
Business Growth Programme and Productivity Pilot
- For help buying machinery, equipment and fit out/refurb of buildings but not the purchase of property.
- BGP requires you to create jobs. Productivity Pilot is focused on improvements in productivity with no net reduction in jobs.
- Grants from £7.5K to £250K contributing up to 20% of total costs.
- Minimum project spend £50K.
- 12 months trading history required.
- Aimed at businesses operating in digital and tech sector only.
- Need 12 months trading history
- At least 50% of sales are B2B.
- Investing in at least £20K in equipment, refit, alteration or eligible fees.
- Grants from £10K – £50K.
Digital Enterprise Grant
- Capital grants from £2K – £12,500
- Minimum of 50% contribution for projects from £4K – £25K.
- Connectivity vouchers available up to £3K for cost of upgrading broadband connections.
Product and Process Improvement
- For help buying machinery/equipment that enables innovation in business – example, you’ve identified a way of improving your end product but need a specific piece of equipment to achieve this
- Grants up to £20K contributing 40% of total costs.
- Package of support available to help business access research based expertise to develop existing processes and products eg. working with Green
- Research grants available up to £100K to help with 50% of the cost of collaborating with a research partner.
- Capital grant pot also available to help fund 20/% of costs up to £100K ie. Max grant of £20K.
- Grants up to £40K contributing 40% of total costs.
- To be used to help businesses save money, material resources and carbon.
- Includes a free efficiency audit and circular economy support, designed to help you get maximum value from your products and materials.
Manufacturing Growth Programme
- Grants to provide access to expert advice to help you grow manufacturing businesses.
- Access equates to 8 days across 4 months. Also includes a capital grant element.
- Includes help to acquire SALSA accreditation (Safe and Local Supplier Approval)
Northern Powerhouse Investment Fund
- Micro Finance fund with loans from £25K to £100K delivered by Business Enterprise Fund.
- Debt Finance fund with loans from £100K to £750K delivered by Mercia Fund Managers.
- Equity Finance from £100K to £2M delivered by Mercia Fund Managers.
- Aimed at high growth pre-start early stage business up to 3 years old.
- Expert advice to help with planning, coaching and growth advice.
- Must trade B2B.
- Grants available from £50 to £2500 for start-ups assisting with set up costs (excluding working capital) eg. Office furniture, IT equipment, website design and development.
- Grants available from £2.5K to £25K for business trading from 1 year up to 3 years to help with capital purchases.
- Start-up loans available through Business Enterprise Fund from £500 – £25K.
Biorenewables Development Centre
- Range of grant-based support available for businesses operating in the bio economy.
- Support focusses on looking at ways to commercialise products and processes through a mixture of testing and research.
- Up to £20K of innovation grants to help you change your business, not necessarily the world.
- Up to £50K for R&D funding.
- Up to £50K for Low Carbon R&D funding.
- Up to £5K grant available to cover 50% of cost when looking to attend trade shows.
- Includes cost of flights and accommodation or legal and professional fees relating to international T&C’s / contracts plus more.
- Plus, Enterprise Europe Network can help you find local partners and distributors in your chosen country.
- Whether your business pays the apprenticeship levy or not, there is support available when taking on an apprentice.
- An apprentice is not just a young, entry level person.
Gigabit Voucher Scheme
- Any business can apply for support to upgrade their connectivity speed so that it is capable of delivering gigabit capability.
- There is no application process as such with the process of being supplier lead. Access support through the website and then find a supplier.
- The discount has already been applied from £500 – £3000.
- Potential applicants can apply together eg. Within the same building or business park so 5 businesses can obtain up to £25K of discount.
- Business who trade from a home address can apply.
- Wide range of training available for SME’s with 40% contribution from the grant if eligible.
- Marketing, social media, management, business development, financial skills, H&S, law, manufacturing, construction, engineering skills all included plus many more.
Our meetings have continued albeit on Zoom. The members have been able to benchmark their thoughts with each other. A welcome support in these strange times.
The subjects we have covered during 4 months of lockdown included:
Connecting with customers in times of crisis
From surviving to thriving
Demonstrating calm and optimism during this trying time
Providing customers and employees with safety guarantees that restore trust
Are you energised and inspired by the progress the crisis has forced on you to make
Is the concept of redundancies right for your business
How do we start planning the transition back into the office
Quick revenue recovery- should we do something different
Thankyou to all the BXG members for supporting the Zoom meetings during the lockdown period, and although the government guidelines are constantly evolving we are now looking forward to resuming the usual round the table meetings in Leeds, Manchester and Sheffield after the Summer break.
Now in our 3rd month of Lockdown and our round the table board meetings have been operating every 2 weeks on Zoom.
The following topics have been discussed to pool our joint wisdom to help all our members grapple with the challenge of a lifetime.
Connecting with customers in times of crisis.
Business building for the crisis and beyond.
The value of external help.
The next business scenario – from surviving to thriving.
Providing customers and employees with safety guarantees that restore trust.
Demonstrating calm and optimism at this trying time.
Are you energized and inspired by the progress the crisis has forced on you to make.
Is the concept of redundancy right for your business.
When should we prepare for business as “new normal”.
How do we start planning the transition back into the office.
Has lockdown helped us rediscover what’s important.
Quick revenue recovery- should we do something different in our businesses.