Start High

BusinessManagement

  • Author Kate Marsden
  • Published July 15, 2013
  • Word count 484

Don’t compromise on your prices and volumes too quickly. Always start higher and give yourself room to come down, so that you can see more revenue flowing through to your profits.

In many of the businesses I see, one of the issues is that the profit margins are too small. Often, on further analysis that is because the initial price is so low and when negotiations start there is no room for maneuver. Or the price is fine, but the volume of business just isn’t enough to keep the business going.

Now, you may be crying out that you start with a realistic and honest price, that you don’t expect to negotiate and that people should understand that. Unfortunately most sales today (and especially Business to Business sales) involve negotiating down the price. So you have 2 options – either stick to your guns and don’t negotiate, or accept that there will be negotiation and leave yourself some room to play with. But whatever you do, don’t go in with a low price and then cave in to negotiation.

Most business owners and leaders are not prepared to hold out (ultimately you have to be sure you are prepared to walk from the sale or deal if you have to), so the first option is too uncomfortable. In that case, accept the negotiation and try the following:

Consider starting high on something other than price to build your confidence. If you really want a 2 year deal, start with 3 or 5 and be prepared to come down rather than offering 2 to start with. If you want to sell 50 of your product, start with a package of 100 and work down from there. Trading people up initially can work in your favour as you plant a bigger idea in their mind.

Don’t start with a high price unless you are clear on how you will justify it. You should be clear on what makes you better than your competitors and how that benefits your customers.

Don’t drop all the way in one go – if you’re that easy to negotiate with, customers will do it all the time.

Try and package things together and put things into the higher initial offer, so that when you do move down you are not compromising on your core price.

Go for bigger opportunities than you think you can get. People are always put off by selling against larger competitors, but sometimes customers don’t want the big, standard option. Aim for the higher value sales and accept that you won’t win them all. That way, when you come down a bit, you’ll still be getting bigger deals than you would have done otherwise.

Take action NOW – this week, try this with one sale - move your initial offer up to a higher level so you can come part way down if you need to.

Kate Marsden is the founder of The Profit Mechanic (www.TheProfitMechanic.co.uk) – dedicated to giving Small Business Owners the tools, input and resources they need to succeed in the most important thing in their business – increasing profit. Kate has more than 20 years business experience, including as Director for a number of well known organisations and as owner of her own businesses.

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