If you are worried that your business isn’t performing as well as you’d hoped, perhaps you should take a closer look at how much you are currently charging for your services and whether it is enough to cover the cost of providing those services. It can be all too tempting to undercut your competition in order to attract their client base, but if these low prices mean that your profit margins are on the decline, it may be a false economy that could eventually bring your business to its knees. Here we look at some tell-tale signs that may signal you are undercharging your clients.
Your rates have remained the same for years
When you first entered your particular industry sector, you decided to offer an introductory rate that really stood out compared to your rivals. That certainly attracted some new business but isn’t it time to get back in line with inflation? You see, your own costs are going to be increasing every year and your customers will understand that the prices should also be aligned appropriately. So long as you have reserved your right to increase your charges with existing clients and provide an explanation for the increase where required, as well as keeping those increases within a realistic limit, your client base should have no qualms and your profits will start to look healthier.
Your competitors charge more but also have more new business
Even if your prices are way below the amount that your rivals are charging, they may still be taking on new clients left right and centre. This may be because your prices seem almost too good to be true. There is still an air of doubt with regards the quality of a cheap offering. Try to adjust those prices in a way that falls in line with how much your competitors are asking for. You may be surprised to find out that your sales start to pick up.
Your services are described as ‘cheap’
When you are asked for a list of services and their respective costs, if you are hearing the words ‘Cheap’ and ‘Amazing’ more often than not, your potential customers are sending you a message. Sadly it is not good news because if those prices are biting into your meagre profits, something needs to be adjusted. Never start your negotiations with a rock bottom price because once your client accepts this offer, you will have zero room for negotiations.
Time monitoring inaccuracies
Another less known way to seriously damage your profit margin often arises when you fail to bill your customers for your services in a way that ensures you adequately cover your costs of providing those services. Get this wrong and you are losing money on the relevant project. By utilising a recognised and proven time management tool such as Tempora, you are always just a few clicks away from knowing what your profit margin is on a project. This is because Tempora knows how much it costs your business in salary, National Insurance and other business overheads for you to carry out the work, as well as how much revenue you are generating from that project. To set up a free demo of our software please call our team on 0845 539 0208.