A few words to increase your profit margin
Most businesses need to negotiate their prices and a very small increase could make a sizeable difference to profitability margins. Read on to find out how best to approach negotiations.
Taking a simple example, if you sell your product for £1,000 and it costs you £750 to make, that’s a £250 profit. Increase your price by as little as 5% and your profit increases to £300 or by a sizeable 20%.
If clients are happy with the quality of your service they may not flinch at a price increase although some, of course, may go elsewhere. You may nevertheless be able to afford to lose some clients if overall your profits have risen.
Most people find it difficult to inform clients of a price increase or negotiate fees but it’s not necessarily about what you say but the order in which you say it. The key point to remember is that people are more persuadable when they think they are gaining something rather than losing something. In short, talk about what they are getting before you mention the fee!
So… “I will ensure your staff are fully trained for £X” is far better than “the fee will be £X to fully train your staff” as the emphasis is on the benefit to them and not the money they need to part with.
If you are the buyer, reverse the emphasis and open strong negotiations with the fee you can offer rather than what you want.
Let us know how you get on and give us a call if you need assistance in clarifying your real profit margin or the potential impact of any increase in price.