Are you working too hard to get the same bottom line? Maybe it’s time to recession proof businesses.
You are busy…your top line has grown…you have hired, maybe added a manager, and have grown to a million-dollar company but your bottom line is sinking.
And then there is the supply chain issue.
It’s getting harder and harder to keep certain parts and products in stock and it feels like there is an infinite amount of shipping containers floating off the ports and in the piers just waiting for someone to come unload them.
The pandemic has done a number on the supply chains and manufacturing, and it doesn’t look like it’s ending any time soon.
Some of you may think – oh I’ll just raise my prices – but that’s not a simple solution.
Let’s look at a few areas where you can recession-proof your business.
For the moment, having extra inventory on hand will help with delays and make sure you can keep servicing your customers, but there are some very important elements you need to be aware of.
First, tying up your capital in inventory takes your liquid assets and turns them into fixed assets. This means your cash flow is going to be affected, and you won’t as easily be able to absorb shocks to your income.
One big unforeseen expense could result in massive losses.
Sell off unnecessary inventory and do not stock a ton of inventory.
Cash flow is the buffer that shields your business from hard times.
IS RAISING YOUR PRICES THE ANSWER?
Your cost of goods is going up and labor costs are on the rise. So what can you do about it?
Many businesses are having to raise their prices in 2022 to stay profitable and keep their doors open, and you might be thinking along the same lines.
But there are pros and cons to raising your prices, and before you start making changes you need to think strategically about pricing.
Sure raising your prices may help you create higher margins and profitability, give a perceived higher value with premium pricing, and thus result in premium higher-end clients.
But you may also lose sales, it may create negative feedback and it’s hard to backtrack and lower your prices again after raising them. People will automatically be skeptical as to why and the quality of your work.
It’s a double-edged sword.
Consider adding additional features or value to your products or services to make raising your prices more palatable. You can also highlight a feature of what you already do if it has never really been promoted before.
Pricing is partly about perception. If you can increase the perceived value of what you’re offering a price increase could be more easily accepted.
Do your analysis before making a change and try to find out if your market will support it. Understand the budgets of current customers and inbound leads. If your customers are struggling to pay your current price, raising your prices won’t be immediately positive.
Try offering a higher-tier service at a higher price point alongside your existing offerings as a test. If your customers are accepting the new solution, you can phase out the old offering over time. You can even offer your current customers to be grandfathered in if they commit to a contract length or some other arrangement.
The bottom line (pun intended) is that raising your prices may be the solution your service business needs to continue being profitable going into 2022, but you need to go about it strategically before making sweeping changes.
LOOK AT PROFIT LEAKS
It always shocks me how many business owners aren’t looking at their numbers, especially their expenses. You might be running your business on autopilot and running it as you’ve always done. I get it – you are busy and it’s hard to find time to review and analyze.
But the more you know the numbers the better decisions you can make, profitable decisions.
Take some time to look at your reports. Review what expenses you have to see what you can eliminate.
Review the TRUE cost of your employees. Every project will be tied to the true costs of labor and the materials involved, with a profit margin built in from the start.
Without understanding the true costs of a job, you could be losing money without even knowing it. Huge savings can be uncovered once you know the true cost of fully burdened labor for each of your employees. For our Profit Implementer Members, we run through a Labor Burden Calculator to find the TRUE cost. It’s eye-opening!
Are there high-interest costs you are paying on some loans or vehicle payments for example can then be eliminated or reduced?
Reducing any profit leaks and costs will help you NOW and in the future.
The key is understanding your numbers, analyzing opportunities, and reducing expenses and planning. You CAN plan for more profits. You CAN plan to protect your business against the recession.
In fact, we have programs that will help you do just that. Simply click on the link below to book a call to discuss which one is the best fit for you.