Number 1 Mistake Small Businesses Make with Pricing

Are you working hard in your business but seeing little money in your pocket? Are you feeling you are paying everyone else except yourself?

Well you might well be.

Number 1 mistake Small Businesses make with pricing

A mistake I’m seeing a lot lately is failing to include a business owner salary in operating expenses.

In business you have fixed and variable expenses you pay each month in order to stay in business and deliver your product or service.

When working out how much you need to charge, you MUST include your salary! Yet many business owners are not.

As a result they are paying themselves last out of profit (if there is any) and working hard just to pay everyone else including suppliers – and in many cases earning less than they would in a job with far less responsibility and hassle!

If you are happy with what you are getting then read no further. If you are not, then let me share some wisdom and suggestions.

First, let me ask you a deep and meaningful question….if you are NOT paying yourself a ‘proper’ salary and have NOT included your salary in operating costs…why not?


RED FLAG WARNING!Do you have a subconscious (or conscious belief) that you don’t deserve to be paid? And careful if your first reaction is ‘No Way!’ It often means you do.

Or do you believe you should be paid last? Do you need to look after everyone else first and then yourself? Or deep down do you feel you can’t achieve a higher salary?

Our businesses are an extension of ourselves and how we think.

To have what we haven’t had before, we usually have to think differently! Either through gaining knowledge or personal insight.

If you didn’t realise you needed to include your salary or the business is under three years old then ok, please make sure you do.

However if you have even a hint of self doubt about paying yourself, I strongly suggest you explore this further because your business will only grow as much as you feel you deserve!

You cannot have the cash in your hand until you honestly own it in your head and heart.

If you want to include your salary, great! Decide how much you need this year – this can be reduced slightly if the business is under three years old but showing steady growth, or you consistently have profit each year.

Take your monthly wage and include it in your total monthly operating costs that you need to cover. Then spread your total monthly costs over however many products or services you sell each month, on average. This gives you a dollar value you need to charge. Monthly variations in sales? That is quite normal so average it out across a whole year. The peak months must make up for the slow months.

If you add your salary and feel your prices are now too high, you have some further work to do and questions to ask – see Step 4. If prices seem ok, then great, you are now in a better position to ensure you get paid as well as everyone else each month.

If your prices now seem too high, what information are you basing this on? Be careful you are not underselling yourself. Re-read the Red Flag Warning! 🙂

Another question to explore is whether you are selling the most profitable products/services? Often businesses are selling what easily sells but the products are not profitable. Do you know your profit margin, the true cost to deliver each of your products? This can be a real wake up call.

You must work out the true cost to promote, produce, deliver and service each of the products or services you sell. Otherwise you could be busting your butt to sell 100 of Widget C that gives you $20 profit each instead of selling only 20 Widget A’s that gives you $100 each and far less work.

Now, assuming you can’t increase your prices, the next action is to explore if you can reduce your overheads somehow? Can you increase efficiency?

Assuming prices can’t increase and overheads and efficiency are about as good as it gets, then how many widgets do you need to sell to provide your required salary? What will it take for you to sell this many?

Adding in your salary to overheads can be a healthy kick up the arse to change what you focus on selling, and/or change your pricing packages. And it can solve the mystery of why you are not seeing dollars in your pocket each month.

Worst case scenario, if you can’t sell enough or charge enough, you may actually have a hobby and not a business.

Special offer

The above is a quick and basic overview of something that can take a few hours or longer to workout. If your pricing or profit is concerning you I can conduct a pricing audit with you to determine what you should be charging and how. This is a 5 hour package and includes a face to face session and worksheets and is an essential step prior to paying for any marketing because you may be promoting the unprofitable products or wrong prices!

Normal price is $1,100 but for the first 5 businesses that contact me it’s only $479 plus GST.

Offer valid until Oct 31, 2015.

Contact me at the email below with name, business name, phone number and email address.

David Lennon
Troubleshooting Expert and Business Coach

Danger, don’t enter!

Is your shop window scaring your customers away?

I have a theory that we are instinctively wired to hesitate on entering places with no sign of life, no movement. If nothing is moving, subconsciously this means its dead. Or staying still in order to ambush us.

We are drawn to movement, it signifies life, action, things happening.

How’s your shop window look?

I can’t believe how many windows present the equivalent of a ‘scary cave’. And these shops are usually quiet. Go to an expo and notice how the stands with things flashing, waving, or displays moving or bubbling are always the ones with people at them.

Just thought I’d mention this in case your window could do with some attention.


Are You Prepared for Xmas?

Xmas will soon be here. Have you:

Are You Prepared for Xmas?

  • Planned, designed and ordered your Xmas marketing materials or ads?
  • Brainstormed Xmas specials or packages you can offer?
  • Thought of gift ideas to trigger more buying?
  • Planned end of year customer reviews to find out how well you are doing, what you can do better or what they would like you to offer? This is gold. And how much work they have for you in the new year? This can be done via online surveys, phone calls, face to face lunch or coffee chats. If you get some negative feedback, accept it, don’t start arguing and defending yourself.
  • Planned staff interviews to check-in and see how they are travelling, are they moving towards their goals, what they would like to be doing next year, and what improvements they suggest for the business?
  • Planned cards and hampers for clients? It’s a time to just give. Don’t include any sales speak or offers in your gift…otherwise it’s not a gift!
  • Planned cards and hampers, bonuses etc for staff?
  • Put sufficient money aside to cover a slow down in Jan? This can make your Xmas hols a lot more enjoyable if you aren’t stressing about bills.
  • Scheduled a business review during the quiet time to reflect on the past year and goals and what to do better this new year?

David Lennon
Troubleshooting Expert and Business Coach

Can You Make an Extra 20% Profit Without Increasing Sales?

Yes. And you might be able to make even more.

How? By making sure you are charging enough and selling more of your most profitable products or services.

Common mistakes are not knowing your real profit margins and not including the cost of running your business in your pricing.

Can You Make an Extra 20% Profit Without Increasing Sales?

Insufficient profit
I’ve seen many businesses pushing sales of products that are actually break-even or losing them money. They strive for more profit and assume they need to sell more product so spend time and money on marketing – yet still don’t see any extra dollars in their hand.
A recent client gained a 20% increase in profit by simply spending an hour working out exactly what his different services cost him. He realised one of his package deals was taking up a lot of staff time but only giving him $4 per customer. He needed to be getting $32. All he did was cancel that package and sell a profitable package. He didn’t need to pump money into more advertising or cold calling.
Make sure you know your margins! It takes time and money to secure customers. Don’t waste it.

A second common mistake is forgetting to include business overheads in pricing. There are fixed and variable costs you have to pay each year to be in business and deliver your product. For example rent, admin, accountants, electricity, insurance, vehicles, supplies, cleaning, laundry, equipment, staff and your salary.
Are you spreading a portion of this overhead across all your products? If not, you could be losing significant amounts of money.

David Lennon
Troubleshooting Expert and Business Coach

Are you Flogging a Dead Horse?

When to throw in the towel

Are you chasing your business dream but feeling like you are treading water? You could be flogging a dead horse.

‘Don’t quit!’ ‘Never give up!’


The most successful entrepreneurs quit fast and cheap and without guilt. They move on quickly when they hit a dry gully. It is known in the game as ‘pivoting’. But how do you know when that horse has died? Here are three red flags for me when I’m talking to a client about their business.

1. You’ve been at it for 3 or more years and you are still not profitable.
Businesses, like farming, take time. You need to plant the seeds of your business, nurture your customer base, and grow the best mix of products. There seems to be a magic three year mark regardless of the industry. At this point, you should really be starting to see a steady inflow of customers. If after 3 years you are struggling, something is wrong and it could be terminal. Especially if it will require more financial resources than you have available to keep going, or new technology has made your offer obsolete or too expensive.

And if you haven’t been in business for three years yet? Don’t panic, it could be too early to pronounce the horse dead. You need to look at how your business is trending over the past year. If your profits and customer numbers have shown a steady increase, then you could be ok. Whether you are ok or not will depend upon whether you have the financial resources to keep going at the current level of growth.

2. You are getting little or no repeat business.
If your customers are not coming back for more or telling friends about you, something is wrong. Plain and simple. You need to be creating raving fans. No matter what the industry, word of mouth is one of the most cost effective and essential business generators.
Don’t despair just yet. Frequently the reason is an easy fix. And then in some cases the business owner is just not suited the line of business and its time to move on. Independent advice from a good business coach is essential at a time like this.

3. You have lost your mojo.
If going to work each day does not excite you, or you are procrastinating on important tasks, listen to your gut feeling. If everyday feels too hard, or your health or family life is suffering, something is wrong. Even amongst the hard work of business, you should feel a sense of excitement or achievement.

If any of these 3 red flags sound like you and your business, then it is time to check your horse’s pulse. It is time to get some objective professional help to assess your business and help you decide whether it is time to get off the horse or change direction.

A business coach or mentor can help identify the blocks and causes to the above and help you make clear and accurate decisions on whether to get off the horse or pivot. Business owners often don’t acknowledge ‘lost opportunity costs’. This is the money you could be making if you went in a different direction and every month counts. One thing we can’t buy more of is time.

Remember: it is not a sign of failure to quit while you are still ahead; it is a sign of a seasoned entrepreneur who knows when to cut their losses and move on to the next challenge. And quitting doesn’t mean your dream is over!

Getting off a dead horse frees up your time, money and creative energy so that you can apply it to a business that will deliver your dream.

Complimentary Checkup
I specialise in quickly identifying whether your horse is ‘dead’ or just has a bad cold, or whether you need to change direction.

Shoot me an email or give me a call to book an obligation free checkup and prescription.
0400 520 471