Name: Gloria Murray
Company: Murray Associates Accountants Limited
Gloria Murray, Queen of Profit and Director of Murray Associates Accountants Ltd awarded the Most Innovative Sole Practitioner in the UK in the 2020 Innovation Awards for 2014. Gloria is dedicated to sharing her innovative advice, ideas and expertise with Scottish Business Women. Her favourite saying is ‘Turnover is Vanity, Profit is Sanity’
Email Gloria with your financial queries and she will answer in following issues of BWS magazine. e: email@example.com
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The ‘Queen of Profit’ answers your questions
At the BWS Live Event in Aberdeen, I was asked some questions that keep coming up. They’re obviously issues that are prevalent in a lot of business womens’ minds. So I thought this month it would be a good idea to pick a couple to answer.
Q: How do I know when I’ve set the right price for what I do?
You don’t! Pricing is not such a cut and dried a topic as you think. There are lots of examples of companies that charge more than the ‘normal’ price for what they do like Innocent Smoothies, Prada, Apple and Ritz-Carlton Hotels. You can buy similar products or services for a tenth of the price (or less), but people are willing to pay more if they perceive they’re getting more. In fact there is now a whole branch of economics, called Behavioural Economics, and researchers ‘experiment’ with pricing to see how people buy. It’s really fascinating as humans are not rational about things, and that goes for pricing too.
Studies show there are three distinct buying patterns. A study from Wharton Business School in the USA calls them tightwads, unconflicted and spendthrifts. Tightwads are very price sensitive and make up about 24% of the population. Unconflicted are average spenders, sometimes they’ll spend more if it’s important to them, sometimes they’ll spend less if it’s not. They make up 61% of the population. Spendthrifts are people who always choose the most expensive option and make up around 15%.
Now you can aim your service or product at tightwads but you’ll have to sell a lot to make any money. As soon as someone else comes in at a lower price you’ll lose the customer to your competitor. They have no loyalty and use price as the way they choose what to buy.
What I want to ask is why not choose the other 85% of the population? They’re easier to deal with and are looking for something of value. In fact 15% of them will choose something more expensive if you give them the opportunity.
For more information on pricing I have 5 of my books to give away ‘How to Run a Successful Business: Focus on Your Price’. The first 5 people to email me at Gloria@murrayassoc.co.uk will receive a free copy.
Q: I’m no good with numbers, so why is it so important to keep an eye on this in my business?
Most business owners would rather have their teeth pulled without anaesthetic than spend time looking at their numbers or doing book-keeping. It’s outside most people’s comfort zones and is one of those areas that you feel you should know about but don’t (and are frightened to ask about).
However no business will survive without profits and positive cashflow and you can’t leave this to chance. If you open your business with no idea how much sales you need to breakeven every week or month and what resources you need to make a profit then you’re leaving your whole business to chance. The odds are probably better in a Casino!!
I’m not suggesting you do all of this yourself, as a business owner you’ve already got a lot to do. But if you have no idea what your numbers are doing then you’re working blind. It’s not numbers for the sake of numbers but numbers to give you important information in your business, to help you spot trends and to work out the most profitable products or services you have. Then you have proper information that leads you to making good decisions.
There are some great book-keeping packages out there that can help you keep your numbers organised. Where you can see at a touch of a button how profitable your business is, who your best customers are, your percentage spend on marketing, whether your average sale is going up or down, all useful stuff to do some regular analysis on.
If you’ve got a numerate outsider (like your accountant) to meet with you regularly they can help you to pull this information together. But it all starts with your book-keeping.
If you would like a free 30 day trial of QuickBooks Online email firstname.lastname@example.org and she’ll be happy to set this up for you.