Developing a fair price strategy

Yes, there is price pressure all around us and much of the media creates its own self promotion around telling the consumers that they should stick it up the businesses and press for a better deal. Does this mean that you have to capitulate to increasing demands for even keener margins? Not necessarily.

It does mean that we should appropriately assess our businesses, our product and our pricing policies.

Is the price a fair price? Does it offer fair value for the customers? Does it offer an appropriate margin for you to continue to operate your business? It needs to be sufficient to pay your employees for their effort and don’t forget that this should include the owners of the business as well. Owners not only need to be rewarded for the effort they consistently put in, they need to meet all the financial obligations of the business and provide for future capital needs, obsolescence of equipment etc and there should be return on the capital they have invested into the business as well.

Striking a fair balance for all stakeholders is no mean feat but it should be our goal. Pricing will always be an issue and I am reminded of a statement made over a century ago which I believe still holds value for today and one that would make the world a better place if all people had an appreciation of it. It was written by John Ruskin (1819-1900) and reads:

The Lowest Bidder!
“It’s unwise to pay too much, but is worse to pay too little. When you pay too much, you lose a little – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done! If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.”

Trevor Phillips
Tax Manager

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Accountplan Taxation Services Pty Ltd
Phone: 3883 8999