When was the last time you looked at your pricing and profit margins? Most business owners set their pricing in the early stages when they are new and desperate for clients, which means that nine times out of ten their pricing is too low.
As the business grows, so does your overhead, but many owners never stop and look at their pricing structure from year to year. So, you may be spending a great deal of time and effort to increase sales when what you really need to do is increase profits.
This can happen to anyone. One Mississippi-based CPA firm was struggling with cash flow. Once a "margin analysis" broke down their gross profit margin on every client, they discovered that one third of their clients, which we put into "Bucket A" were high-margin clients. One third of their clients (Bucket B) were low-margin clients. The final third of their clients were negative-margin clients (Bucket C), which meant they were losing money on every sale they made to these Bucket C clients!
The firm raised pricing on all Bucket C clients or gently guided them to other firms. Next, they went back to the Bucket B clients and both raised pricing and looked at ways to reduce the production cost to do the service work, both of which improved their margins.