Cash Flow: Revenue (Actual, Part 2)- Increase Prices
July 23rd, 2009
Copyright © 2009 Integrated Profitability TM
This is the second article devoted to improving Cash Flow by increasing actual revenue, as opposed to merely adjusting the timing of revenue. The last article of this series covered increasing sales.
Revenue consists of two pieces:
1) a unit of something (e.g., a product, a service, a period of time)
multiplied by
2) a price
The previous article concentrated on increasing the number of units; this article focuses on increasing prices to improve Cash Flow.
● Increase prices
Every business, market, product/service suite and customer base is different. The ability to increase prices is dependent upon many relative characteristics across all four areas, and how they, at the current moment, are interconnected. For example, who has relative market leverage: buyers or the seller? If you have leverage, there is a better chance you will be able to increase prices, without causing a more-than-offsetting decrease in sales. If not, you don’t.
More importantly, where is your product/service placed in the range of similar offering? How is it perceived by the market? If it is one of high quality, then prices may be able to be increased. If you know that your product and service is the best quality and value in the market, but your customers don’t know it, then you have some marketing homework to do. In order for someone to pay a higher price, he or she most perceive that the product/service is better and deserves the premium.
How does your product/service compare to the competition?
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