374 – Unleashing Profitability: How Pricing Exercises Revolutionise Business Success

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Running a successful trade or contracting business requires more than just technical skills and efficient project management. To thrive in a competitive market, it’s crucial to understand the nuances of pricing, share financial information with employees, and prioritize profitability for sustainable growth. In this blog post, we’ll explore key insights from Mike Disney, CEO of CEO Warrior and an industry expert, on these essential topics.

Onboarding New Staff with Pricing Exercise

One of the common challenges businesses face when hiring new staff is ensuring they understand the company’s pricing structure. To tackle this issue, Mike Disney suggests conducting pricing exercises during the onboarding process. By involving new employees in pricing discussions and exercises, they can grasp the value of the services offered and the importance of accurate pricing. This exercise helps align the team’s understanding and ensures everyone is on the same page regarding the company’s pricing strategy.
 

Scenario of a Small Truck Business and Daily Metrics

In the podcast episode, Mike Disney presents a scenario involving a small truck business. He emphasizes the significance of tracking daily metrics to monitor business performance. Metrics such as fuel consumption, maintenance costs, and daily revenue provide valuable insights into the business’s financial health. By consistently monitoring these metrics, owners can identify areas for improvement, make informed decisions, and optimize profitability.

Importance of Sharing Financial Information with Employees

Transparency and open communication play a vital role in fostering trust and creating a sense of ownership among employees. Mike Disney highlights the importance of sharing financial information with the team. When employees have access to relevant financial data, such as revenue, expenses, and profit margins, they can better understand the impact of their actions on the company’s bottom line. Transparency helps to hold people responsible, makes them aware of how their choices affect money matters, and inspires them to work towards the company’s achievement.

Understanding Pricing Nuances for Higher Profitability

Pricing is not just about covering costs; it’s about maximizing profitability. Mike Disney emphasizes the need to understand pricing nuances to achieve higher profitability. Factors like market demand, competitor pricing, and value-added services should be considered when determining the optimal price point. Tradespeople and contractors can find the best way to make money without upsetting customers by studying the market, customer behavior, and testing different prices.

Additional Expenses to Consider

When setting prices, it’s essential to account for all expenses associated with running a business. Mike Disney advises considering both direct and indirect costs. Direct costs include materials, labor, and subcontractor fees, while indirect costs encompass overhead expenses like insurance, licensing fees, and equipment maintenance. By accurately estimating these expenses and factoring them into the pricing structure, businesses can avoid underpricing their services and ensure profitability in the long run.

Breaking Down Pricing Structure for Customers

Transparent pricing builds trust and fosters better customer relationships. Mike Disney recommends breaking down the pricing structure for customers, clearly explaining the value they receive for the price they pay. By itemizing the costs and highlighting the expertise and benefits provided, businesses can justify their pricing and differentiate themselves from competitors. This level of transparency also helps manage customer expectations, reducing the likelihood of disputes or dissatisfaction.

Importance of Profitability for Reinvestment and Growth

Profitability is the lifeblood of any business. Mike Disney emphasizes the significance of profitability for reinvestment and growth. By maintaining a healthy profit margin, businesses can allocate resources to develop new products, expand service offerings, and invest in marketing and employee training. Profitability also ensures the business’s long-term sustainability, enabling it to weather economic downturns and seize growth opportunities.

Key Takeaways

  1. Company Meetings to Discuss Business Profitability: Regular all-company meetings provide a platform to discuss financial performance, pricing strategies, and the importance of profitability. Involving employees in these discussions fosters a sense of ownership and promotes a collective effort towards business success.
  2. Customers Supporting Businesses for Sustainability: By educating customers about the value they receive and being transparent with pricing, businesses can foster customer loyalty and support. Satisfied customers not only provide repeat business but also become advocates, driving new leads and contributing to long-term sustainability.
  3. Help Service Experts Understand Impact of Purchase Line Items: Educating service experts about the financial impact of their purchase decisions helps them make more informed choices. When employees understand the cost implications of different line items, they can prioritize value for money and contribute to cost optimization.
  4. Importance of Accurately Estimating Expenses for a Business: Accurate expense estimation is critical for setting appropriate prices and ensuring profitability. Businesses must account for both direct and indirect costs to avoid underpricing and maintain financial health.
  5. Reinvest in New Products and Services to Improve and Grow: Profitability enables businesses to invest in innovation, new service offerings, and employee development. By reinvesting in the business, tradies and contractors can stay ahead of the competition and meet evolving customer needs.

In conclusion, understanding pricing structure, fostering financial transparency, and prioritising profitability are essential for tradies and contractors. By sharing financial information, educating employees, and accurately estimating expenses, businesses can build trust, promote productivity, and ensure long-term sustainability. Remember, pricing is not just about covering costs—it’s about maximising profitability while delivering value to customers. With the right strategies and a commitment to financial responsibility, tradies and contractors can thrive in their industries and achieve lasting success.

Ready to dive deeper into these topics? Don’t miss out on our full podcast episode with Mike Disney and unlock the blueprint to success in the talent market.

Video Discussion Points: 
00:00 – Coming Up
00:27 – Get 30 leads in 90 days
01:14 – Welcome back Mike Disney
04:58 – Educate employees on financial responsibility for growth.
11:42 – “1 booked call could mean millions – clarity, alignment, accountability”
13:31 – Create pricing structure for owner-operator business
24:26 – Costs of running a business: $3600 + bad debt + bank charges + accountant.
28:46 – Credit card fees cost several hundred monthly.
36:45 – Expenses: office, payroll, and rent.
44:56 – Incredibly conservative expenses, hourly rate calculation.
51:56 – Interactive pricing exercise teaches financial responsibility.
59:49 – Tennis balls loss led to profitable sales.
Other Episodes For You to Check Out:

🎙️ Episode 372 – Step Aside, Boss: 5 Leadership Commitments for Empowering Your Team

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