A Costing Review allows a growing business to evaluate and rest pricing to stabilise and create sustainable growth.
In the current climate all businesses are experiencing cost changes. These range from importation, container cost increases, cost of materials to cost of employees.
The implication of the costs rising is many businesses are already experiencing turnovers reducing. The business profit margins begin to feel squeezed, and against rising inflation.
Unless these increasing costs are managed and passed on through price increases a business will be forced to make decisions. To manage change, it is important that any business performs a costing review.
These decisions will impact the overall performance of the business. Under pressure to keep prices stable a business would consider changing suppliers to get a better deal. However this can sometimes impact the quality of the product or service.
Other decisions to cut costs for example redundancies, or reducing contract employees potentially has other impacts on the level of customer service.
Solutions
Undertaking a costing review will help identify what the current break even points are for product and service delivery. By considering and reviewing the overall profit outcomes for the business a new cost analysis can be created.
Ultimately, increasing prices in line with changing supply and people costs is inevitable to continue with sustainable growth.
Raising Prices
A simple solution in increasing prices is often overlooked and placed as a last resort for many business owners.
The psychology of pricing brings in the fear of when prices increase less will be sold. For many entrepreneurs the thought of not selling the same number of units or clients leaving because of price increases is an obstacle rather than an opportunity.
What is overlooked is this opportunity to attract the right value for the quality of service or product. Compromising on quality will have a much bigger impact on the business through brand reputation for example.
Whilst it can be scary to face the review of your costs, the real time picture of the business will help with further forecasting, planning and scaling.
At Direct Peak we offer our clients an additional consultancy service which includes costing reviews, get in touch today!
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