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How to tell if a small business is lowering the price of its products

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crate mask (@clatemask) is the founder and CEO of Keap, a maker of sales and marketing automation software for small businesses. He is also the co-author of Conquering Chaos: How to Succeed in Small Business Without Going Crazy.

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One of the most difficult tasks small business owners face is determining the price of their products and services. Often they get it wrong. They usually price their products too low, resulting in lower profits.

Many entrepreneurs underestimate skill sets and experience, especially when they put a price on knowledge and expertise. Other owners don’t know enough about market conditions and what their customers are willing to pay. In addition, some people do not take into account all the costs associated with providing products and services, and others want to accelerate their workload in order to generate more revenue.

So how can entrepreneurs know if they’re underestimating what they have to offer? Here are some red flags that indicate it’s time to raise prices.

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you can’t keep up with all the work

On the surface, this might seem like a good question, but dig deeper. It’s nice to believe that your product or service is so great that people can’t wait to work with you, but the reality is that your business isn’t right for every client. No. It shouldn’t be. There’s a delicate balance when it comes to pricing, so if you’re struggling to keep up with the influx of business, it’s time to re-evaluate your pricing structure.

I have a lot of customers, but I’m in financial trouble

There are two main reasons why this happens, depending on your business. If you’re a professional services business, you could be a victim of “scope creep.” This means that the scope of work we do for our clients often changes beyond what was originally agreed upon. We address this by clearly communicating our plans to our clients so that both parties understand and align our vision, what each needs to deliver, and the timeframe to produce results. If you’re producing goods, costs may be squeezing your profit margins. Make sure you factor in all hard and soft costs into your price. Otherwise, pricing may be too low.

We do a lot of custom work

This is a common problem for companies that provide professional services. There’s a place for custom work, but you don’t have to reinvent the wheel for each client. This takes a lot of time and energy and can affect your ability to scale. For most consultants and companies that provide professional services, success comes from commercializing proven strategies that serve a variety of customers. Your clients know what they want, but they don’t know how to get there, so they need your expertise. By identifying the process of implementing proven strategies, we can efficiently give our clients what they need to move their business forward.

you are offering your knowledge for free

Generally, small business owners genuinely care about their customers and want to help them. It’s commendable. But doing good for your customers doesn’t come at the expense of your own business’ profitability. Your expertise and advice are valuable and valuable to your customers. intention Pay—so let them.

Write to Mr. Musk at reports@wsj.com.

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