Back to Blog

How Do You Price Your Services?

Pricing a service is a lot more difficult than pricing a product. Most business owners use a variation of cost plus pricing. What is Cost-Based Pricing? Cost-based pricing is the oldest and most common approach to pricing services. In this method, all the various costs are added up: direct labor costs, material costs, the overhead costs, and then an arbitrary markup for profit is added, which then becomes the price that's charged to the customer. As much as it ensures marginal profits, this pri...

October 7, 2019

People Are Clueless About Price

People, including your clients, are clueless about price. They are not even sure if the price you have given them is reasonable or not. This isn’t a mere claim, science actually proves this. How do I know this? Research in a branch of science called psycho-physics, has shown that the area in our brain responsible for making monetary judgments, is the same as the area that makes sensory judgments. Therefore, the human brain makes judgments based on color, taste and smell in the same way that i...

October 7, 2019

How Much Should Your Accountant Be Charging You?

Should it be based upon on a percentage of your turnover? Or the amount of time spent on your affairs? Or should it be in line with what their competitors are charging their clients? The answer is: It depends. It depends on the role that your accountant plays as this varies substantially from one accountant to another. Role Of an Accountant At one end of the spectrum, you will have those accountants that see you once a year. You will go to their office to drop off your records, they will do yo...

October 7, 2019

Business owner with kids in private school? Read this..

Kids are back to school next week.If you have children in private school, that big invoice for the first term will be due for payment. Bank of mum and dad is set for an assault yet again!As much as private education is an investment into a child's education and future, the payment of fees is still painful!Can I reduce the pain in any way? Whether it is activities during the school holidays, childcare, tuition fees and related university living costs or private school fees needing to be paid...

September 14, 2019

A Strategy For Getting Higher Average Prices

Let’s start with one of the most profound principles in the field of pricing.  And that principle is, different customers value things differently. We all value things differently.  We all have a different perception of the value of any product or service.  So, we all have a different maximum amount we are willing to pay for a particular product or service.  Economists call this the buyer’s reservation price.  And your goal is to set your price as close as possible t...

July 8, 2019

When Your Competitors Are Cheaper

Pricing is always complicated with the presence of competitors.  You have to consider the quantitative effect on your sales arising from any change your competitor might make to its pricing, and how a competitor will respond when you change your pricing. If your competitors are cheaper than you there are two things you can do.  One of the two is smart and the other is usually stupid. The stupid thing is to try to compete with them on price – by cutting your prices and perhaps even st...

July 8, 2019

How To Put Your Prices Up The Right Way

When you look at the most successful businesses in any sector, whilst there may be one or two that are successful using a low-price strategy, the majority are premium high-priced businesses, such as Apple, Starbucks and Disney. Despite that, and even if you acknowledge that most of your customers are really value sensitive as opposed to price sensitive, you might be thinking, “If I put my prices up I’ll lose customers!” Not necessarily. Why the concept of incremental irrelevance will insta...

July 8, 2019

Discounting The Right Way

One of the biggest problems is discounts being given by employees and sales people indiscriminately.  Very often they are given with little or no senior management involvement or authorisation.  There needs to be better systems, training and communication. If you have employees and sales people in your business, make sure you educate them about the profitability levels of different products.  If employees and sales people are to have the ability to use discretion to give discount...

July 8, 2019

The Dangers Of Discounting

What cost takes up the biggest share of the annual sales of almost every business (and it doesn’t appear in your annual financial statements)? Price discounts. Annual financial statements for any company report sales net of discounts and promotions.  That means the cost of those discounts and promotions is often not measured and forgotten. We saw how reducing average prices by 10% for Eddie could be disastrous.  Here’s a more high-profile case… A salutary lesson1931 was the ...

July 8, 2019

What Is The Right Pricing Strategy

There are really only two pricing strategies: Low-cost leadershipHigh-price differentiation Everything else just falls somewhere in the middle. In fact, most small businesses don’t have a pricing strategy.  They often use what I call, emotional pricing; reacting to gut feel and emotion rather than the facts.  Reacting to what the competition is doing.  Pricing based on guesswork, or simply pricing the way it’s always been done in the past. Low-cost leadershipThis is a strategy...

July 8, 2019

It's All A Big Lie

When I tell business owners they need to put their prices up they usually say, “You just don’t understand.  My customers are price sensitive!” There is a perception that most people are price sensitive.  It’s one of the big pricing myths. There certainly are price sensitive people in society, but it’s much less than you probably think.  Estimates by behavioural economists and price psychologists put it at between 14 – 20%.  These are people for whom price is the s...

July 5, 2019

Should I buy property through a pension?

If you already own or are looking to buy commercial property then you should consider it.Residential property cannot be held in a pension so if that's all your investing in then the rest of this article will be irrelevant.Most people when they think about 'pensions', the big insurance companies and the pensions scandals come to mind. People don't feel that they are control of their pensions. They are at the mercy of the big pensions companies and the markets as to whether they'll be left with mu...

April 9, 2019

Can I claim back VAT on property?

The default position is that the activity of renting out a building is considered an 'exempt supply' for VAT purposes. This means that VAT doesn't have to be charged on rents but conversely, VAT cannot be reclaimed on expenses incurred.As far as residential lettings are concerned, they are always considered exempt from VAT and you will never see VAT added to residential rents. That means you can also never reclaim VAT on expenses incurred in conducting your property rental 'business'.When does V...

March 26, 2019

Can I avoid the 3% stamp duty surcharge?

A purchase of a second residential property is now subject to a 3% stamp duty surcharge. That is the case whether you buy in your own name OR even via a company you own.Is there any way round this?  Unfortunately not for single buy to let investments. However, there are some property type purchases and transactions that don't attract the 3% surcharge.In the main these are listed below:Commercial propertyMixed use property Whilst the first is probably obvious to most, commercial property is ...

March 26, 2019

Do I need an in house Finance Team?

There comes a point in the stage and growth of a business where you think you might need to recruit additional finance staff. Or does there? Technology has massively changed the way financials and accounting are now maintained. Dedicated roles of accounts payable, credit control, sales ledger clerk etc now face extinction due to software being able to largely do the same thing. However, the plethora of skill sets required to navigate and properly handle a growing business' financials has grown s...

March 26, 2019

What is an SPV?

If you're in the property world either looking to invest in a project or involved in developing properties for a profit, then you've probably come across the term 'SPV'.SPV stands for 'Special Purpose Vehicle'. When used in the context of a property deal it essentially is a posh name for a Limited company!The term SPV is generally used to reflect an understanding that a project will be run through a separate legal entity set up for that particular project only.Why use an SPV?SPV's are commonly u...

February 28, 2019

Should I transfer my properties to a Ltd Company?

If you own buy to let properties, chances are you've heard that it might be beneficial to transfer them to a limited company. When is this appropriate? One of the main reasons why ownership of buy to let properties is more tax efficient via a company these days is due to the introduction of the mortgage interest relief restriction by HMRC. This means that you no longer receive a full deduction for the interest paid on any mortgage against your tax relief. It is mid way through being phased ...

February 28, 2019

What expenses can I claim on my buy to let properties?

In a nutshell, any expenses that are wholly and exclusively incurred for running your property business, as it were, are deductible against your rental income. The obvious ones you are probably claiming already - such as mortgage interest, maintenance / repair bills and agency management fees.The type of expenses that are often under-claimed or are not claimed at all are:Travel expensesComputer equipment and office expensesUse of home as officeOther professional feesLet's look at each of th...

November 26, 2018

Should I buy a property through a company?

The last few years we have witnessed an unprecedented wave of legislation against buy to let landlords. First there was the 3% rise in stamp duty for second or more properties. Then there was the removal of tax relief on interest payments for higher rate taxpayers. If that wasn't enough, the wear and tear allowance worth 10% of rents on furnished was also abolished.Tax bills for landlords holding property in their own name will undoubtedly have risen substantially - and keep rising until 20...

October 10, 2018

The most powerful lever in the profit equation

You can’t manage profit. Profit is simply an end result. It’s the end result of a series of processes.It’s the business model.Numbers drive that business model. When you fully understand your business model and how the numbers work you will be able manage and improve the drivers of profit.Every business is different and will have its own unique business model and profit drivers. Nevertheless, for most businesses there is a generic model. This model has 9 drivers, s...

September 25, 2018

Why do businesses fail?

There are many reasons why businesses struggle, and in some cases, ultimately fail. It happens for both Start Up businesses and established businesses. Here are some of the common causes. Starting out in business According to research more than half of new businesses don’t survive beyond 5 years. Here are some of the reasons for such high failure rates: An inability to build a profitable business model with proven revenue streams, Failure to create and communicate value propositions in a clear...

September 25, 2018

Should my accountant be helping me to grow my business?

Running a business can be a lonely experience. You have people to manage, customers to keep happy, bills to pay and mouths to feed. And the buck always stops with you.  Having someone to lean on, to help you navigate through the rough seas that business can bring, to act as a sounding board and to just be there when you need them, can work wonders.  This someone needs to be someone you can trust. Someone who understands your business. Someone who appreciates the challenges and pain you...

August 22, 2018

Why do I have to make a tax payment in July

There's always a confusion around the July tax 'payment on account' for income tax under the self assessment regime.If you are business owner, chances are you're under the self assessment regime and have to submit a tax return every year. One of the advantages of being self-employed or a company director is that you do not have to pay income tax monthly under PAYE like normal employees. Given that you are in control of how you pay yourself - mainly via dividends - you can also control to some ex...

July 30, 2018

What's the best way to run my car through the business?

This is a question we get asked a lot here. The answer as with most things in tax is, it depends! It depends on what kind of car you have for a start. The tax rules these days are based on the CO2 emissions of the car i.e the higher the CO2 emissions, the greater the potential tax charge. By contrast, there are tax incentives available for cleaner electric and hybrid cars such as being able to write off 100% of the cost of the car against profits if Co2 emissions are less than 75g/km e.g Tesla e...

July 19, 2018

How can I use my children's tax allowances to reduce my tax bill?

It's that time of the year when the kids are about to break up for the holidays - which means that the bank of mum and dad is set for an assault yet again! Whether it is activities during the school holidays, childcare, tuition fees and related university living costs or private school fees needing to be paid, there is a way to make the paying of these a little less painful. You see, the tax-free earning allowance (currently £11,500) applies to everyone from birth. This means you if you can fi...

July 12, 2018 Posts 1-25 of 46 | Page next
 

This product has been added to your cart

CHECKOUT