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Pricing Strategies

Pricing Strategies

What's the best way to establish a price for your products or services?

Getting your pricing right is crucial. Put your prices too high and your customers may desert you; put them too low and you’ll generate sales but won’t have a large enough profit margin to create healthy revenues and cashflow for the business.

Whether you’re a new startup, or an established business, choosing the right pricing strategy is a fundamental part of designing your business model. As such, pricing is something that’s likely to take considerable thought, research, planning and analysis over the lifetime of your products.

So, how do you know what to charge for each product and/or service? And how do you decide a price point that’s both competitive AND profitable for the business?

Costs, margins and hitting the right price point

For your business to be viable, you have to know for certain that you can:

  • Find and win customers
  • Meet your project sales and revenue targets
  • Cover your running costs, overheads and operating cashflow
  • Generate profits and get a return on your investment.

But how does this all come together to define your final sale price? The answer is to have a granular understanding of your costs, your margins and your pricing – and also to know who you’re selling your product/service to.

Different ways a price can be worked out

Cost price

When you make a product, or deliver a service, you need to spend money to do that. This expenditure includes the raw materials, the business overheads and the labour costs of creating your product/service.

By adding up all these expenses and dividing them by the number of units you delivered, you get your cost price. In other words, it’s the total cost of the unit before any margin or profit is added.

Wholesale price

Your margin is the amount you add on to your cost price to make a profit.

So, if my cost price per unit is $5, I might sell each unit to a wholesaler at $7.50. By doing this, I recover the cost of making the unit (or ‘Cost of Goods Sold’ in accounting terms), and I make a profit of $2.50 on each unit I sell to my wholesale client. This is the wholesale price.

The wholesaler will then add on their own margin in order to sell it to a consumer at. Using the example above, if the wholesaler sold each unit for $10. You make $2.50 and the wholesaler makes $2.50.

Retail price

This is the price when you sell the product to a consumer. The retail price factors in margins and comparing prices within the market to ensure you're competitive but still turning a good profit.

So, if you sell direct to a consumer, at a price of $10, and your cost price is $5, then you’ll make $5 profit for every unit you sell.

This contrasts with $2.50 profit per unit if you sell to a wholesaler, although you’re likely to sell in bulk to a wholesaler and will make your profits through this economy of scale.

Premium or economy pricing

Knowing how to position your product/service in the market is important.

Are you selling a premium product, with a high price tag? Or are you selling an economy product, with a low price point? There’s a big difference between selling a limited number of units at a high price (and high profit), and selling a big number of units at a cheap price (low profit but larger sales).

Positioning your prices between these two polar ends of the pricing spectrum isn’t easy, and will take time, experience and plenty of experimentation to get right.

Knowing when to discount or increase your prices

Your price isn’t a static thing.

Costs of production will increase, markets will change and sales campaigns will require discounted prices. So it’s vital to continually assess, review and update your prices.

For example, you could run a discount to increase sales, decreasing your margin and selling more units. Or you could choose to put your price up to increase your margin and make things more profitable.

What’s important here is to know how price-sensitive your customers are, how loyal they are to the brand, and what they’re willing to pay for your specific products/services.

Pricing is a complex and difficult area to get right, so working on your pricing is something that should be done on a regular basis.

If you’d like to review your current pricing strategy, please feel free to talk to us. 

Leadership lessons: JUST FOR ME

Leadership Lessons

JUST FOR ME

There are thousands of books written about leadership. We’ve distilled some lessons from some of them into the acronym JUST FOR ME. Nine things within your control to help you become a more effective leader.

1. Just do it

So often we get in our own way of implementing our ideas. Stop limiting the business’s potential and prioritise your time to ensure the important things get done.

2. United vision and values

Your vision is where you want the business to be in the future; your values are the compass that drive your behaviour to get there. Clarify and articulate these ASAP.

3. Safety

It’s a leader’s job to ensure physical and emotional safety for their team at work. This goes beyond legal obligations; the safer employees feel at work, the more productive, innovative and loyal they’ll be.

4. Teamwork and Trust

Form a team of people who are smarter than you in different ways, using your collective expertise to achieve results impossible to achieve alone. Build a culture of trust so your team know they can rely on you and that the feeling is mutual.

5. Focus

Bring focus to each team member’s individual contribution towards achieving the business goals and vision. Provide clear key performance indicators to ensure everyone knows what to focus on.

6. Opportunity

Look for the opportunity in every mistake, challenge and difficult situation. These are key sources of learning.

7. Resilience and Resourcefulness

Resilience helps you recover quickly from difficult situations; resourcefulness helps you find quick and clever ways to overcome difficulties. Build resilience and resourcefulness in your team and yourself.

8. Mindset

This is the attitude you bring to your role as leader. Do you have an abundance mindset or scarcity mindset? Do you take ownership, accountability and responsibility for your actions? Your mindset has a huge impact on how you and your team feel about coming to work each day.

9. Empathy and Energy

Empathy is the ability to see things from another’s perspective. For example, instead of disciplining a team member for struggling, first seek to understand why they’re struggling, then offer support and training. Increased empathy increases energy across the team and the business and improves results.

Take these nine factors and make a plan for how you can develop your leadership skills. Which one will you focus on first? 

“Success is neither magical nor mysterious. Success is the natural consequence of consistently applying fundamentals.” - Jim Rohn

JobMaker scheme – key points

JobMaker Scheme - Key Points

The JobMaker hiring credit scheme is now open for registration.

Here’s a summary of some of the key points around the JobMaker scheme.

If you are considering applying for JobMaker, please take into consideration the administration of JobMaker can be quite complex, so we don't recommend attempting to manage this on your own. Talk to us about how we can assist.

For background, JobMaker was announced by the government in the October 2020 federal budget, and will operate until 6 October 2021.

Key points:

  • Key to the hiring credit scheme is that employers must have added additional employees and also have increased their payroll during the relevant JobMaker period, as compared to a baseline date.
  • The hiring credit is backdated to 7 October 2020 (applying to new employees from that date) and will provide eligible employers with the following payments for up to 12 months for new jobs created from that date.
  • Eligible employees must work an average of at least 20 hours per week over a JobMaker period for the employer to qualify for the payment in respect of that employee. They must have commenced employment between 7 October 2020 and 6 October 2021, were aged between 16 and 35 years at the time they commenced employment, and worked an average of 20 hours a week for each whole week the individual was employed by the qualifying employer during the JobMaker period.
  • The JobMaker payments for up to 12 months for new jobs created are:
    a) $200 a week for hiring a worker aged 16 to 29 on at least 20 hours a week during the JobMaker period and
    b) $100 a week for those aged 30 to 35 on at least 20 hours a week during the JobMaker period.
  • Employer eligibility criteria are broad. Some employers are specifically excluded. These include:
    • employers who are claiming JobKeeper
    • entities in liquidation or who have entered bankruptcy
    • commonwealth, state, and local government agencies (and entities wholly owned by these agencies)
    • employers subject to the major bank levy, and
    • sovereign entities (except those who are resident Australian entities owned by a sovereign entity).
  • Entitlement to a hiring credit payment is assessed in relation to three-month periods known as “JobMaker periods”. These periods are relevant for the purposes of the additionality criteria (refer first point).
  • Claims can only be made during the claim period. No exemptions or extensions are available. There are strict dates by which claims for a period must be reported by. The credit is paid every 3 months in arrears to employers.

As mentioned at the start, this is a summary of some of the key points around JobMaker. There are many other requirements and a thorough understanding of those requirements are needed to ensure your JobMaker administration is correct. 

Talk to us if you need support in applying for or administering JobMaker.

Five benefits of outsourcing your Payroll

Five benefits of outsourcing your payroll

When it comes to running a business, time is an irreplaceable commodity and we are seeing more and more businesses start to outsource specialist or essential services. If you employ people, then payroll is both a specialist and essential service.

Why?

Because outsourcing payroll allows business owners to focus on their strengths and core business, leaving the complexities of systems and compliance to experts.

With the right team behind you, the benefits of outsourcing your payroll can be realised almost immediately.

Here are five benefits of outsourcing your payroll.

1. Save time

By outsourcing your payroll, time spent on compliance, regulations, and training staff on using internal systems is eliminated. Cloud-based payroll services can also eliminate time spent by HR updating entitlements, leave and benefits.

2. Save money

Having fewer full-time employees can cause a ripple effect on cost savings throughout an organisation, from HR and IT through to office space and utilities. Outsourcing to payroll services providers reduces the cost of hiring and retaining specialised staff – two activities that are expensive and increasingly seen as unnecessary.

3. Compliance

For many small business owners payroll isn’t a core competency. And that means the complexity of work place agreements and EBAs increases the risk of costly errors. Keeping up with the Australian government’s National Employee Standards (NES) vigilance and expertise to remain compliant.
Outsourcing to a specialist payroll provider ensures that the minimum standards are adhered to.

4. Simplified reporting

Outsourcing payroll provides complete transparency and access to accurate information that doesn’t need to be verified. Simplified reporting means, as a business owner, you can more effectively plan for growth and predict changes to your staffing needs.

5. Avoid losing payroll expertise

Outsourcing your payroll means your business maintains a consistent approach to payroll management. There’s no need to induct employees and role transfer can be reduced to the functions and outputs of the payroll service.

At the end of the day outsourcing payroll services allows you to focus on the aspects of your business that generate revenue.

Talk to us today about outsourcing your payroll so you can invest in strategic resources that increase value and drive the growth of your business.

Leveraging your technology


Leveraging your technology

The decisions you make in your business are only as good as the data you use to make them. The more accurate and up to date your data is, the better your decisions will be. Leveraging your technology will provide you with accurate real-time data to make more informed decisions in your business.

Processes and systems drive your business, so it’s important to ask yourself if all of yours are clearly documented and up to date? Some processes may be followed simply because they always have been. Although other processes may have evolved over time, your documentation might not necessarily reflect this.

Using technology to streamline your processes and systems increases efficiency in your business, saving time, money, and reducing stress. You’ll also prepare your business for the future, making it more sustainable, scalable, and saleable.

Leveraging your technology can help you to:

  1. Make your data accessible from the cloud, allowing you to view real-time data and make decisions on the go.
    Example: Xero.
  2. Reduce human error and increase productivity by automating repetitive tasks and workflows.
    Example: Asana for workflows.
  3. Track your expenses and load them directly to your accounting software simply by taking a photo.
    Example: ReceiptBank.
  4. Minimise double handling and increase efficiency by integrating your apps.
    Example: Xero Marketplace.
  5. Collaborate with your team regardless of where they are.
    Example: Slack and Microsoft Teams.
  6. Save the time and money needed to travel by using online meetings.
    Example: Zoom and Microsoft Teams.
  7. Induct new team members seamlessly with clearly documented processes.
    Example: Deputy.
  8. Monitor your inventory in real-time, reducing inventory days and freeing up cash.
    Example: Fishbowl and Unleashed.
  9. Store customer preferences to personalise customer experience, increasing customer satisfaction and retention.
    Example: Vend and Kounter.
  10. Make your business become scalable with systems in place to allow the business to grow without the wheels falling off. Talk to your business adviser. 

Using technology to its maximum advantage will help to improve your business. However, implementing these changes can often be overwhelming.

Talk to us about any of the above technology to improve efficiencies in your business.



Building a better business in 10 steps

Building a better business in 10 steps

There’s no magic bullet to building a better business; it’s about taking small steps every day to get a bit better than the day before - it all adds up!

Owning and running a business is not easy. And at times you might question why you’re even doing it, particularly after the impact Covid-19 and the associated lockdowns had on business.

But you’re here because you had a vision. You decided being in business was a better way to achieve that vision than working for someone else. And, you’re right; you just have to work on it.

It's likely that you're an expert at what you do. Maybe you’re a tradie and know plumbing or carpentry like the back of your hand. Or, maybe you’re a restaurant who can dish up delicious meals. This doesn’t mean you’re an expert at running your business though. It’s hard taking time out of working in your business to work on it. But doing this is essential for its success.

There’s no magical overnight solution to building a more successful business. It’s about taking small steps every day to get a bit better than the day before.

So, what should you do to build yourself a more successful business? We’ve broken it down into 10 essential steps

Ten steps to building a better business

  1. Get clear on exactly what it is that you want.
  2. Be open to change and new learning.
  3. Define where you are now (warts and all).
  4. Make a plan.
  5. Get your organisational structure right.
  6. Be a better leader.
  7. Be held accountable by someone independent.
  8. Build strong networks.
  9. Monitor your progress.
  10. Keep your well of happiness full.

These are the 10 most important things you should be working on to ensure you achieve your goals. Small, incremental changes can have a massive effect on your success.

We’re here to help you, every step of the way. Get in touch!

“Success isn’t overnight. It’s when every day you get a little better than the day before. It all adds up.”  Dwayne ‘The Rock’ Johnson


The Fundamentals of a Business Budget

The Fundamentals of a Business Budget

The Fundamentals of a Business Budget

A business budget is one of the essential tools in managing your business finances and actively building your business.

A budget shows what you plan to do with your cash over the next year.

For a complete picture of your business health, you need to review the profit and loss statement, the balance sheet, the cash flow forecast and the budget. Taken together, these reports allow you to make informed business decisions and monitor performance.

Why have a budget?
  • Forecast sales and expenses according to monthly or quarterly variations.
  • Evaluate performance over time, including changes or patterns.
  • Get really familiar with where your money goes and where it comes from.
  • Clarify targets and goals and use the budget to help you focus and achieve those goals.
  • Comparing actual figures to budgeted figures allows you to see potential problems early and plan for unexpected costs.
  • A budget will help you to see the big picture and stay motivated over the long term.


Where to start

A basic budget takes known income and expenses, then makes certain assumptions about the timing of income and planned expenditure. The basic budget is based on cash in and out of the business.

Over time, as you start to see the benefits of using a budget, your budget should evolve into a more sophisticated version that includes non-cash elements such as provisions and depreciation.

Most businesses will start with one budget but soon move to having three budgets.

  1. Business as usual -  the next year’s budget is based on current year income and expenses, with perhaps a small adjustment for consumer price index increases.
  2. Worst case - budget is based on a pessimistic view of next year’s performance.
  3.  Best case -  budget is based on an optimistic view of performance over the next year.

A budget is usually for a financial year, but you can also set up budgets for two to five years.

Once you have one budget (or more) set up, you can then run your current financial reports against the budget to see how you are tracking. This allows you to make rational business decisions in real time to adjust accordingly.

Your can run your financial reports monthly and adjust your budget as needed.


Whats next?

It's never too late to to put a budget into place. Book a time with us to help you create a meaningful budget in your accounting software so that you can use it as a proactive part of your business management, strategy and your success.

xeros short-term cashflow feature

Xero’s short-term cashflow feature for businesses

Xero's short-term cashflow feature for businesses


Business cashflow is simply money coming in and money going out of the business. Your outgoings will include things like rent, payroll, taxes and supplies. Your income will be revenue from sales but might also include investment funds or the sale of assets.

For most businesses, income and expenditure don’t always happen at the same time so focussing on strong cashflow management will help you prepare for the shortfalls and also manage surplus income.

Cashflow reports allow you to look back at cashflow in your business. This can uncover cashflow patterns over time and show you how much money you need to run your business each month.

Cashflow forecasts look forward by combining payment dates and due dates for invoices, to give you an idea of what your cashflow will be like going forward.

Managing healthy cashflow

Xero’s short-term cash flow feature gives you an up-to-date dashboard view of your organisation's cashflow. You can choose multiple bank accounts and see the projected cashflow over 7-30 days. The more information you include, the more accurate your forecast will be.

Healthy cashflow management gives you better control, so you are more prepared for growth or for the unexpected. Read the article at Xero Central to learn more about this feature.

We can help. Talk to us about improving your business cashflow.

understanding working capital

Understanding working capital to maintain business success

Understanding working capital to maintain business success


If cashflow is the lifeblood of your business, then working capital is the health check you should regularly undertake to keep your business alive. It is important for you to have an understanding of your working capital to maintain business success. Regularly checking working capital will play an essential part in maintaining business success during these times of greater economic insecurity.

What is working capital?

Working capital is your current assets minus your current liabilities and measures the surplus (or deficit) you have to keep your business afloat without needing to sell assets, borrow more, or add your own money into the business. The more working capital you have, the easier it is to fund growth or weather any downturns.

To calculate your working capital: Cash + debtors + stock + work in progress - creditors - taxes owing

For example, if your business had the following balances:

Cash $150,000
Debtors $120,000
Stock $100,000
Creditors $45,000
Taxes owing $25,000

Then your working capital would be $300,000 ($150,000 + $120,000 + $100,000 - $45,000 - $25,000).

If the business had an overdraft of $150,000 rather than a positive cash balance, the working capital would be zero. This means the business would have no cash to cover any slowdown in debtor payments or a downturn in sales (which would lead to higher stock levels). Worse, the business could be in serious trouble for trading while insolvent.

It’s likely your working capital has taken a hit due to Covid-19. Now is the time to review your processes and boost your working capital.

Consider the following strategies:

Build up enough cash to cover at least 2 months’ sales value

One of the key learnings from lockdown was how important it is for businesses to have enough cash in the bank to get them through a shutdown. Use the average sales value for the last six months to calculate the amount you’ll need, then manage your expenses to build your cash stocks up to this level.

Renegotiate your debt

If your business has an overdraft, could the core debt be negotiated into a term loan? Have you spoken to your bank manager about options for managing your debt as a result of Covid? We can work with you and your bank manager to determine your best finance options.

Negotiate with suppliers

Speak to your suppliers and see if you can negotiate better terms. This might be a discount for early payment or longer payment terms. They’ll be suffering too, so work together to come to the best arrangement for you both.

Set aside money for taxes

Calculate the percentage of sales you need to put aside for taxes and put this aside in a separate bank account so you have the cash to cover tax payments as they fall due.

Inject sufficient funds

If the above strategies don’t boost your working capital sufficiently, you’ll need to invest your own funds into your business to cover your working capital requirements.

Even with the many challenges of a post-pandemic economy, undertaking regular working capital checks is an effective way to help increase your business’s cashflow. We can help you calculate your working capital requirements and identify strategies you can implement to increase your working capital.


“Change is not a threat, it’s an opportunity. Survival is not the goal, transformative success is.” - Seth Godin

We can help. Talk to us about your working capital.

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