12 BUSINESS WOMEN SCOTLAND business advice
ask the expert
MURRAY ASSOCIATES ACCOUNTANTS LTD • Tel: 0141 889 4247• Business First Business Centre, Paisley PA1 2FB
Gloria Murray Queen of Profit and Director of Murray Associates Accountants Ltd
awarded the Most Innovative Sole Practitioner in the UK in the 2020 Innovation Awards
for 2014.Gloria is dedicated to sharing her innovative advice, ideas and expertise with
Scottish Business Women. Her favourite saying is ‘Turnover is Vanity, Profit is Sanity’
Email Gloria with your financial queries and she will answer in following issues of BWS
magazine. e: [email protected]
The ‘Queen of Profit’
answers your questions
At the BWS Live Event in Aberdeen, I
was asked some questions that keep
coming up. They’re obviously issues
that are prevalent in a lot of business
womens’ minds. So I thought this
month it would be a good idea to pick a
couple to answer.
How do I know when I’ve set the right
price for what I do?
You don’t! Pricing is not such a cut and
dried a topic as you think. There are lots of
examples of companies that charge more
than the ‘normal’ price for what they do like
Innocent Smoothies, Prada, Apple and RitzCarlton Hotels. You can buy similar products
or services for a tenth of the price (or less),
but people are willing to pay more if they
perceive they’re getting more. In fact there
is now a whole branch of economics, called
Behavioural Economics, and researchers
‘experiment’ with pricing to see how people
buy. It’s really fascinating as humans are
not rational about things, and that goes for
pricing too.
Studies show there are three distinct buying
patterns. A study from Wharton Business
School in the USA calls them tightwads,
unconflicted and spendthrifts. Tightwads are
very price sensitive and make up about 24%
of the population. Unconflicted are average
spenders, sometimes they’ll spend more
if it’s important to them, sometimes they’ll
spend less if it’s not. They make up 61% of
the population. Spendthrifts are people who
always choose the most expensive option
and make up around 15%.
Now you can aim your service or product at
tightwads but you’ll have to sell a lot to make
any money. As soon as someone else comes
in at a lower price you’ll lose the customer to your competitor. They have no
loyalty and use price as the way they choose what to buy.
What I want to ask is why not choose the other 85% of the
population? They’re easier to deal with and are looking for something of
value. In fact 15% of them will choose something more expensive if you
give them the opportunity.
For more information on pricing I have 5 of my books to give away ‘How
to Run a Successful Business: Focus on Your Price’. The first 5 people to
email me at [email protected] will receive a free copy.
I’m no good with numbers, so why is it so important to keep an
eye on this in my business?
Most business owners would rather have their teeth pulled without
anaesthetic than spend time looking at their numbers or doing bookkeeping. It’s outside most people’s comfort zones and is one of those
areas that you feel you should know about but don’t (and are frightened
to ask about).
However no business will survive without profits and positive cashflow
and you can’t leave this to chance. If you open your business with no
idea how much sales you need to breakeven every week or month and
what resources you need to make a profit then you’re leaving your whole
business to chance. The odds are probably better in a Casino!!
I’m not suggesting you do all of this yourself, as a business owner
you’ve already got a lot to do. But if you have no idea what your
numbers are doing then you’re working blind. It’s not numbers for the
sake of numbers but numbers to give you important information in your
business, to help you spot trends and to work out the most profitable
products or services you have. Then you have proper information that
leads you to making good decisions.
There are some great book-keeping packages out there that can help
you keep your numbers organised. Where you can see at a touch of a
button how profitable your business is, who your best customers are, your
percentage spend on marketing, whether your average sale is going up or
down, all useful stuff to do some regular analysis on.
If you’ve got a numerate outsider (like your accountant) to meet with you
regularly they can help you to pull this information together. But it all starts
with your book-keeping. n
If you would like a free 30 day trial of QuickBooks Online
email [email protected] and she’ll be happy to set this
up for you.
Post a question to Gloria on the BWS website at
www.bwsltd.co.uk/ask-the-expert