I read somewhere that you should be losing half of your business on price, in other words you should set your price so that half of your potential customers won’t pay it.
Can this really be true?
Well, I just made this spreadsheet simulation and sure enough, the rule is correct! if you set your price so low that pretty much every enquiry turns into an order then the price has to be so low that the profit margin on all this work is really low. You’d make more money doing less work but at a higher margin.
Of course, you have to have decent quality and customer care, and the elasticity of demand remains an unknown, but look at my sheet and the assumptions I’ve made and you’ll see it’s pretty sensible. And yet the result is indeed quite surprising – put your price up, and work smart rather than busy!
The spreadsheet explained:
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