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Business Problems: When To Bite Away At Your Own Revenue

Aug 22, 2008
When it comes to business, some decisions can be tough. In some sectors, like IT and technology products, your prices are probably heading south over time. Entrepreneurialism is a difficult profession at the best of times, but even harder when you have to decide between dropping your prices and losing your customers. In this article we take a look at how you can reach a happy medium.

Do you know which customers aren't profitable?

Some customers know that they can call up at the end of their contract period and get a good bargain. However, some businesses have cancellation and retention policies that benefit their customers too much. If you reach the stage that you're not making a gross profit on a customer, then you better have a good reason for keeping them on board with your business. And, you have to ask yourself why you got in that situation in the first place. Offer them one of your newer packages, maybe with some discounts, and see if they take it. Entrepreneurialism doesn't always mean closing sales at any cost.

Maintaining Dignity for Your Business

When you end up offering your clients too steep discounts to keep them, they will no longer respect you as much. That's why you should always think of excuses for lowering their costs. For example, ask them to change their payment method, come to you for more services, and switch to email-only support. It doesn't have to be a big sacrifice, but make sure they're making one. Entrepreneurialism is about winning, and that's why you always ask your client to give you something in return when you move away from your standard pricing. People like to know that your business is transparent with pricing, and that people don't pay more or less depending on their negotiation skills.

How do you know when the time is right?

If you have a client on a twelve month contract, and they are paying more than your new customers, then it's hard to know when you should bite the bullet and lower their prices. You will lose revenue from your top line right away, but if you keep that revenue then you stand a higher chance of losing it when it comes time for them to renew their contract.

Entrepreneurialism is a lot to do with testing, and finding out what works best for you. There are also different models that work better depending on the level of competition within your sector, and the type of products or services that you're offering. That's why you should always tailor things towards your business.

However, if you wait until one month or two months before your client's contract is up, then you will have more than just yourself to compete with. Why not approach them after half of their contract period is up, and offer them a 12 month contract renewal on only a partial price discount? Then, if they say they require your new prices in order to accept another 12 months, you have time left to win them over.

Another strategy that works well is to offer your client free services in return for a contract extension. If they ask for a product or service that isn't included in their contract, why not evaluate whether you can give them it for free? Entrepreneurialism can often involve lots of thinking outside the box to find the best solution for your business.
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