There are a million reasons to raise prices right now. Inflation. Lack of labor. Taxes. The continuing impact of the pandemic. War. Global supply chain issues.
On the surface, it might seem right: If we don’t add value, we don’t survive.
On closer inspection, there is a reason not at all to the They won‘Don’t survive if you lose your customers.
Price gouging can permanently damage your relationships and your overall business. Doing so opens the door for your retail buyers and customers to search for similar products elsewhere or to inquire about your product needs together. This is especially true if you are a small to mid-sized supplier to some of the world’s largest retailers.
This is the dilemma nearly all business leaders face today, with many believing they have no choice but to pass on the raise or risk their entire business.
What if I tell you not at all Should it be one or the other? What if you could not only save, but grow your business without passing on price increases to your customers?
You can keep major retail partners coming back to you for more business and at the same time cut suppliers at your rate. You can expect high quality without going through price hikes. You can be stronger and more ready for growth in your inflation and low economy.
i know it it is. Because I’ve helped run my own companies and helped other businesses navigate it many times over the past twenty years. You can do the same.
This four-part “P&L Survival Guide” series has a clear theme: Take control of the controls and get your business in shape. Clear in theory; Practically difficult. You cannot control inflation, epidemics, labor shortages, taxes, war, or global supply chain issues. so what can Are you in control?
For starters, you can control your income. Getting your P&L in shape is the first critical step. Here’s how.
I don’t mean lower your standards, sell your savior value or your soul. Instead, focus more on increasing sales revenue. Companies with the potential to not only survive, but achieve significant growth over the next few years will be best equipped to sell.
It won’t be easy. Selling may require changes to your organization’s culture and your overall business model. It requires proactive and personal accountability within the organization to find and implement new and diverse revenue streams.
Here are five ways you can improve your online income. Without price increase;
- Send existing orders in full – the easiest sale is what you already have.
- Expand existing classifications – create new products for existing customers
- Create New Business – Identify new customers, services and revenue streams
- Go live – increase margin and consumer engagement
- Review terms – renegotiate freight, discounts and program terms
Send current orders in full. Recently, many businesses are facing problems in shipping their orders on time and in full. If you are shipping items short of purchase orders, focus first on solving the issues that are causing you to short, delay, or cancel orders. You’re almost certainly facing chargebacks, penalties and lost sales as a result. Fix it. Fix stocks, fill rates and lost sales. Imagine – you already have the sale. Make sure you capture them all.
Expand available classifications. What if instead of passing price increases on to existing customers, you could get them to add more items to your inventory? What are some additional SKUs you could add to your category? Can you create a new bundle with existing and new SKUs, especially if some new items have better profit margins? The increase in income may offset the marginal loss of the increase in expenses if you have to pass on much – or all – of your assets. Think of ways to increase your footprint, value and influence with your customers.
Create a new business. This is obvious and where CEOs often start. They try to sell existing products to new customers. Yes, this can be a game that works, but try to be more creative and open about possibilities. What about moving from selling products to selling services?
As an example, one of our businesses distributes homegrown products to wholesale, large retail and D2C channels. We have leveraged our fulfillment capabilities in this existing business to offset warehousing, fulfillment and distribution costs with other companies struggling to execute effectively. This increased selling capacity not only generated additional revenue, but also created an entirely new business model, increasing our long-term growth opportunities.
Go straight. Direct-to-consumer sales can handle price fluctuations more easily than major retailers. Consider expanding online where you control cost and margin, but it’s important not to. Cut off Your retail partners. If you can convert a small percentage of the market by offering a superior product experience and value through D2C, you improve your P&L without alienating your retail partners. They also give you the best pulse on your prices, products and brand community by creating a direct connection and relationship with your consumers.
TERMS OF REVIEW. There are also indirect ways to increase income. Many businesses struggle to secure, monitor and manage freight, which is not only a huge expense, but a liability that can expose your business to large customers. Can you upgrade your supplier agreement from prepaid freight to FOB collection? Discounts, rebates and allowances are also a great place to look. Can you reduce or eliminate these programs while keeping your billing rates the same? The retailer leaves some margin, but cannot raise shelf prices for consumers and lose retail sales. This one is tricky, but it’s an example of how you can be creative to improve your business without going through price hikes.
These strategies are just the beginning. There are endless opportunities to increase income if you are willing to seek them out and innovate. You don’t have to pass on cost increases as a default, instead you can choose to take the initiative, adapt your business and expand your products and services.
These strategies to increase revenue are just the beginning. If you’re willing to commit to all of them and still feel the need to pass on spending increases to larger retail partners, stay tuned. The next section lays out another actionable tip for improving the second major component of your P&L: reducing cost of goods sold.