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5. How to Create and Sustain Your Business Profitability with Smart Pricing

Air Date:

Jul 18, 2022


48 Min

Do You Know How Profitable your business is?

Unfortunately this isn't a question many business owners can answer. Understanding your business profitability is key to smart pricing.

And what exactly is smart pricing?

Check out the episode to find out. Enjoy the show.

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Episode Show Notes :

How to Increase your Profitability Series

In this series, we are going to cover a few key topics that are essential to helping businesses increase profitability. What we have seen from several companies that we work with and others that we have studied these ideas have really made a huge difference so we are going to share the list and then use multiple episodes to really dive into the topics.

So here is the list:

  • Smart pricing 

  • Cost-effective planning 

  • Process design

  • Outsourcing

  • Complimentary Services

  • Automation

Smart Pricing

When it comes to pricing you want to make sure that you are using what we call “Smart Pricing” approaches. In this context the word smart is not an acronym or a complicated concept, we really mean what the dictionary says about the word smart.

Merriam-Webster defines the adjective smart in three ways

  1. Quick to learn or do

  2. Showing good judgement

  3. Fresh sense

When you think about your pricing you want it to be:

  • Quick to learn or in practical terms adaptable to the reality of the situation. One of the most obvious examples of this that we all live with is Gas prices. When you think about it the price of gas is almost directly tied to its underlying cost and the price changes as the cost changes. Now when you think about how to apply this to your real world of business it may not be as easy to change your prices like gas prices change but that does not mean your prices should never change. 

    • What I recommend is that you consider the change in your underlying cost structure on a regular basis, at least once or twice a year and ask yourself do my prices need to change.

    • Establish a set time where you will review your pricing to see if a change is necessary.

  • To the second definition; showing good judgement - see this requires you to stay attuned to your customers and paying attention to what they actuailly care about. Some might call this a value pricing approach, because you are paying attention to your customers and asking yourself how much is the solution that my product or service provides worth to them. 

    • This approach does take more effort because you need to actually study your clients

    • This approach does require some judgement because there is no magic mathematical formula that will completely answer this for you

    • Some things to consider:

      • If your customers did not use your product/service what would it cost them

      • How much time does your customer gain if they used your product/service

      • If your customer had your product/service how much emotional, social or reputational benefit would this give them (for example why is a person willing to pay $2,390 for a pair of Isabel Marant shorts vs $59 for Jen7 shorts)

  • The last point is a “Fresh Sense”, when i think about this it refers to how you approach pricing and using a new or unique way to price your products or services. Some examples of a “Fresh Sense” on pricing could be:

    • Subscription model - if you a customer is willing to lock in a set schedule maybe the pricing is lower

    • Pricing matched with a referral discount - this is a great one for service based businesses, if you refer someone esle we will apply a discount to your services

    • Trial period discounts - where you offer the customer a trial period price which gives you time to prove that your product works and it also gives you some time to determine if you want to keep this person as a long term cient while getting some compensation in the process

    • Tiered pricing - where you adjust your pricing levels based on the performance of your customer/client’s results.

Overall pricing is not an exact science there are times where you need to adjust based on new relevant factors, maybe consider some non- financial factors, come up with a creative approach to offering your product or service.


  1. There is no one size fits all approach to pricing, and if you are going to get pricing down you have to be willing to invest the time to understand not only your business but the impact that your product or service has on your customers

  2. If you are going to remain profitable you have to regularly review your pricing, time changes, inflation happens, cost structures adapt so you have to have a regular process for adapting with it.

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