My first MONEY exchange for services rendered was when I was 10 years of age. I mowed the lawn for a person who had a want and was willing to pay and I was paid to do it. I thought I was in business at that moment but I was not.
I had a very limited view of business at the age of 10. I was however, in a value-added agreed exchange transaction (the art of the deal).
1. The elderly woman who wanted her lawn mowed got what she wanted, and;
2. I got the 50 cents I wanted.
Seems simple enough and it was both innocent and simple. The real issue is that business is becoming more and more complex. Complexities are there because of:
1.Accounting, finance, trading terms, pricing
2.Legal/Agreements around trading terms, buying, selling. Really, agreements are the new oil of every economy (A story for another time).
3.The ability to Train/Educate the process of any business….
Creating wealth with a cycle of a repeating cycle of a business transaction,
Combined with flow created by…..
4.Branding, words used, icons created, colours used
5.Marketing outward = promotion of services and products
6.Selling of products or services….
All being measured by using WORDS/NUMBERS
Leading and lagging indicators of success
OVER TIME
WORDS/NUMBERS/SYMBOLS/FOCUS
Every level being described above has both into “Me” and out to “You” actions. It gets to a moment of overload of thoughts and actions that create inertia in most individuals. Overload is always a moment of retooling and increasing capacities. Humans are the most beautiful design of the Universe and are designed to able to:
1. Experiment
2. Experience
3. Aggregate the experience (feedback)
4. Re-aggregate into know-how (debrief)
5. Create new thoughts with new human capacity
6. Most importantly, Evolve into the new cycle of the same process.
The point of it all….at the age of ten, my wants were totally different from today. I could not mow the lawn for 50 cents today. The elderly woman could find it hard to employ a ten year old boy to mow the lawn. I’m not the same person I was when I was 10. I have so many more responsibilities that must be considered in any transaction; the world is far more complex. Today, before mowing the lawn I must consider:
1. My licence to trade in mowing lawns
2. The type of equipment I would use to mow the lawn
3. Insurances for many reasons
6. The amount of profit that is required on each job that is aggregated to a daily, weekly, monthly, yearly proposition. How much profit is required for a viable to sustainable business to look after “ME” “WE” “YOU” “OTHERS
In business today, it is an extremely inclusive matter. Governments, Banks, and large Corporations have seen to that. Combined these with all the above, it is now a serious consideration of:
1. Time…. When does the pricing cycle start?
2. Timing… When is a sale made? When do I get paid? And, When will a repeat sale happen?
3. Sequencing….. Outbound to inbound actions must be thought about for pricing to be accurate.
4. Lag….. How long is there between any elements being considered in a pricing policy?
Yes….. life is easy when you are 10 and someone else is taking care of most of my living costs and expenses……. Thank you Mums and Dads for taking care of the children whilst the human process of learning is taking place.
The Great Spirit for some reason did not give “ME” a manual to understand all of what I’m writing about. As a student in the school system, I was an outright pain in the bottom when I was in any schools. Please forgive “ME” for that….as a kid, I didn’t know any better. I’m very lucky that I have had the support of other individuals who took their time to educate me to where I’m at today.
In terms of pricing, I have had many lessons; mostly in the difference between the ART of pricing, which is always the perception of Value in the customers mind and the SCIENCE of pricing, which is the design to have profit left over to continue to be in business for all the tomorrows.
Pricing for me always starts with the following thoughts:
1. How many levels of profit are wanted to complete any transaction?
a. Manufacturer
b. Wholesaler
c. Retailer
2. Is my product a….
a. Physical product (widget)?
b. A service (eg: law, accounting)?
c. Or both ( eg: banking and MONEY)?
3. Is the product or service a….
a. High volume, low margin thought?
b. Low volume, high margin thought?
c. Or is there a mixture of both?
To give you an idea, I have had to work out a pricelist for 8 levels of profit distribution. To do that, the manufacturing was R8 per unit and the retailer sell price was R15.00, or a multiplier of 1,875 from manufacturer to end-user buyer.
Now consider that the manufacturer has to make a profit on R8 per unit. So in other words, almost certainly, they will have to produce the product fully packaged and ready for market at 40 cents per unit, and even then, the freight cost must be considered. This is a high volume, low margin deal. In other words, millions of units must be sold.
At the retail level at R15.00, in relative terms, the retail sale is low volume, high margin sale.
This is a small example of what goes on. Next week, I will take the time to show a pricing model I have used in supporting business to make decisions on how to set the price. This week has been a hard week for me!!!!!
Sales may well be the life blood of a business……
Pricing determines how you live and how long your business stays alive.
As always have a great week.
SABEF Struggledork out!
Thank YOU for allowing me to share the best part of “ME”
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