Create a plan that is accurate, defendable, and capable of keeping your finances in perspective as you grow.
Pricing is quite a challenge for startups and too often, a bit of experimentation. Choosing the right price for your offer is easier once you have done the right kind of analysis. Once you have your starting price and you begin engaging your audience, you will be continuously pressured to reduce your price. Do NOT let this happen! Once you start conceding on price, your sales team will use it as a tool for closing deals and your customers will devalue your offer. Your profitability will decline and eventually, you will use price as your differentiator …which is the precursor to going out of business. We’ll teach you how to establish a defendable price that brings the profit required for growth.
When studying the price options, many factors come into play, and they vary in weight across each business. When done well, it will factor in such things as:
– Perceived value of benefits
– Type of benefits (measurable, intangible, & emotional)
– Relative comparisons in market
– Buyer risk
– Alternative spending options
– Cost of goods
– Customer acquisition costs
– Cost of doing business
– Profitability goals
– Sales compensation model
– Promotional strategies
– Direct competitive comparisons
Sound familiar? …this isn’t a forecast. It won’t win over an investor, and it won’t predict your success. Forecasting is an exercise in calculated prediction. In this area of work, your grasp of everything that precedes this will be put to the test. This is where you predict all aspects of your business. When you do it well with defendable data, your risks are dramatically lower and you march forward with confidence as you execute.
Having predictions helps you minimize assumptions, make better decisions, plan more reasonably, and measure your progress with more meaning. For those seeking investors, this exercise will play a huge role in defending your valuation and establishing credibility. Things you need to forecast include:
– Revenue & profit
– Cost of goods sold
– Operational costs
– Sales and marketing expenses
– Infrastructure costs and milestones
– Growth investment
All the activities previously discussed are comprised of a varying mix of research, best practices, theory, and assumptions. Once you have real world experience, we can begin to analyze the gaps between what you thought was true vs. the realities you are seeing. We will determine where the disconnects are and then we will fix them. For example, a common problem is that Sales talks to prospects but struggles to close the deals. There are many potential root causes to analyze, including:
– The advertising might be bringing in the wrong people
– The messaging could be off target
– The sales process may be broken
– The sales rep might not be very good or very comfortable yet
– The pricing and packaging may not be right
When we identify a root cause, we fix it by doing two things:
1) We find the reasons they occurred in the first place, and correct our understanding to avoid having those miscalculations affect you in other ways
2) We repeat some of the related activities already performed (such as requirements, positioning, pricing, etc.) to develop a new perspective with higher accuracy.
This process works at any point in your company lifecycle. Sometimes it is used to fix major problems that are obvious, and sometimes it is used to squeeze smaller refinements out of the business. The analysis tells us what the opportunities to improve look like so you can decide which ones you want to tackle and when.