You are here: Home » Profit Worksheets » Pricing Proficiency Assessment

Pricing Proficiency Assessment

Figuring out how much to charge for your products and services is one of the most important decisions you have to make as a business owner. If you’re like most other owners it’s also one of your most difficult. Set them too high and you drive off customers. Set them too low and you leave a major portion of your profit on the table, costing you money you can never recover. Money that is often the difference between rousing success and barely scraping by on the edge of bankruptcy.

At an even deeper level, what you charge is a major component of the image your company presents to its customers, prospects, and the outside world. Generally speaking, higher prices tend to create an image of quality and prestige, while low prices often leave a second-rate impression.

Taking this quick assessment will let you know how close your current prices are to where they should be to earn maximum profit. Armed with this information, you’ll either know that your pricing decisions are right on, or that you’re letting large amounts of cash slip through your fingers that can never be recovered. Improved pricing skills will lead to higher profit and improved cash flow almost overnight.

Simply answer each question yes or no. Follow the directions at the end of the quiz and read your assessment.

1. Is your gross margin declining while sales volume is staying flat or rising?
Yes
No

2. Is your net income dropping?
Yes
No

3. Are your prices lower than your competitors?
Yes
No

4. Do you get a lot of comments from your customers about how good you are or how much better you are than your competitors?
Yes
No

5. Do less than 10% of your customers complain about your prices?
Yes
No

6. Have your prices stayed the same over the last year?
Yes
No

7. Do customers buy without asking for discounts?
Yes
No

8. Do your customers often buy without even asking the price?
Yes
No

9. Are you getting a lot of new customers for no apparent reason?
Yes
No

10. Have you had a sudden increase in sales volume without any action on your part?
Yes
No

11. When your customers have a problem, do they insist on you fixing the problem instead of asking for their money back?
Yes
No

12. Have your costs increased?
Yes
No

13. Do known price buyers buy from you?
Yes
No

14. Do you have a large backlog of orders?
Yes
No

15. Does your backlog exceed the industry average or your competitors’ backlogs?
Yes
No

16. Are customers buying more than they need or would normally buy?
Yes
No

17. Are you having to take more collection action?
Yes
No

18. Is your percentage of past due accounts receivable increasing?
Yes
No

19. Are the number of requests for price quotations increasing while industry volume is flat?
Yes
No

20. Is your success rate on winning bids increasing while industry volume is flat?
Yes
No

21. Does the percentage of bids you win exceed your industry market share?
Yes
No

22. Are your competitors’ sales reps starting to complain about how you do business?
Yes
No

23. Do customers quit buying from you and then come back?
Yes
No

24. Do customers tell you they can get your product somewhere else cheaper but continue buying from you?
Yes
No

25. Do your customers insist that you quote their jobs?
Yes
No

26. Do your customers ask “is this price list still in effect” or “is this quote still good”?
Yes
No

27. Do your competitors sometimes buy from you?
Yes
No

28. Are you too busy?
Yes
No

 

Now count the number of “Yes” answers:

If your score is 5 or less you’re pricing more effectively than most and little or no action is required.

If your score is between 6 and 15 you can improve your company’s profitability by learning to become a more effective pricer.

If your score is greater than 15, you’re losing a lot of money right now. Learning how to become a better pricer now will close this huge profit drain and you’ll see significant, immediate increases in both profitability and cash flow. Your company’s at risk of failing and you simply can’t afford to sit still while its bleeding cash.

Subscribe to the Fat Margins Journal
The Fat Margins Journal is a blog that contains articles of interest to business owners and others interested in maximizing profit margins. It is published weekly and is FREE. Other than occasional announcements of up-coming Fat Margins programs, no advertising is included in the Journal – only the latest tips, research findings, strategies, and similar information so that you can be alerted to new developments that you can use in your business to make it better.

You can subscribe either via email or RSS subscription. If you would like to receive the email version, simply enter your name and email address is the space provided. Of course, you can cancel at any time.

We respect your privacy – your contact information will never be disclosed to anyone. Period.

Ask Chuck
Faced with a profit margin question or problem want to make a comment? Simply use the Contact Form or call toll-free (877) 373-0710 weekdays between 9 am and 4 pm and let us know. You will receive a prompt reply.