Pricing is one of the most critical aspects of running a successful business, yet it’s often misunderstood. Many businesses undervalue their products or services, risking long-term viability. At Accountants and More, we help businesses establish pricing strategies that not only reflect true costs but also drive sustainable profit.
A prime example of poor pricing strategy can be seen in the coffee shop industry. In Australia, coffee prices range between $4 and $7 – well below what’s needed to cover costs. For instance, a single cup of coffee has a variable cost of $2.50 for materials, but when you add $5 for wages, $5 for overheads and $3 for profit, the actual cost should be closer to $15. Without proper pricing, even a steady flow of customers won’t sustain the business, as we saw with a local café that recently closed due to rising rents and low-margin sales. On the other side of the coin, New Zealand has actually recently tripled its Tourist tax and they won’t lose clients because a lot of their goods and services are price resistant.
Another recent example of price rises includes the airlines, Australia Post and housing which has gone up from 30 to 80 percent in recent times.
Evaluating your Prices Based on Unique Costs, Risk and Goals
Customers consider several factors when evaluating price: brand reliability, quality of customer service, location convenience and your ability to connect with them. While these elements add value, they don’t justify under-pricing. Setting prices based on “market norms” is an outdated concept nowadays. Instead, businesses should focus on their unique costs, risks, and profit goals to achieve success with their business.
At Accountants and More, we encourage businesses to adopt a simple formula: cost multiplied by 2, 3, or even 4, depending on the risk and industry. Price increases might initially trigger complaints, but consistency and transparency win in the long run. Airlines, housing markets, and even government services have demonstrated that customers adjust to higher prices if the value is clear.
If your business struggles with pricing, let us help. At Accountants and More, we’ll work with you to develop a strategy that reflects your real costs while maximising profit. Together, we can ensure your business thrives, even in challenging markets.
So, if you’re in need of reliable, friendly, and professional team of accountants, come and discover why Accountants and More is the right choice for you. Let us take the stress out of your finances!