Think about price

Vendors who price for the future benefit by having the enhanced ability to grow the business, the flexibility to pivot because of increased liquidity and gain economic protection from external forces that affect the price.

Thinking About Growth

When you think about growth think about more labor, inventory, more production capabilities and facilities, and more locations.

Providing a service or selling goods the owner of a business has a responsibility to plan for the future to become a contributing member of the community. The community takes care of the business and the business takes care of its community.

The vendor must price the services or goods sold to reflect not the current position of the enterprise but the future position of the business.

If the business has one employee, it must price its products for the possibility of three employees.

When business is booming and demand is high there two things that can hurt the business, lack of service or lack of inventory, both of these problems can be solved with an increase in the labor force.

Lack of service equals a bad experience and destroys the reputation of the brand.

Lack of inventory, basically the customer wants it and you don’t have it, sends a message the organization is unreliable.

The labor force must be big enough to provide goods and services for three times the demand but also not break the bank in the process.

Adjusting the fix cost of running the business with the potential cost of salaries for future employment.

For example, materials are 10, fixed cost are 10, and variable cost are 10 an additional cost should be added for the growth of the company by adding the salary amounts of future employees.

Let’s say the salary of one employee is, you guessed it 10 then you have that number 3X or the amount of future resources you plan to add to your business for the growth of the company.

In the end, the new price will factor the employees not hired by the business plus all other existing costs. These funds will end up in savings for those employees in the future.

It’s better to have the ability to hire more help when more help is needed than to not have the option and struggle to maintain growing demand.

Flexibility

A vendor can plan for many scenarios but the truth is, you can plan for some but not for all, and that one scenario you never saw will pop up and possibly change your business model.

Having the ability to pivot your business requires capital and patience. There capital you have the greater the patience of the vendor.

With increased liquidity, a seller can hold and keep prices consistent when sales are low maintaining the confidence of future and past buyers.

Maintaining a consistent price is one example of flexibility and another is moving to a better location for higher foot traffic.

Protection

The external environment of the marketplace can shift and change in many directions affecting demand.

Pricing for the future by factoring all costs included with doing business for 6 – 12 months and then pricing for 90-days of operating costs provides the seller time and protection.

With increased time the seller can understand and think about the external conditions of the marketplace and consider all options carefully and not rushed.

During a price war a vendor can afford loss in sales and still maintain a premium price.

Remember don’t price for now poce for the future.