Getting your ducks in a row.

Planning for 2024.

You should be starting to think about your 2024 plans soon. Setting budgets, agreeing targets, and updating your strategy.

Did you know price improvement is the biggest lever you can pull to increase profits?

A sustainable increase in average selling prices can usually generate anything from 5% - 30% in increased profit margins. (Clients of PriceMaker are currently yielding an average 22% increase in net profits.)

When setting your plans and budgets for next year, don’t make the mistake of just focussing on revenue growth targets.

Revenue is a function of price + volume, so you should put as much thought and effort into setting your pricing targets as you do your sales targets.

Here are my suggestions on things you should be doing now to get ready for 2024.

1.?????? Start now

You need to be planning at least 3 months ahead of any intended change, so start now by gathering data and feedback. What’s going on with your customers and competitors? How have you fared this year with sales growth and profit targets? See my list of Dos and Don’ts for price planning.

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2.?????? Update your unit costs & pricing model

This is a given, but make sure you have the latest unit costs for each of your core products or services. Factor in an inflationary increase on top of this for next year as well. i.e. if your direct costs have risen by 8% on average this year, what assumption should you make for next year? Decide on a number (or a range of numbers) and add it in to your cost model.

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3.?????? Conduct scenario analysis

“If we increase our prices by 5%, what will happen to sales growth?” Most businesses don’t have price elasticity data on their products, so it can be hard to answer this question correctly. However, a simple workaround is to come up with 3 scenarios – best case, worst case and likely case. If you increase prices by 5%, the impact on sales growth might be:

• Best case:? +3%
• Likely case??? +1%
• Worst case:?? -10%

Make sure you calculate the impact of any of these scenarios on your gross profit margins to correctly assess the value of any planned price change. (You might be surprised!).

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4.?????? Engage your sales teams

There will be a lot of resistance from your sales teams to any planned price increases. (This might also be you if you are the main salesperson in your company!) Help them get over any fears by engaging with them early in the planning process and ensuring you give them the tools, training and confidence they need to successfully sell and justify your prices.

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5.?????? Plan your price communications campaign

If you want to make changes to your pricing with effect from 1 January 2024, then you need to be giving notice to your customers by the end of November at the latest. In which case, you really need to have your ducks in a row by October so that you can implement your customer communications in good time. See my previous article on “How to write a price increase letter”.

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6.?????? Set target prices in your 2024 budget.

Once everything has been worked through, you can now set target prices in your budget. I don’t just mean a revenue target; I mean you need to separate out sales growth and price improvement. So, if you plan to grow sales by 10% and increase prices by 5%, you will actually achieve revenue growth of 15.5%. If you don’t set price targets, you can’t measure performance!

It’s always good practice to set yourself a price target, and then ask yourself the question:

“What do we need to do to justify this price? How can we add more value to our product offering that customers will be willing to pay for?”

Need some help?? - Pricing Strategy Workshops

If you need help with any of this, I offer pricing strategy workshops to help businesses work out the best pricing strategy. If this sounds like something that would be helpful for you, then let me know.

Wishing you the best of success with your growth plans and pricing strategy.

#pricing #plans #2024 #growth #success