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Behaviors Affect Revenue

Updated: Sep 13, 2022

When we think of maximizing our profits, many business owners go straight to looking at expenses and try to discover ways to minimize them in order to maximize profit. Increasing revenues is also a way to maximize profits, and many business owners think "If I raise my prices, that will increase revenue" or "If I can sell to more people, that will increase my revenue!" But I am here to tell you that what may be most important to affect revenue - is your behavior.

From my perspective, Money has always been a manifestation of emotion. Emotion drives behavior, and behavior results in real-world consequences. So what drives our emotions? Beliefs drive our emotions. And as stated above, many business owners believe that raising prices or selling to more people will increase revenues. And while that obviously can increase revenues, it can also lead to a loss of revenues. If your logic isn't accurate, then the beliefs you have can be negatively affecting your ability to raise revenues. This article discusses 4 inter-related behavior-based revenue concepts that you can apply to your own business and help you clear up some of the beliefs you have about these concepts and improve your revenue earning ability.

Pricing We will start with pricing. Fundamentally - we want to price our product or service to cover our direct and indirect costs, with a reasonable markup so that we earn a profit. Figuring out these costs can be relatively easy, but costs + markup is only part of the equation. Your markup needs to be in harmony with your targeted consumer's willingness to pay, and this should also be congruent to as close a degree as possible to the value your product or service provides your customers. For example, if you are a thrift store, you aren't going to price your items as if they are brand new from a department store. This is an easy illustration, but it is common for businesses to price according to their own revenue needs, rather than by a balanced formula that incorporates the 4 concepts, and so they wonder why no one wants to pay the prices they have set. This concept is inter-related to the next described concepts and will be explained further, in "Targeted Consumer".

Targeted Consumer

Your product or Service should align with the needs and values of those you are directing it towards. You will never find success marketing a television to an Amish Community, for example. No matter how low you price the televisions, you will not earn any revenue targeting this demographic. And we don't need to explain how lowering your price eventually just bankrupts you, right? If they're not buying what you're selling, it isn't going to go anywhere. Again, this illustration paints the obvious, but in what ways are you possibly targeting the wrong demographic? You will find the most success by adopting behaviors that incorporate the values and needs of your customers with those of your own in a harmonious way. You can't expect Amish to purchase televisions, so align your thinking and set pricing accordingly. This concept is inter-related to the next: Consumer Expectations and Your Values.

Consumer Expectations and Your Values

In many cases, the end consumer has Caviar Dreams on a Beer Budget. It's human nature to want to get the most we can for the least amount of money. However, as a business owner, you can not let the consumer's desires drive your pricing. Set clear expectations upfront and do not compromise on your values to meet expectations that don't align with your product or service offering. Pivoting or adapting on either side (Business or consumer) should be mutually beneficial. By "pivoting by the consumer" I mean a client paying more than they expected, or "pivoting by the business" meaning pricing lower than expected or providing more product than expected. If either of these occurs, it should be mutually beneficial in some way, or it should not be allowed to progress. A client should see an increase in benefit at a higher price, and a business should see a beneficial increase in business success if taking on new jobs/product offerings to please a customer. If something feels uneasy after you (the consumer or business) have given it thoughtful consideration, do not go through with pivoting to please the other party. That is your gut telling you that you're not prepared to move forward and that you need to look elsewhere. Taking on an expectation solely to not upset the other party at that moment will lead to a loss in the future, for a variety of reasons. 1. You will be too busy to take the business on that you set out to in the first place, 2. You will not do as good of a job as you would like to which may lead to not as great of a finished product 3. You may have bitten off so much more than you could chew that you actually choke! And this leads to the final concept of Scarcity Mentality & Not Investing in "Good" Expenses.

Scarcity Mentality & Not Investing in "Good" Expenses

They say "Spend Money to Make Money". But you need to spend it in the right places. Assuming the expansion is something you want, then not spending money on skilled labor so that you can match demand or fill a gap for the new expansion is a behavior that will lead to lost opportunity and lost revenue. Not investing in technologies that will provide efficiency in your production will lead to a loss in revenue. Even forgoing travel can lead to lost revenues, because going to an educational event, or a vacation to clear your head to allow new ideas to come to you and build on, can lead to lost revenue. One trap many business owners fall into is the scarcity mentality. There are only so many earnings coming in and they need to go here or there to pay for this or that. You get stuck in the constant cash flow crunch and you don't develop ideas. You don't plan for growth. You don't map out a plan. One behavior you can implement to shed the scarcity mentality is to do a forecast of "What would this look like if (I bought this software, I went to that conference, I paid for that training for my employee)"

These are things we all eventually come to realize and work on in our businesses. As time goes on, these things become more and more of an "Aha!" moment. But if you begin thinking about them now, I can help you flesh out these concepts and consider how these general ideas fit into your own business. Give us a call to consult about it! We'd love to hear your ideas!

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