How much? What’s your price? How much does it cost? What will this cost? What’s the best price you can give me?

We hear these questions from buyers every day.

Rather than tossing out an off-the-cuff answer, it’s important to take a little time to think about it. You want the stated price to be appropriate not only for the quantity ordered, but for the customer and the situation as well.

The first issue to consider is whether the customer is profitable for you to serve. In other words, how much net profit (not gross margin) do you earn per year working with this customer? And how does this profitability level compare with other similar customers?

You have unprofitable customers. I know this because every single business I’ve ever worked with does.

Ideally, every salesperson should know the profitability of his or her key customers – and take that profitability into account when pricing.

The best way to improve your profitability is to stop offering your products and services at prices that are too low. Now, you might be thinking you’ll lose business by raising your prices – and maybe that’s true. But no-profit and low-profit business is precisely the sort of business you want to be losing!