

At the center of the business operating system model I’ve developed is my Five Ps of Business Success philosophy. These five components – People, Product, Process, Pricing, and Planning – not all of which are financial, are integral to both strategic planning and day-to-day operations, and impact profitability.
Recent blogs have focused on “People,” “Product” and “Process.” Now we’ll take a look at “Pricing.”
Achieving profitability is highly dependent on pricing. You’ve determined what to sell and how to sell it. But often, business leaders don’t put in the time to determine the right pricing structure. Pricing is the most vital component for making money and is central to your company’s strategy to increase profitability.
It’s erroneous to assume you can base your pricing on what competitors charge, your gut instinct, or even on your costs to produce and provide your product or service. Your objective is pricing well such that your price tag reflects what the market will bear, yet motivates buyers to choose your product over the competition while retaining the perceived quality and value of your brand. To find that sweet spot, pricing decisions must be based on quantifiable data and a good understanding of where you are and where your sights are set in terms of profitability.
As you’re developing your pricing model, consider the following questions.
Data is crucial to optimizing your pricing structure, and that’s true in many areas of business. In his book, Traction: Get a Grip on Your Business, Gino Wickman points out that, without data, businesses are flying blind, unable to gauge where they are, where they are going, or whether they are headed in the right direction. He likens the absence of factual information on which to base decisions to “managing assumptions, subjective opinions, emotions, and egos.” So how do you get the data you need?
Wickman recommends implementing a “Scorecard” – which you’ve also heard about from me – that enables you to quantify your company’s results. The Scorecard is a time-tested tool that may also be referred to as a dashboard, measurables, or key performance indicators. The objective of the Scorecard is to provide activity-based numbers that are reviewed regularly and applied to decision-making. To create a Scorecard that fits your business, follow these steps.
Your Scorecard will become an invaluable, proactive tool that you’ll rely on for ongoing decision-making and much more. It will also help illustrate how the “Five Ps” come into play relevant to business success and profitability. Once you have 13 weeks (a full quarter) on your Scorecard, you’ll be able to see patterns and trends. And you’re creating historical data, which can be very useful, especially for long-term planning.
Using a Scorecard can create an organizational shift in that your leadership team can take a proactive approach to solving problems since you’ll have the hard data to identify not only current issues, but to predict future ones. Best of all, you always have an accurate picture of where you really are and where you’re headed.
As the former owner of a multi-million dollar company, I’m a CFO with a CEO perspective, which provides me with a unique understanding of the Five Ps of Business Success and how each contributes to a company’s overall performance. I’d welcome the opportunity to help you develop your pricing model, as well as your unique Scorecard and the confidence that comes with knowing where you are and that you’re on track to get where you want to be.