Price is the only element in the marketing mix that brings in money 

Every business needs profits to justify its continued existence. You may have already identified the 5 W’s + H aligned to the 6 P’s in marketing for your business, but none of these contributing factors to your business model matters if you don’t make a profit.  Your profit per transaction trumps all other metrics.

Put another way.  You can only sell so many products or provide so many services at a loss before you have no money remaining to fund your operations.  When you’re out of cash, you’re out of business.  It’s a law of business reinforced in Accounting 101.

Selling anything at a loss happens for two reasons: Either the buyer does not appreciate the value being created, or they are not efficiently producing and delivering their product.  Either way, there is no exchange of value happening.  There is no need to be served or want satisfied when you lose money on a sales transaction.

The cash into your business represents your side of the exchange of value with your customers

The dollars you earn for your products and services reflect the consideration given in exchange for transferring ownership from your business to the buyer.  The nexus of every commercial transaction is the amount the buyer is willing to pay and the amount the seller is willing to accept.

Price is the only element in the marketing mix that brings in money.  The other elements of product, place, promotion, packaging, and people are the investments you make to get people to pay your price.

What you invest in your people and your means of production and distribution before you can deliver a product or service of value that someone will want to buy is your cost of doing business.  The key to profits for every business lies in being able to charge a price for your products and services greater than your costs so that each transaction generates a profit.

The simple truth is, the higher your cash inflow for your products and services, the more money you will have to cover your expenses.  When you have money left over, you have a profit.  When you don’t, you have a loss.  This is the core of business math—the success of any business is as simple as that.

The only way you can survive negative operating profits on your sales is when you have substantial cash reserves in the bank.  Otherwise, your revenues must always be higher than your expenses, or you will soon be out of business.

If you have enough cash to sustain operations for any time, you can absorb a loss on any sale.  But why would you want to?  A loss on a sales transaction indicates that you are paying your customer to do business with you.  Unless you are in the earliest stages of starting up your business, this makes no sense.

Don’t subsidize your customer purchases from you: the price you set and charge matters in every way to your business.  You show how price matters when you know what price the market will bear, and you charge a high enough price to cover your costs that earns you a profit.

How much is pricing impacting your business fitness score?

If you have shrinking profits and struggle to hold onto cash, take the “free” BusinessCPR™ Business Assessment to learn how fit your business is to compete.  Click here to take the no-obligation business fitness test.  Upon completing the business assessment, you will receive a risk profile showing how at risk your business is to suffer cash flow and profit problems over the next three years because you aren’t pricing your product and services right.