Is Cash Pouring In Or is It Just A Trickle?

Growing and scaling

As many of you who read my blog last week know I was on holiday in Fiji, a place that I can relax like no other. I love the place.

So while I was relaxing and observing life I asked the question which is the nuts and bolts of my blog this week.

  • What products or services are losing you cash?
  • When was the last time you asked your customers about what you charge?

You see whilst relaxing and observing, it was interesting to see how holiday resorts extract cash from your wallet. Or credit card. Or simply to get your room number so you can have your heart attack when you check out. Our Resort had a full time heart surgeon at reception whose job was to assess all guests just before they got their final bill.

Day trips and tours are at a premium. Taxi fares suggest you should be in a Rolls Royce but in reality you would be safer traveling in a plane built by the Wright Brothers in 1903.

Some things are extremely cheap and some are ridiculously expensive. It did not make sense and it looked as if the pricing was organised by someone with a mental age of five. My parrot could have done a better job. I then proceeded to investigate this in extreme detail. Well to be honest, I spent a few minutes. What I calculated was astonishing.

The Kids' Club

There was a kids' club which was free for all children aged 4 to 12. This is not just a place where they put a few colouring pencils and ask the kids to make some paper planes. There was serious playground, guided tours, movie nights and discos. All for free.

It gets better. Staff would look after my kids so my wife and I could have some  morning and afternoon fun without worrying about them.

But then we saw there was some t-shirt painting in other part of the resort and we thought this would be fun for the kids. The price? $45 for a cheap t-shirt that would take them about 10 minutes to stencil. We said some pleasantries, looked very interested and then moved along. Two kids meant $90! No way. And I wasn't the only one. At the end of the day I asked the lady how many painted t-shirt were sold. Surprise! Surprise! There were less than 10. And our resort was full of kids.

Very quickly, I worked out that what they should be doing is charging a small fee for the kids' club – even a minor fee like $5 per child for each session ($10 for the day) and reduce the prices for the painted t-shirts to say $15. I would have happily paid $10 for each child to be looked after all day and I would have been happy to pay $30 for the t-shirts. That would have got the resort $50. Multiply this over a few hundred rooms and the figures start getting a bit big. Instead they got $NIL. Even my 6 year old boy knows this is not good.

Conclusion

So here's the thing. If your prices are all wrong, all you could end up doing is upsetting your customers or at best restrict them into spending money with you which is exactly the opposite of what you want them to do. Many people we spoke to loved the kids' club and some other parts, but thought some things were just outrageous and started to ration their spending. Make everything reasonable and all of a sudden the cash could be pouring in.

So go back and look at your pricing – is it cash trickle which if changed could flow to a load of cash?  


Hitesh Mohanlal

Hitesh Mohanlal

Director at WOW! Advisors & Business Accountants

I am known as Australia’s Number 1 Business Growth Strategist (profit increase and owner lifestyle improvement specialty), and have been recognised on CNN, Fox, NBC, CBS and ABC. I am also a Chartered Accountant in the UK and Australia and have been practicing for the last 22 years. I run three businesses. I have worked with over 3,500 businesses in Australia, America, UK, Japan and Europe. I work with small to medium enterprises to improve their profits by up to a staggering 2000%


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Jef Lippiatt

Jef Lippiatt , Owner at Startup Chucktown

I agree that pricing is important both for products and services (and in combination). As you've pointed out having a nominal service fee to reduce the cost of products is a smart play. And it's always good practice to reach out for feedback from customers.