What profit margains should we be aiming for?

[shamrocker]

Hello all,

as some of you already know I deal in golf equipment. I am beginning to get quite a few orders through word of mouth and repeat custom, apparently because my products are of very good quality and at a 'remarkable low price'. I am wondering if I am undercutting myself, even though I am quite happy with my profits. I typically sell goods for around £70 (sometimes more)which cost me less than £40 to buy. I don't have many overheads to deduct, just my computer costs, internet access, stationery, etc. I would already have a computer and internet even if I wasn't trading. People are obviously very happy with the service and value for money. Should I be charging more or is it better business sense to keep doing what I am now? What profit margains do the rest of you aim for?

Cheers,

Shamrocker

[joshdhaliwal]

I'd stick with what you're doing already. One of the benefits a small business has is low overheads which allow it to compete aggressively on price against larger players - allowing your products or services to become affordable to a wider market.

By increasing the price you run the risk of possibly alienating potential customers and losing your differentiator.

[DavidHa]

I agree with josh, wait till the business takes off, then look to tier your customers based on loyalty and value.

Give long term/high value customers bigger discounts (loyalty discounts), and raise your price for smaller value orders or new clients.

A loyalty discount will then act as an incentive to buy more and a way of retaining your most valued assets.

But for now focus on growing the business to a point where this type of strategy is viable.

Stay great.


David