Pricing is one of the most critical aspects of running a successful business, yet it’s often misunderstood. Many businesses on the Gold Coast undervalue their products or services, risking long-term viability. Most businesses think they might also lose clients if they put up their prices. New Zealand has actually recently tripled its Tourist tax and they won’t lose clients, because a lot of their goods and services are price resistant.
A good example is a local coffee shop I frequented regularly, which has recently closed its doors as rent went up and clients were coming in ONLY buying a single coffee nothing else – up-selling does not work in a cost of living crisis unfortunately. In Australia, coffee prices range between $4 and $7 – well below what’s needed to cover actual costs. For instance, a single cup of coffee has a variable cost of $2.50 for materials, but when you add $5 for wages, $5 for overheads and $3 for profit, the actual cost should be closer to $15. Without proper pricing, even a steady flow of customers won’t sustain the business, as we saw with our local café closing.
Another recent example of price rises includes the airlines, Australia Post and housing which has gone up from 30 to 80 percent in recent times.
Evaluating your Prices Based on Unique Costs, Risk and Goals
Customers consider several factors when evaluating price: brand reliability, quality of customer service, location convenience and your ability to connect with them. While these elements add value, they don’t justify under-pricing. Setting prices based on “market norms” is an outdated concept nowadays. Instead, businesses should focus on costs, risks and profit goals unique to their own business.
At Master Accounting, we encourage businesses to adopt a simple formula: cost multiplied by 2, 3, or even 4, depending on the risk and industry. Price increases might initially trigger complaints, but consistency and transparency win in the long run. Airlines, housing markets, and even government services have demonstrated that customers adjust to higher prices if the value is clear.
If your business struggles with pricing, let us help. At Master Accounting, we’ll work with you to develop a strategy that reflects your real costs while maximising profit. Together, we can ensure your business thrives, even in challenging markets.
So, if you’re in need of reliable, friendly, and professional Gold Coast Accountants, come and discover why Master Accounting is the right choice for you. Let us take the stress out of your finances!