Wednesday, February 04, 2009

A Business Owner's Novel Response to the Financial Crisis

A local entrepreneur who's in the physical therapy/rehabilitation business told me about his approach to dealing with the financial crisis:

First, he gave up his lease on a large office and moved into a smaller one, cutting his overhead substantially. That's a tactic that would be at the top of anyone's list.

Then, he did something unexpected... he raised his prices. As a result, he lost some clients. But because of the lower overhead, and the higher contribution margin of the remaining customers, he's making more money.

As he said, "Basically, people who weren't valuing the service don't come anymore. The clients who are left really care about their health and are willing to invest in it. For them, the price is reasonable."

Anyone can cut costs. But cutting costs and raising prices? That's an innovative prescription.

Related post:
If you can raise prices, don't hesitate

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