Customers profitability and its relation to your pricing and business

As a business, your aim is to profit from selling your product to customers, this is true regardless if you’re a solo founder or a billion dollar startup. 

It’s common knowledge that we should understand the customer, but we often overlook a critical aspect.

We need to consider how our cost relates to their affordability, can our customer actually afford our product, with sufficient margin.

Consider the profit margin of a Restaurant at 14% a grocery at 6% and a SaaS at 33%; its clear that the SaaS has the largest margin of dry powder, meaning selling to them would be far easier than the grocery business at 6%.

If you couple this with the size of the customer, if your product costs 50k per annum and your customer is small, that 50k could be the difference between hiring someone  or buying your solution.

This also means that for the 50k customer, any price change or upselling opportunity is going to be significantly hindered, moreover, the customer is going to expect significant value and return for their investment into purchasing your product.

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