Tourism and hospitality businesses affected by the current economic challenges may be tempted to discount prices to continue to attract the same or higher numbers of customers.

In addition to the cost-of-living crisis affecting customer spending habits, business costs including staffing, energy bills, laundry, food and other supplier costs will have increased dramatically, affecting profit margins.

Understanding and improving the profitability of a business is even more important during challenging times, and family-run chartered accountants, tax and business advisors Lamont Pridmore recommend that all business owners regularly review their economic model and pricing strategies.

The award-winning firm has offices across Cumbria and North Lancashire. It is also a tourism and hospitality specialist, working with a wide range of businesses in the industry and collaborating with Cumbria Tourism as one of its most established Strategic Partners.

Chief executive Graham Lamont said: “Many businesses don’t achieve acceptable profit levels because they are reluctant to charge the right price for their goods and services.

"Yet studies show that price is often not the main influencing factor when deciding on a purchase.

“Trying to hold or win market share on the basis of price discounting only works as a competition strategy where you have a definite cost advantage - either fixed or variable - over your competitors, and your product or service is one where customers are very price sensitive.

“The price profit model can enable you to become more courageous in your pricing decisions, and can clearly set out the increase in sales required to compensate for a discounting policy. For example, if your gross margin is 60 per cent and you reduce price by 10 per cent, sales must increase by 20 per cent just to maintain your starting profit.

“On the other hand, if you increase prices by 10 per cent with a 60 per cent margin, sales would have to decline by 14 per cent before your gross profit is reduced below its initial level.

“A profit improvement review will consider the issues affecting your business, analyse the costs and profit margins of your products and services and identify pricing strategies for profitability. It would include not only assessing the current profitability of your business, but also benchmarking your operations against others in your sector and creating an economic model of your business.

“No two businesses are the same and it’s vital to find a bespoke solution based on your individual circumstances and goals. It can be challenging to find the time and resources to focus on your business model, but time spent assessing pricing and profitability will be time well invested.

"We recommend you do this annually and if you haven’t done this in the last 12 months, the start of the new year is the perfect time.” 

To find out more visit: www.lamontpridmore.co.uk