Jim and Julie own a small manufacturing business that is to die for.

Their client base is based around high net worth individuals, who own businesses that are recession proof and where Ferrari's and Bentley's are the norm in their garages.

The quality of their work is outstanding and many clients keep telling them that they are way too cheap and should double their prices at a minimum.

Do Jim and Julie listen to their clients?

Jim had a strong religious upbringing and has been brainwashed into believing that charging what his clients are willing to pay for his outstanding skills is morally wrong. I'm not being anti religious but when the family suffers because of this approach, has difficulty putting meals on the table, is behind in it's obligations to the tax office and regularly does work at below cost ... "because they are nice people" ... beliefs such as this are difficult to reconcile.

Julie is under constant stress, she is grossly over weight and Jim is the opposite both as a result of the extreme stress they are under.

Do Julie and Jim know what the core issue is?

Conversations with Jim end up at the point where he has difficulty reconciling the hourly rate his business needs ($110) to survive with what he feels he personally should be paid ($50). "But I'm not worth $110 an hour" is his constant whine. Julie knows the issue but is hesitant to "do" the one simple thing she can do in fear of being seen to be disloyal to her husband ... assigning the correct hourly rate into the quotes and the invoices she mails out.

Do Jim and Julie have a strategy to overcome their position?

Jim has retreated back to his comfort zone he is producing lower quality, lower cost items and insisting that $60 an hour is as much as they can charge out "as our competition is importing from China".

Last month they turned over $200, 000 and I got a call from Jim saying how well they had done. When I asked how much of that was Cost of Good Sold and compared what was left to cover the monthly overheads and staff costs they lost $40,000 Jim said that was "utter bullshit"

When I explained that cash flow and turnover didn't mean profit, and that he was chasing "profitless turnover", he slammed the phone down in my ear. Julie rang me later in tears they can't pay this weeks wages.

What does the future hold?

For Jim and Julie it holds more angst and stress at best, at worst who knows.

To move into a positive position

We sat down yesterday and completed a cash flow budget on just the high quality production at realistic prices. Jim struggled to keep up his promise to stop complaining how he "wouldn't pay that much for that item".

At the end of the day meeting the current orders with zero marketing would see them in profit with all outstanding bills paid within 3 months. That still left 4 months of orders to complete, time enough to allow for Julie to roll out a contact program to reconnect with former clients and announce a new range of products.

Julie understands how to quote using their hourly rate as a minimum and a value based model as the standard. Jim agreed to "stay away from those things where he knowingly undermines his businesses potential"

The future is more positive

To be honest I'm not sure.

With Jim likely to revert to his "I'm not worthy" approach it may well turn for the worse.

My challenge is to be able to let nature to take its course and remember this is Jim and Julie's business and they have decisions to make that are theirs and theirs alone.