Should I Raise My Prices?

Situation:

All companies will face the question at some point in time about the rates or costs associated with their goods or services. Do prices for goods and services increase over time? Usually, and with good reason. The normal fear for this price increase is that it will cost you clients. As logical as this sounds it is not true. It may cost you customers (especially ‘price-only’ shoppers) but it will never cost you true clients.

Analysis:

1. When any business first starts, prices are usually lower than standard as the company is new and wants to attract people to the business.

2. As your company matures, and as you the business owner matures, you get better at what you produce or sell.

3. Also, as the business matures, you are developing a clientele that values you, your service, and the quality of your business.

4. Remember, all of your clients were getting the product or service you provide somewhere else before you came along. How did you win their business?

5. Talk to your current clients and tell them that as the costs of you doing business have increased (which everyone understands) that you are thinking you may have to raise your prices. Get their input as to what they think. Your clients input will probably surprise you!

Solution:

If you can, phase in price increases over a period of time. Try to increase items in an incremental manner. If you are in a service-based business, send a letter (or email) to each of your clients explaining that on a certain date your hourly rate will increase. Make it very clear (i.e. increase from $75 to $100 per hour) so that they can calculate the increased costs of doing business with you. On an individual basis, contact your accounts and go over the value you have brought to them over the course of your working relationship.

You will lose some business when you raise your rates. It is human nature to react this way. Consider the people who you do lose. Were they really the type of clients you wanted or were they taking up 90% of your time on matters that stopped you from going after more and better business? Since you did raise your rates, you are now working in a higher category of clients that know the value of what you produce and bring to the table. Do not forget that as you mature in your business you are becoming more valuable to the businesses, clients, and people who need your goods or services.

Make sure you can weather the storm of the transition as some customers fall off and some clients are added. Also, make sure you are not pricing yourself out of the market. Raising prices to make a decent living and margins is one thing. Raising prices to gauge the public is another, and it is illegal.

Are you faced with this question? If so, how are you dealing with it… or have you? Have you lost clients due to a rate increase or become more profitable? Share your story with us! And if you need someone to help you through the process, and grow your business without losing it, contact ASBC today!

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