Is it time to Raise Your Prices?
There comes a time for every small business to raise their prices. We don’t always want to, for the sake of our customers, however in order to pay staff, overheads, and maintain and reasonable profit, raising your prices for goods or services is essential. With inflation rising at a rapid rate, unemployment at an all time low and wages rising to meet demand, have you looked at your business figures to ensure your business is is still returning a viable profit.
It is your job to keep prices fair, both for you and your customers. That means you have to charge prices that work for you and allow you to remain in business.
Here we look at key reasons you may need to raise your prices if you want to stay in business.
Your costs have grown
The thing about inflation is that everyone is going to feel the pinch – including you. If your business supplies are now more costly than before, you have to pass those costs on.
Nobody likes raising prices for their customers but at the end of the day, it’s a necessity. You have to be able to cover your costs and continue supplying your customers with the quality and efficiency they have grown to expect.
You’re too busy
If you find that you’re consistently booked 7-10 days out, it’s a sign that you’re delivering good value for money. People know your worth and are fighting for your time.
It comes down to supply and demand. Excess demand means your customers are happy with and require your service. Every business has capacity limits especially if getting staff is difficult. You have only so much capacity to meet the high demands while maintaining your high quality offering.
Whether you are a unique service or a service that is simply a necessity, the reality is that your have only a few choices
a) raise prices and provide the best service and product you can for your clients
b) cut corners and lower your quality of product or service
c) run yourself into the ground both physically and financially because you want to meet quality and demand and not raise your prices
Let’s go with “a”
When demand increases you NEED to raise prices. In raising your prices, you may lose some clients in the process, but that’s okay. You’re now attracting higher-quality clients who recognise your value and are happy to pay more for it.
Beware of getting carried away, though. This is not a reason for a cash grab. Raising prices should reflect the economic environment, competition and the quality of your product or service. If you raise your prices by too much, too fast, without adding any value, you’ll find yourself in trouble. If you run a service business, you may find that as your skills improve, you automatically provide more value for money. In this instance, raising your prices is justifiable and will be met with acceptance from happy customers.
Enough time has passed
Even without adding on more value or skills, it’s okay to raise your prices regularly. In fact, it’s recommended. A good general rule of thumb is to raise your prices by 5-10% every year and a half or so.
This may sound like a lot, but consider that the average rate of inflation falls within this bracket. If you don’t raise your rates and the cost of your supplies hasn’t gone down, you’re losing money.
Your competitors are doing it
Yes, it feels great to be able to offer your customers a fantastic deal. But don’t be the one left with rock bottom prices when your peers have all raised theirs. This translates into you working harder to earn the same amount of money.
Be aware of what’s going on in your industry and adjust. Customers judge a business based on perceived value. If you’re at the bottom of the pack price-wise, they’re likely to skip over you as a cheap and nasty offering, choosing instead a business that offers good value at a reasonable price. Price yourself accordingly to attract quality clients.
You’ve become more valuable
As you work in your field, you gain more skills, experience, and knowledge. This translates to more value. If your business is better than it was a year ago, it’s time to charge accordingly. Understand, there will be clients who do not recognise that value and will move on. They are potentially not customers who are growing with your business goals anyway. Others however will fully recognise, utilise and expand their engagement in your business offerings – benefiting from the increased quality of your service, skill set or products.
Don’t undervalue yourself. Most of the time, customers understand that you’re more skilful and are glad to pay for your extra expertise.
You’re trying to rebrand or reposition your product
There may come a time when you want to attract more high-quality, higher-paying clients.
One of the most obvious examples where you see this is in the restaurant industry. As a place becomes more sought after, you’ll notice that they change the menu to make the descriptions more detailed. Maybe a popular item will undergo a name change to make it sound fancier. and with this the price tag will go up. This is a rebranding meant to raise perceived value, and the prices along with it.
It’s just good business sense to raise your prices to meet demand, improved service/quality and rising costs. Whatever the case, make sure you do your research and review your prices often to make sure you position your business correctly. Don’t underestimate the intelligence of your customers. You want customers who value the service or product you provide. You also want to maintain and support your loyal client base with fair and competitive prices that reflect the quality of your business offerings.