Is it time to raise your prices?
It’s no secret the costs of running a business are rising. If you’ve been absorbing inflation from your suppliers without considering what you’re charging for your own products and services, it could be time to consider a price rise.
When is the right time for a price increase?
To determine if the time is right to increase your prices, ask yourself these questions:
- Are you struggling to keep up with demand?
- Have you recently received media coverage that has dramatically increased your customer base?
- Have your operating costs increased?
- Do you have, or are you trying to develop, an upscale image?
- Has it been a while since your last price increase?
- If the answer is yes to any of these questions, it’s time to consider charging more for what you sell. At some point, prices go up; that’s just what they do. As long as your customers aren’t caught off guard, or left to wonder whether they’re getting increased value for their money, it can be done successfully.
With the right plan at the right time, a price increase can be a great way to add new revenue to your business and help maintain a healthy cash flow.
Top tips to planning your price increase
If you want to raise rates, but you are nervous about possible backlash from your customers, consider reframing what you are selling. That is, change the products and services to justify a price increase.
- Add free features. For example, a dry cleaner might add free delivery, a copywriter might build in more rounds of revisions, and a financial adviser or ad agency might offer an annual account review and status report. As long as you can provide these additional services for less than the price increase, you could be better off financially.
- Bundle your products and services. By pairing particular products or services, you could charge a higher price. For example, a landscaper might add leaf raking to their grass-cutting services and then charge a premium for a comprehensive package. A hairstylist might bundle a haircut and treatment for a higher fee than just a haircut. As long as you increase total profits when you combine products and services, you will earn more money for your time.
- Add new products and services. “When you roll out new offerings, take the opportunity to up your prices across the board. For example, a website designer might announce new graphic design and hosting services when adjusting all service rates. A cupcake bakery might announce the addition of cookies, cakes and breakfast pastries to the menu, and update cupcake prices at the same time.
- If your customers are fully informed regarding the changes, they are likely to be more understanding and willing to accept them. To be fully transparent, publish your price increases on your website and direct your customers to any new terms and conditions. Don’t pressure your customers to commit to anything. If you allow them to make an informed decision, they are more likely to remain loyal customers.