I have, like most others being paying attention to the Labelling problem with the Beef / Horse Scandal in Europe since December. Two major brands made statements that their prices had not increased in 4 years, even with inflation, something has to give, it has become evident that the quality of the produce has been the deciding factor.
Returning to your business, have you increased your prices recently, or have you kept them flat and suffered a reduction product quality, gained better deals from your suppliers, adjusted your baseline figures or just been squeezed in the middle. Have you picked a sales price on the basis of market forces and demand, now collapsed with the economic climate.
There are lots of reasons to review and increase your prices on a regular interval. Many start-ups find it difficult how to approach this topic, but in the business world it is fairly normal that prices or fees increase or change.
Sales prices, if you are up front with your clients, and give them advance warning of a price increase, negotations should be straight forward. If they value your custom, their customers demand your product, you have a reasonable hand to conduct these negotations. Sales are relationship driven, people in business want to be able to trust their suppliers. Give them reasonable notice, so that they can make a choice.
An easy option is to gain additional clients, and leverage these for your old clients
What is your reason to raise your price?
- You don’t need to have a reason! But your clients might want to know.
- Simple, because you want to earn more (but be aware that if you charge too much your profitability will actually go down! Becoming more efficient and create more in a shorter period of time might actually have a similar effect on your longer term profitability as raising your prices)
- Due to the current economic conditions and annual inflation everybody is increasing their prices. Your material (for example the price of gold!) or travel costs might have increased dramatically and need to be carried over (more) to the client. January is normally a month when companies increase their price.
- You want to reposition yourself or work with a different target market that enables you to charge more.
- You are busy (or not) and overbooked, but especially want to work less hours but earn the same or a higher annual salary.
- You have increased your credibility, done more training, got more experience, have improved your brand.
How to introduce new prices?
- Firstly, as said above, let your existing clients know in advance.
- It is far easier to increase your prices if you provide a service than a product, as they are less comparable with each other. In fact, if you provide a service you might not even state your prices, as you want people to contact you to discuss their specific requirements and provide a specific quote. Unless your service is a very specific programme with specific features you will not need to provide a fixed price.
- If you increase your prices of your product or your hourly rate then do this by a percentage, and introduce these in the first instance to new clients. If you want to you can give a reason, but you don’t need to – be confident about it that you are worth it!
- If you introduce new services or products it is easier to introduce them at a higher rate from the beginning. Discount older stock so that there is less comparability, which will decrease the chances of somebody asking about your price change.
- Be confident about your work, the value that you add to that specific client, and you will be able to charge the price that you are worth!