Raising Prices

Ha ha … I got a few emails about my last post on raising my prices. I labeled it a “funny story” because the way my customers reacted was totally unexpected. The truth was that many of my clients were in the oil and gas industry and money was flowing. The same thing may not have happened a few years later when money got tight! How much did I increase my prices? I doubled them. Several times which probably meant I wasn’t charging enough in the first place.

So what’s the reality of RAISING PRICES?

Many businesses use formulas for when and how much they should increase their prices. You can keep it simple by increasing your prices gradually every year … 5% to 15%. That should keep the costs of inflation and your Cost of Goods (COGS) covered as well as give yourself a small salary raise. If you have a price list of various packages or products ... you could raise some of them at one level, for example 5% while you raise other products at a different level.

If your loyal and long time customers say “something” … you could give them 90 days at the same price and then tell them the price will increase after that. Make sure you let them know you are doing this BECAUSE they are good and loyal customers. In the mean time all new customers pay the new prices.

You could also use price increases as a "sales tactic." For example ... let all your customers know there will be an increase in prices ... and urge them to come in to take advantage of the old lower prices. You could also ask your customers to tell their friends. Say something like, "If your friends come in before (date) and they mention your name, they will also get the old lower price. "

Avoid getting into a situation where you don’t increase prices for several years and then you are forced to go for bigger increases. Remember, this is a business and you are in it to make a living but to generate enough profits to grow your business.

START with a fair price (read the last post on perceived value) and then keep your price increases small and steady.