The dos and don’ts of increasing your prices
Have you been charging the same price for the past few years?
Are your clients telling you how amazing your work is?
If either of these are ringing bells for you, then it could be time to think about increasing your prices.
This, however, can be one of the toughest steps to take as a small business operator. In fact, even big companies are hesitant to increase their prices in case it ends up costing them in the long run.
Keeping clients on side
The main reason why boosting your prices can be tricky, is that once your clients are accustomed to paying a certain amount, it can be difficult to convince them that they should pay more.
It’s not unusual (especially for people who provide services) to start off charging relatively low fees, with the intention of increasing prices 12 months down the road to a more realistic level. In practice though, these increases aren’t introduced and the low rate becomes the norm.
Getting the balance right
The challenge facing most small business owners and entrepreneurs, is that they don’t want to upset existing loyal clients who are paying a regular fee. If you increase your fees by an extra 10, 20 or 30 percent, your clients might naturally question what they are getting for that additional amount.
It might be tempting in this situation to tell your clients that you charge a competitive rate but this can be the kiss of death. Very often, all this will do is make your clients want to shop around, because you’re telling them there are more service and product providers out there who are charging low rates.
Understanding your value
So those are some of the risks and they can be worrying and significant, but it’s important to value your efforts and services appropriately and not always to be deterred from upping your prices. As so often in business, it’s about getting the balance right.
Here are some key considerations and action points to focus on, if you’re looking to keep your clients on board as you introduce a price increase:
1. Timing is key
Timing is a crucial factor in determining whether raising your fees will be a successful manoeuvre.
You need to choose a time when your increase will have most impact and encounter least resistance. Is the beginning of the year the right time for your business, industry and client base? Or is March or September more conducive to your market?
And although we’re talking about increasing your prices, don’t forget about the right time to apply a discount. We only need to look at how retail stores have sales over the holidays, whether it’s Christmas, spring or summer and events like Black Friday and Cyber Monday, to see how different times of year open up particular opportunities.
2. Communicate the change
You should be sure to tell all your clients in advance that you are increasing your fees on a certain date. A three-month window is a fair amount of notice. So you can announce in January for a March increase.
However, your top 20 clients should receive a personal call from you to let them know this is happening. During your call make sure you explain why your prices are increasing.
Alternatively, if you have decided not to increase your prices to your existing clients, it’s a worthwhile courtesy to send them an email letting them know it’s happening, but as a valued client it will not affect them. Plus this way, if they recommend you, they will be aware that your prices have shifted.
3. Increase your value where possible
A great way to boost your prices without any backlash is to increase the value you’re offering at the same time.
For example, as a coach you may have a supplementary online programme, or run a monthly webinar, or have a one-day training course. By including one or two of these elements into your newly increased fee, you are adding to the value of your service and smoothing the road for your incoming price rises.
4. How much to raise your prices by
There are two schools of thought on this.
(a) The baby steps approach – This will involve increasing your prices by a small amount and selling your services at that price to a handful of clients. Then you would look to increase your price again by another small amount and sell your services at that price to another handful of clients. And then aim to continue doing this until you get to your ideal price point.
The benefit of this approach is that the increases aren’t so big that they feel risky. You might naturally feel more confident of increasing your prices gradually without too much danger of losing clients over the issue. And because the increase is not too big, you will feel and sound confident when discussing your new fee with your clients. Plus, existing clients might just see this as a nudge up, rather than a big increase.
The potential downside of this approach is that you might have a number of clients on different fees – so keeping a good system in place that keeps you on top of what you have charged each client is essential. This way, when the time is right to have the discussion with your client about ‘carrying on working with you’, you are fully updated on what your client has paid previously.
The other negative is that you’ll have to keep increasing your fees and letting your clients know about these changes, which may not reflect well on your brand over time. In a sense, it might look like you are not entirely in control of your business and how it’s progressing.
(b) Hike it up baby – This approach will involve increasing your price by a significant amount but with the intention of not doing so again for a couple of years.
The benefits of this approach are that you do it once, it’s seen as a very clear and decisive move, and you don’t have to go through the process of raising your prices again for an extended period of time.
The cons with this approach, are that your price hike might be seen as a quantum leap. So the increase in fee might be too large and make you feel uncomfortable when asking for it. This might have the knock on effect of making you feel and sound less confident as you broach the subject with your existing clients.
5. An alternative option
Some clients will not want to pay the increased prices you’ve decided or intended to charge, especially if you adopt the ‘hike it up baby’ strategy.
So you can help yourself out by offering an alternative option, something that takes less of your time and fits within your clients’ budgets. Depending on the work you’re involved in or services you offer, you can look to manage your time in a way that means your clients get what they need from you at lower costs, because it involves less work for you.
So if you’re a consultant, for example, you might create a monthly group call where a few of your clients have their questions answered collectively, rather than on a one-to-one basis. Such an option can work well for your clients as well as your business, especially if the fee they end up paying is lower than the fee they were paying previously.
Whatever approach you take, when you increase your prices it’s always likely that some clients will stop working with you. Sometimes it’s because the fee has become too high, other times they simply feel the increase is not justified and sometimes they feel the time is right to move on.
You mustn’t be alarmed by this this.
Clients have a shelf life with any service or product provider. They are on a journey with you up to a point and then their path continues in a different direction with a different supplier – it’s just the way it works. On the positive side, this means that you are open to the possibility of working with new people that you can help with achieving their desired outcomes.
Never be afraid to raise your prices. People will always pay for great value and exceptional experience. And they will always pay well for a service that solves their problem.
Go be a problem solver!
Let me know what you think – I’d love to hear in the comments below!