There comes a time at every type of business when a price adjustment is necessary. Most businesses do not like to raise prices but in fact, it is just part of doing business over time. Keeping pricing the same for long periods of time can have a negative effect on your bottom line and your cash flow. If you want to stay in business and stay profitable, you will need to adjust your pricing from time to time.
For many types of businesses, raising prices can be a little bit stressful because you don’t know how your customers will react. For other types of businesses, it can be just a way of
doing business. If the market dictates what your cost of goods are, then you have no choice but to have pricing go up and down at times. In fact, there are some types of business such as certain distribution companies that adjust prices daily. And remember that daily catch sign at your local seafood restaurant? Pricing fluctuates in business and you need to get comfortable with adjusting pricing.
As a collection agency that works with small business, we see a couple things that hurt a business. First is not paying attention to cash coming in from receivables. Whatever you are charging, you need to make sure your customers are paying on time and for the services you have provided them. But the second is not giving the proper attention to sound pricing. If your business is hurting to make a healthy profit, it’s time to review all your pricing.
No need to apologize:
There really is no reason for you to apologize for raising your prices. If your costs are going up and you continue to provide your customers with what they come to you for, they should understand. If your business fails to meet your obligations with your customers and services goes downhill, then you might have some explaining to do. But in general, if your customers like what you are doing for them, there is no need to say sorry. Don’t try and sneak a price increase under the radar. You’ll will still need to explain some, but don’t feel like you need to write out an apology letter. And make sure everyone that deals with your customers understands why the prices have increased as well as how to explain that to your customers.
We know this is not always possible but to the best of your ability, try to see what others in your industry are charging. If you belong to industry associations or trade groups, you may be able to get some feedback from others in your field. Sometimes it’s a simple as having someone call your competition posing as a potential customer. In many cases, an industry will have an accepted price range that you can try to follow.
The customer experience:
If you need to raise prices, make sure you are reviewing the customer experience at the same time. If you are raising prices and there is a question about the level of service your customers are receiving, make sure you address that before adjusting prices. You don’t want to hear customers complaining that your service or level of work quality is less than they need from you after you raise their prices. If you have not addressed basic service elements within your company, make those changes before adjusting pricing.
Create new options:
Not all of your faithful customers are going to rejoice over your price increase. For whatever reason, they may need to stick to what they are currently paying you. In order to mitigate the risk of losing any of these customers, try creating newer levels or packages that allow you to keep these customers that might leave over a price increase. Be careful to include the most important aspects of what your customers expect while keeping your costs in mind. In many cases, consumers like choice and may even embrace other options you lay out in front of them.
Rip the band aid off:
When it comes right down to it, you need to make a decision if you are going to stay profitable and stay in business. Not everyone is going to embrace your new pricing and you need understand this reality. If you have made the decision to raise prices and you have done all your due diligence, it’s time to make it happen. By nature, many of us procrastinate on so many things in life and in business. We worry about everything and what could go wrong. But there comes a point when you need to do the right thing for the business. Be ready for a little backlash and also be prepared to explain your decision.
Don’t just raise prices for the sake of making more money. And don’t raise prices to see how much you can get away with. Raise your prices so you can stay in business and take care of all your customers. Most people do understand that the only way a business stays in operation is to be profitable. And as a collection agency, we understand profits because lack of cash flow is a major setback for any business.
If it’s time to raise prices, do your homework, be prepared to explain and then carry out your price increase.