All businesses need to increase prices in order to adjust to the market, stay competitive, and make sure the business is consistently making a profit. But how do you know when it is the right time for a price increase, and how do you do it without losing customers?
If you’re wondering if you should raise your rates, here are four signs that now is the right time.
1. Demand Keeps Increasing
Having more work than you can handle is a sign that you are in a great position to raise your rates. Especially when it means that raising your rates translates into making more money by doing less work.
2. Business Costs Keep Increasing
Every business is subject to the increasing costs of staying in business. Your rent may increase; good employees come at a cost and your overhead expenses usually don’t stay static for the long term. In order to stay in business, a combination of cutting costs and raising rates is often necessary.
3. The Market Gives You the Go Ahead
Successful business owners track what’s happening in the market to make sure the business is staying relevant and that there is a growing demand for the products and services offered. Knowing what’s happening in the market can tell you when you might need to change things up, as well as when the market can handle a rate increase.
4. You Haven’t Raised Prices in a Long Time
There’s no rule that you need to raise your rates every year as standard practice, but if it’s been a while since you have, it’s probably time to at least explore the idea. If it’s been a very long time since you had a price increase, you don’t need make up for lost time with a massive adjustment. But, depending on your business, starting a small and consistent increase schedule may make a lot of sense.
So you know you are due for a price increase. How do you do it without losing customers?
1. Conduct Market Research
Do you know what your competitors charge? Do you know what market share you hold in comparison to those competitors? Do you know what makes your products and services unique? Doing this type of research will tell you when an increase is in order while giving you the facts you need to explain the increase to existing customers.
2. Start Small
Deciding to raise your rates doesn’t need to happen in one fell swoop. Consider testing new rates with new clients to see what the response is. You can also start with raising the price of some products and services. Approaching it incrementally can help both you and your customers ease into your new pricing structure.
3. Make Sure You Communicate Changes
The key to raising your rates successfully without losing your existing customers is keeping the lines of communication open. Springing a price increase on your customers without any warning is not a good idea. In fact, your customers are more likely to understand your decision to raise rates if you take time to explain the reasoning behind your decision while giving them time to adjust to the increase.
Raising your rates can be a tricky prospect, especially when you fear losing customers in the process. Following these tips will help you get to the price point you want while continuing to grow your business.