When Should You Increase Your Prices?
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While from the outside, it might seem easy for business owners to raise their prices whenever they want, the reality is quite different.
If your business hasn’t been around for long, like many entrepreneurs before you, you may be experiencing imposter syndrome.
And this can make raising your prices tricky!
Yet, if you want your business to thrive and last, you need an effective pricing strategy.
So, to help you nail down your pricing, here are three signs you’re undercharging your clients and should raise your prices right away.
3 Tips To Increasing Your Business Prices
You’re Constantly Under The Pump
If your workload is so heavy you can barely take a break during the day or, worse, have to work seven days a week, it’s time to raise your prices. Sure, you’ll lose some clients, but you’ll keep those who value your work and will, therefore, be ready to spend more on your products or services. And losing clients in this scenario is a blessing in disguise. Why? Because working with fewer clients for a high price tag allows you to earn the same if not more as you were before while working fewer hours!
For instance, let’s say you own a cleaning business and were previously charging $25 an hour for your cleaning services. To earn $1,000 a week, you had to work 40 hours a week. Now, let’s imagine you decide to increase your prices to match the industry average and charge your clients $35. To make the same amount of money, you now only need to work 28 hours a week.
You can use this strategy to not only cut down on your work hours, but to also give you the time to grow your business and find more clients who are willing to pay you more for your product or service. In the scenario above, if you were happy to continue working 40 hours a week, and found a few more clients who were happy to pay you $35 an hour, your weekly revenue would go from $1,000 to $1,400 just like that!
If this sounds like you, on top of increasing your pricing you should also look into ways to run your business more efficiently.
You Can’t Pay Your Bills
If your business is doing well, you have a constant stream of new clients and are keeping existing clients happy but can’t seem to get ahead financially, you need to raise your prices. While this could come down to cash flow mismanagement or underestimating the risks in being a business owner, it could also be because your income isn’t high enough compared to your outlay. Perhaps you hadn’t considered all of your business and personal expenses when originally setting your prices. Or perhaps your expenses have increased as your business grew, and you need more cash.
Now, you might love helping your customers and are afraid that some of them won’t be able to afford your new pricing. But remember that you need to make money from your business and, if not a huge profit, at the very least, you should be able to pay your bills!
Your Customers Tell You Your Pricing Is Low
If you’ve received feedback from customers raving about your services or products and how inexpensive they are, it’s definitely time to increase your prices. Sure, you might think that having low prices will attract more clients. But the reality is that you could be creating the exact opposite effect, driving potential customers away. That’s because the human mind tends to associate value with price, and potential customers could very well wonder what the catch is with your offer.
As the saying goes, if it’s too good to be true, it probably is. Even if you’re authentically offering a great service for a low price, you could deter qualified prospects by pricing yourself too low.
Include Business Insurance When Setting Up Your Pricing
Setting up your pricing typically involves working out your expenses and adding your margin. Now, business insurance isn’t the first expense business owners usually think about when working out how much they need to pay their bills and live every month. Yet, it's a critical tool to protect your business and your financial assets against costly legal action.
To find the best policy cover for your needs, jump onto our instant quote generator, where you can get an estimate on market-leading insurance in seconds. Simply enter your occupation and expected revenue to get started.