Stay in business long enough and you’re going to have to deal with raising your prices at some time or another. After all, if you don’t, your profits will be eaten up by your increased costs, which means that you’ll be making less even though your bills are likely higher than ever.
While some small business owners seem to have no problem raising rates for their goods and services, others struggle with how their customers will likely respond, causing them to not want to raise their prices at all for fear of the impact it may have on their business overall. That was me.
I knew that others in my field with the same qualifications were making more than I was, but I dreaded contacting my loyal clients and asking for more money for my services. I felt almost guilty for wanting to earn a decent wage for my content services. I didn’t want to become filthy rich by charging astronomical (and unreasonable) prices, but I was tired of putting in 12 and 16 hour days and barely cutting my bills.
So, I set out to find out the best way to raise my prices without losing the clients that I wanted to keep working for. What I learned helped me increase my price structure, and I am fortunate enough to report that I did not lose any of my regular, weekly clients. What did I do that can hopefully provide you the same positive results?
I followed these five guidelines:
- Give your customers notice. Raise your prices without first telling your long-term, loyal customers and it might really hurt your relationship, possibly causing them to no longer want to do business with you. However, when you tell them before you do it, it gives them time to plan for and budget in the increase. I notified my regular, weekly clients that my rates were going up 30 days beforehand to give them adequate time to prepare financially.
- Be careful how you break the news. In studying business ethics, I learned that when delivering news that may not be taken well, it is best to use the inductive approach. This requires giving minor details before actually saying that you’re going to increase your prices and it allows you to approach the issue from a position of positivity and keeps them off the defensive, which generally gets a better response. For instance, one detail you may want to offer is your reason for the increase, which leads us to the next point:
- Share your reasons for the increase. Most everyone understands that expenses go up annually, so if this is the reason for your increase, you may want to share this. Your customers will likely understand, since they face the same issues. This way, even if they aren’t happy with paying more, they at least know why it is necessary, which sometimes makes it easier to take.
- Schedule an increase over time. If your prices are way below what they should be, raising them all at once may not have the best effect when it comes to customer retention. Therefore, you may be better off by coming up with a schedule that allows you to increase them slowly over time, minimizing the immediate impact on your consumers.
- Revisit your pricing regularly. Once you have your pricing where you want it, make sure you revisit it regularly, adjusting your rates if necessary. This will help you stay current with the economy without giving your clients sticker shock with huge price jumps.
For more tips on how to raise your prices without it hurting your small business, the U.S. Small Business Administration has a few that may also help. For instance, one is to create a tiered pricing structure. As an example, if you own a pizzeria, you may want to charge $10 for a small pizza with one item, $12 for two items, and $14 for three items. That way, “the decision to spend more is ultimately in the hands of your customer.”
If you’d like to share how you raised your prices without having too many negative consequences, feel free to comment below. Your ideas may just help other small business owners do the same!