4 basic rules to follow before you raise your prices

Charging more money in your business: should you do it? The real question here is ‘how to raise your prices’.

Let’s face it, it’s the question we ask ourselves as business owners all the time.

From wanting to make more money, allowing ourselves more financial freedom, providing a better service, or just because you need to hire staff, raising your prices will come to the table many times throughout your career as an entrepreneur.

And while it’s completely normal to change your prices periodically (hello inflation), it must always be done the correct way.

Once you follow a few simple rules, you’ll be able to make better business decisions and have a more clear business vision, which will lead to a more organized and strategic marketing plan.

Because if you’re putting up some scary numbers, I’m willing to bet you’ll be motivated to reach those numbers day in and day out!

So, how should you go about raising your prices?

Glad you asked, let’s get started!

Know your numbers

If you want to be profitable and have a successful business, then you NEED to know your numbers.

You absolutely must know much net income you want to make, how many expenses you expect to have (including business fees and taxes), and how much gross sales you need to reach.

Instead of throwing prices at the wall and hoping that they stick, being aware of your exact numbers will set you up for a brighter future.

While there is no set pricing formula, as all businesses and services are different, you can estimate by knowing your numbers. Check out this post that explains in detail the various types of pricing formulas for various businesses.

 

Check out your competition

This is important, but probably not for the reasons you may be thinking.

Knowing your competitors pricing is a must when pricing your goods and services, if nothing more than knowing what the going rate is for your industry in your area (either localized or online).

But that’s not all, knowing what your competitors charge is a gold mine in terms of being able to raise your prices. If most of your competition charges similar prices for similar products, then you are in luck my friend.

Why?

This means that you have the opportunity to raise the bar, raise your prices, and stand out in your industry.

How is that? Won’t I be digging myself a hole if I charge more?

On the contrary to popular belief, that answer is a big, fat, NO. You might find that in your market research, many alike businesses charge lower fees or mid-range “competitive’ fees. If you think about it, all of these competitors are really just competing with one another.

So what happens when you raise your prices?

You have a lot less competition, if any, depending on your product and region.  And less competition equals more business opportunities for you!

 

Service

Now that you know that you can confidentially raise your prices with less competition, how do you expect to win over higher paying clients to begin with?

You need to find a way to make yourself stand out above the crowd.

The best way to do this is by providing an excellent experience and high level of service than your lower priced competitors.

If you provide a local service, this could be in the form of meeting your clients in person for coffee instead of exchanging emails back and forth. If you’re a retailer, then the atmosphere or your store and level of service you provide to your customers must be unmatched.

Simply raising your prices and not offering anything different in your business could lead you down an unwinding path, and that’s something you should avoid at all costs (pun intended).

 

branding

If you desire to eat at the most expensive restaurant in your city, would you feel comfortable if the tables were sticky from the customers who sat there before, the atmosphere was loud and distracting, and people were elbow to elbow?

My guess is, probably not.

No, you’d expect a better experience. Dimly lit eating rooms, candles and fresh cut flowers on the tables, having your menu personally placed in your hands, and footmen coming around to brush the crumbs off your table cloth after each course.

This is branding.

By mixing in your visual brand (logo, website, and marketing materials) and the experience you give, you cultivate a brand that appeals to the clients/customers you are trying to serve.

If you’re aiming for higher-end clients who expect to pay top dollar, then give them what they came for.

The same rules apply for middle of the road prices too: give what your clients expect, just make sure it’s in-line with your brand and business goals.

Now you can understand that raising your prices, no matter what the industry product or service may be, is very involved, but also very rewarding!

Raising your prices should be fun and exciting, but also well-thought out and strategic.

I hope you can use these simple rules in your business when it’s time to raise your prices, even if it doesn’t happen right away!

Have you recently raised your prices or plan to in the near future? Share with us your experience or plan in the comments below – we can’t wait to hear from you!