A few years back I was working with a client
that was having some cash flow issues.
One of the first strategies I suggested was that she needed to raise her
prices.
She thought I was nuts. I recommended that she raise her prices
10%. I can’t raise my prices, I’ll lose
all my clients she told me.
All your
clients, I asked?
Once she calmed down,
she agreed to give it a try. At the
beginning of the year she sent a letter out to all her clients thanking them
for their business and notifying them of the price increase.
To her amazement, she didn’t get much push back. Then she got that dreaded call from her #1 client (that accounted for 35% of her
business) saying they couldn’t live with a 10% increase.
She was frantic when she called me to tell me
the bad news. So I just simply asked
her, how much of an increase would they find acceptable? “I don’t know, I didn’t ask. I was too worried about losing their
business.”
To make a long story short, they did finally
agree to a 4% increase. That increase
amounted to over 50% of the increased revenue she generated from all of her other
clients combined. Her client was willing
to accept the price increase because of relationship and value they received from
her.
Don’t be afraid to raise your prices. That fear could kill your business. What is fear anyways? False
Expectations Appearing Real.
Most of us are afraid to increase our price
because we see our competitors keep dropping their prices just to get the
sale. That's because all they know how to do is sell on price and not
value. With that said, the business advice that I give my clients is to
raise their prices.
I'm serious, even in this tough economy you
can raise your prices if you know how and when. Raising your prices in
your slowest season might be tough but it's a must during your busiest season.
Here are 3 easy steps to raise your prices
with no complaints.
- Get a list of all your products and services that you sell and rank them on the amount sold for the same time last year.
- Take out the most price sensitive items.
- Now raise your price on the top 10% of items that are left
It's really that simple. Another one of my
clients that implemented this simple strategy has reported one of his best
months ever because he was able to increase his average dollar sale with no
resistance from his customers.
Please let me know your thoughts in the
comments section below...
What a great idea, This is an easy way to raise your bottom-line and improve cash flow for any business. It makes good sense to me.
ReplyDeleteI agree. Steve taught me this years ago, and I found out that I was hung up on the price more than my clients (or prospects). In fact, I raised my average rate about 25%, and got no more pushback at the new rate than I did with the old rate. Everything stayed the same except I was making more.
ReplyDeleteI've seen this subject approached a couple of times this week, and just can't figure out how to apply it to my own company since I work on a commission basis. In the travel industry, a supplier may choose to lower their pricing when they need to fill space, and when they do that they will frequently honor the lower pricing for guests or passengers who booked earlier. As an agent I wind up re-booking the client, doubling the amount of work I have to do, and make less commission because the commission is purely a percentage of the booking price. So far this year I've lost several thousand dollars in commissions by re-booking passengers. Any thoughts?
ReplyDeleteIn the first place, almost nobody will notice if you raise your rates by 10%. In the second, if you constantly lower your prices to get more business, then it won't be long before you have no more business.
ReplyDelete