When Should You Raise Your Prices?

Guess who is most commonly afraid to raise their prices? Believe it or not, it's the business owner!

Maybe you haven't increased your prices in years because you're worried you'll lose customers or you won't close business. But trying to grow your business this way is not sustainable and will eventually put you out of business! In most cases, adjusting your prices is crucial to maintain profitability. 

So how do you know when it’s time to raise your prices? Consider these four factors:

Demand is high and your capacity is stretched. 

Maybe you’re looking to optimize your revenue in order to grow your business and hire personnel to accommodate the high demand. Or you’re looking to lower the demand and lessen your load while still maintaining (or even increasing) your current profits.

Think of it this way, with some rudimentary numbers. Say you’re currently selling 1,000 products at $10 per item each month for a revenue of $10,000. By raising your prices to $11 (just a 10% markup), you now have $1,000 more per month to invest into growing your business structure. Or, you raise your prices to $13, slightly minimizing the target audience and lowering the amount of sales per month to 800 (and yet you still maintain a $10,400 revenue).

Operating costs rise. 

As expenses for supplies, labor and transportation increase, companies may need to adjust their prices to offset these higher costs. If businesses absorb these increased costs without raising prices, they risk dipping into their profit margins.

You’re charging less than competitors for similar or BETTER value.

Take some time to assess your competition. While price may be one competitive factor, you shouldn’t rely on being the cheapest option as a way to outdo your competition. It’s important as a business to know the real worth that you are providing your customers. What are your brand promises? What makes your brand unique? Take this into consideration when adjusting your price amongst your competition.

You’ve improved your products or services.

If you’ve added features or boosted quality, your prices should reflect those enhancements. A majority of customers see the value in what they pay for, and noticeable improvements should warrant paying more…which many people would be happy to do!

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If you identify with one or more of these scenarios, you should strongly consider adjusting your prices to ensure longevity of your business. And, increasing prices can help to reflect a higher perceived value to customers.

Want to learn how I coach my clients to charge what they're worth and not lose clients? Contact me to start a conversation about how this can work in your business.