It’s a growing pain every business owner experiences at some point: you realize that the value you’re providing customers is no longer in balance with the price they’re paying for your product or service.
It’s time to raise your prices.
You deserve to be paid what you’re worth, but how can you increase your price gracefully, especially when you already have a client list that’s used to the price they’ve been getting for months?
Here are 6 tips to keep in mind as you begin the process of raising your prices.
- Your fear is your biggest hurdle
Businesses raise their prices. It’s part of life and happens in every industry.
In fact, we’ve grown accustomed to seeing reports like this one from the Bureau of Labor Statistics, which show the average increase in salaries for workers over the last quarter and the last year. We expect them to go up, right?
If we recognize that price increases are a natural part of the economy, why do we have such hesitation to raise our own prices? We shouldn’t.
Chances are, your own fear is the biggest hurdle to clear in this scenario. Just like ripping off a Band Aid, the faster you do it, the easier it will be.
- Don’t apologize
You’d never say this: “I’m sorry for charging what I’m worth.”
So why would you say this: “I’m sorry our prices are about to increase”?
Don’t apologize for taking the right step for your business.
It’s an interesting psychological phenomenon: we often say ‘sorry’ when what we really mean to say is ‘thank you.’
There’s a wonderful cartoon by artist Yao Xiao that illustrates this perfectly. Here's part of it:
The same can be applied to your price increase. Rather than apologize for it, instead say something like this: “Thank you for being a loyal customer. We’re excited about an upcoming change that will provide even more value in our monthly services.”
Which brings us to our next tip…
- Add value and clearly explain it
Of course we all want to make more money, but that’s not a valid reason you can give your customers for raising their rates.
Your price increase should be tied to something tangible, like additional features you’ve added to your monthly service package or new expertise on your part, like a specialized degree or an advanced certification.
A price increase stings a lot less when the customer feels like he’s getting more in exchange for paying more.
Clearly outline the reasons behind your price change and communicate these reasons to your customers.
- Charge by the project, not by the hour
We have a whole post on the pros and cons of project versus hourly billing here.
It’s much easier to raise your prices when you bill by the project rather than by the hour.
The reason? You likely send a new proposal at the start of every project. This is a natural time to convey the added value we mentioned above that will be included in the work.
Plus, project billing gives the customer an up-front expectation for what the new price will be, as opposed to hourly billing where they may be surprised by the new price on their invoice at the end of the month.
- Offer an alternative
It’s possible that a client simply won’t be able to adjust to your new pricing; maybe their budget has already been approved based on your old price or something else along those lines.
To accommodate for this, offer a lower-priced alternative when you announce your new rates. You might offer a similar package with fewer features, a comparable plan with fewer dedicated service hours each month, etc.
- Be prepared to let clients walk
At the end of the day, you have to accept the fact that some clients may walk away from your higher price. It’s important to remember that these are probably not the kind of clients you want, anyway.
We talk a lot about this in our post on setting a minimum price; when you clearly and definitively set (or raise) your prices, you eliminate bargain shoppers and the hassle of haggling from your business.
Want some real-life stories of how business owners successfully upped their prices without ticking off the customer? Bidsketch has four great case studies from entrepreneurs just like you.
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