Is it time to hike your prices? Here’s how.
If you need more revenue, one option surely worthy of consideration is to nudge up your prices. And I reckon a great time to do that is right now. So come on, let’s do this!
Growing revenue is never easy. To do it we either need more customers; existing customers to buy more stuff; lower costs or get paid more for what we do. And it’s this last action of raising prices that way too many of us avoid.
While not based on any detailed analysis or scientific research, a gauge I use and have observed many of my clients using to great success, is this:
‘If when you mention your fees you’re a little uneasy that you’re charging too much, then you’ve probably set them about right!’
Well, I did warn you.
While not validated by any financial institution, I can tell you, it works and it’s no bad thing to squirm a little when you hit ‘send’ on a new proposal. Why is it though that so many of us lack the confidence to nudge prices up?
From what I observe it’s usually a fear that by so doing we’ll lose business. In my experience, this is rarely the case.
"“...small price increases can significantly impact your revenue.”"
I like the way blogger and entrepreneur Yaro Starak thinks about pricing. In this article he said this:
‘Pricing is very much a psychological element. You need the belief that you are worth the fee, and you need to use the necessary proof points to demonstrate to the world that you are worth the fee.’
A key point to note is that customers seldom leave purely due to a price increase. Departure is more complex than that and more often has to do with how well you look after the customer, how much you demonstrate understanding, promote your ‘proof points’ as Yaro says and, of course, how well and how reliably you deliver your work.
So when and how should you increase your prices?
The first sign that an increase could be in order is when you can’t meet demand. When there’s a queue for your work. A small queue is a solid indication; a longer queue a definite sign.
Another indicator is when you notice a feeling of resentment creeping into your work and this may be felt keenly with one particular client. A fee increase might help ease this and indeed the increase may help ease them out of your business.
And at times that can be a very liberating thing!
Making small price increases can significantly impact your revenue, which in turn frees up money for marketing and business development. That adds to that queue yet again.
One method that can result in an increase is to better itemise and document actions that you undertake during a project, and charge for each of the steps along the way.
Start thinking about ‘add-on’ services in much the same the way a car detailer charges little extras like making the wheels shiny or adding a fragrance to the interior, and be sure to constantly talk about the value of any additions.
Bigger organisations routinely do this kind of thing to maximise profits and avoid leaking money on forgotten unpaid extras. Just read through your itemised phone bill if you need a reminder or keep a close eye on those ‘extras’ you choose when you next book a plane ticket.
Successful soloists are doing this too. By itemising tasks it reinforces the value you offer and ensures all the elements in the process are not taken for granted.
It also helps with boundaries: a logo designer, for instance, could state two rounds of revisions are included in the design fee, but extra changes after that will be charged accordingly.
Finally, a useful strategy and one that I always come back to is to pre-announce price increases, rather than ‘drop’ them on people as a surprise.
Here’s how I phrased my last fee increase to my small band of clients. I included this sentence in a short note, two months prior to the price hike:
‘Having not adjusted my fees for the past 24 months, I’m just letting you know that from February 1st there will be a small increase to XXX.’
With a couple of clients, where the relationship was new, I added this comment too:
‘Just letting you know that from February 1st my fees will be increasing, however given that our relationship is in its early days, this will not impact you until June 1st’.
Having the courtesy to advise in advance emphasises that this is a considered move. Sure, it gives your customer the chance to consider your relationship, but in the meantime you can turn up the customer love.
So what kind of increase do you think you could introduce and when will it take effect?