How to increase your prices (and profit) without losing business
Pricing has never been more critical to your business with costs increasing at a higher rate than inflation would suggest, staff able to jump ship and find a new job the same day and the pressures on the UK economies income making every £1 count.
Over on the Insiders (Our confidential mastermind group) the subject of price often comes up and the issue many business owners face is;
- Do I increase our prices?
- How much do I increase our prices by?
- Do we just put them up sneaky, or do we give our customers notice?
- How can we ensure we don’t lose customers as a result!
As a Founder of The Business Womans Network I’m one of the contributors to our award-winning website supporting women (and men) in business and with the issue of price it needn’t be a nightmare.
I’ve helped thousands to increase profits and gain more customers (not lose them) and there are key things to remember;
Firstly, you are running a business, not a charity. As an example, on the Insiders in 2022, I pointed out that a Greg’s sausage roll has increased from £1 to £1.35. I asked the Insiders if you increased your prices by 35% what would that look like and how would it feel?
The 3 questions above were often the key questions that people thought of (after the initial “We can’t charge that much!”)
If you handle pricing correctly not only, can you increase profit without working more hours or adding new products or services you can also ensure you are attracting the right customers that will pay whatever you charge.
Which leads me on to the second crucial point to remember. Your pricing can become secondary of interest if customers really want what you have. So understand your pricing structure but don’t get fixated with it.
As I like to remind our members, Eggs, sugar, butter and flour aren’t that expensive, and yet when put together by a baker they can be a £5 sponge cake or a £3000* wedding cake – it’s your choice. The substantial difference in the £5 and £3000 cake is that the marketing, the communication, and the target audiences are very different – have you really understood who your audience(s) are?
If you don’t know your audiences well enough, you aren’t going to be able to keep them loyal with a price rise.
It can be scary putting up your prices so don’t do it on a whim and just increase prices. Check out this article that looks at why people quibble prices, and what you can do about it to ensure you gain the right customers because when you know you have the right customers It’s never about saying “Give us more money.” It’s about analysing their needs, understanding their budget, and working out where that can meet in the middle. I can teach you starting with this article how to help everyone with a budget from £10 to £10000 Click here to read more https://old.thebusinesswomansnetwork.co.uk/they-quibble-our-fees/
In this article I talk about the issues that impact on successful pricing, so instead of repeating myself read that here – https://www.mandieholgate.co.uk/7-reasons-why-your-business-is-failing-and-how-to-fix-it/
It’s important to remember with pricing that it is about you not just selling something at the right price but selling the right things too. In my new book (14 vital strategies to make your small business grow* The secrets that no one will tell you!) I look in detail at the number of businesses that fail in the first 5 years and shockingly still one of the biggest issues is not understanding what people want or need to buy.
Take time to do your research and understand your target audiences. If you have studied, my target audiences course you will already understand who your audiences are and how they like to think. When you tap into that knowledge people want to buy because you’ve spoken their language https://mandiie-holgate-business-life-coach.teachable.com/p/learn-who-your-target-audience-s-are-and-get-them-buying
When you combine that knowledge with an ability to address the psychology of the sale which we look at in module 5 Turning No’s into Yes’s and in the marketing course in the sales mountain and the marketing production line modules, people don’t even notice your price increases (well not a lot) they are so blown away with what you do, how you do it and how you care for them as customers, they can’t imagine going anywhere else.
Remember Tech Giant Apple doesn’t really need to market its products and often it is still churning out beautiful adverts even when there’s not a new product about to drop, so why do they do it? To ensure you stay loyal to them!
A big issue for small businesses that need to increase their prices is that they’ve not been consistent with their communication to;
- Past customers.
- Current customers.
- Potential customers.
This means while you’re busy working on looking after your current customers, your competitor can jump in and work out how to steal them away from you. You’ve got to keep consistent and if you’ve studied the marketing course you will remember the module on consistency and what that does to your marketing results. Work out who will keep you accountable to the actions to successfully increasing prices and ensuring you have the right volume of customers.
“But Mandie, no one has any money!”
This is something I often hear. The cost of living is rising; however, many have put up their prices, many were furloughed in the pandemic and now are sitting on savings, and many are making a lot of money. Doubt me?
According to AA Financial Services, 85 per cent of UK adults spent less during lockdowns, saving on fuel, going out, holidays, etc. On average this was a saving of £617 a month for many UK Adults who were still receiving their full income. They also reported that 31% with savings accounts had increased their monthly deposits since the start of lockdowns. Backed up by Bank of England data, which found that personal bank deposits had grown by three times the recent average. The Bank also revealed that consumer debt was down by £7.4 billion!
It’s why the building trade is booming, like many other industries tailored to nice homes, people are spending money, however consumers have never been so savvy on how, why and where they spend it.
If you hold the mindset that people aren’t spending, your clever mind will find you plenty of evidence of people not spending, likewise if you have a growth mindset that says “I need to find the right audiences” then you will be able to find people to buy (remembering the above key points of course.).
I’ve touched upon the next key strategy in the 7 reasons why your business is failing article, and that is how essential it is to know your numbers. Please don’t do your accounts for your year end or quarter and then forget that information. Use that vital data!
With most clients at some stage, we work out:
How many days they actually work? (And no, it’s not 365!) Take out holidays (you may not get them now but imagine you wanted one, how many days would that be? My clients all achieve their family and personal goals! This process helps you to get the family on board in your business and they are a lot more aligned to your goals and needs!)
Now take out weekends. Getting so ill you can’t work. Christmas day. Etc.
Now take out time for admin, marketing, training – time that isn’t spent on money making jobs.
That leaves you with how many days you actually work – can you see how it’s not 365?
Now convert each day into number of customers. For me that’s either a team of people for a day or 2 customers for 2 hours each.
Now you can tell me what your maximum earning potential is on your current pricing structure. Happy?
No? Then it’s time to increase your prices!
Do not despair though, I see many who need to increase prices and are nervous to do it, you don’t want to be in the position where you pay everyone but yourself, or worse close your business in 12 months’ time because funds dried up.
When you know your numbers and have decided to put the prices up, remember you don’t have a mindset of “I can fleece this lot!” you are thinking “How can I ensure I do my best for my customers and make a profit?” It’s important to remember this because most clients feel very uncomfortable discussing price increases with customers. (On my site you will find an abundance of advice on communication and difficult conversations, often the big issues is the conversation in your head!)
When you realise you need to increase your prices depending on how often your clients buy you need to start communicating the price increases – but don’t talk about the price, talk about the benefits they get.
When I do this process with clients, we often workout a diagram that displays the levels of products and services available and what they are cost the business, the profit margin and thus you know the optimum level you want the majority of your customers to be working with you.
The sales mountain is a good way of picturing this too. It helps your low-priced customers, or those interested that have not bought yet, start to move through your sales funnel in a way that honours what that customer is thinking. Remember in all my sales and marketing courses I teach you the psychology of the sale – by understanding how people think you can use that in your marketing and pricing communication.
When discussing pricing with customers you need to plan phrases to use (not a script), such as;
“You’ve been working with us at our historical rate of £350 for 3 years now, as you can appreciate prices have increased dramatically in that time, we aim to keep the costs to a minimum and we’ve 3 ways we can do this (giving customers options – but not too many that they can’t process them and give up – enables them to see the benefits you are offering them);
- Increase to the new rate of £450 and continue with these products and services, you will also get X every month for free (make it something they were probably getting, and you were over delivering on anyway or a low-cost automated product or service).
(Giving the hardest to stomach offer first is essential for the way we think.)
- Stay at the old rate, however we will need to reduce the hours we deliver to you each month, not give X. (With my clients I offered the old rate if they had no coaching report which can take 1.5 hours to write – not a single client wanted to lose this vital document so all increased to the new rate – without exception.)
- Move to the rate of £400 and we will deliver (this is where you refer to your diagram that displays products and services. What is a slightly lower down in value and time needed that you could offer?)
3 options is plenty. Enough to not feel backed into a corner. You always ensure you make this about “How do I / We ensure we are able to maintain and offer more to you our loyal customers?” Make it all about the benefits they get.
This is why you never sneak higher prices onto your customers in my view. How does that say, “we value you?” or “you matter to us?”
For my clients we usually work to the quarter and start to have conversations with customers on the upcoming increases. Don’t make the conversation about an ultimatum because again if people feel backed into a corner, they are likely to run. Make it about an opportunity to get more from you. The lead time you need will depend on how often you work with your customers.
You need to consider how you communicate with your customers and what would gently drip drip drip the information to them, so it feels natural and okay to accept.
As with all aspects of sustainable business growth it’s about excellent communication and one thing that will damage that is confidence.
- How can you communicate price increases if you lack confidence?
How can you ask for what you are worth if you question if you are worth it yourself?
- How can you discuss your customers needs and find out their thoughts without confidence?
It’s why in every coaching session I assess my client’s mindset and confidence levels. It’s an entire article on its own to discuss mindset and confidence so;
- If you’ve no budget – head to my blog for free advice on boosting your confidence, remember you are aiming for internal confidence (that is not rocked by a dreadful day, or someone saying no and not external confidence, that only exists with the Yes’s and good news days.)
- Small budget read my books to understand your way of thinking and how it impacts on your ability to ask for what you want and how to boost your confidence levels.
- A bit of a budget – take my confidence course – on average that increases confidence within 2 to 7 days – https://mandiie-holgate-business-life-coach.teachable.com/p/how-to-rocket-your-confidence
- A healthy profit a few hours with me will help you understand what is impacting on you and we will create the strategies to ensure it doesn’t impact on your ability to confidently tell people your prices and attract the right customers.
Remember – eggs, flour and butter make a cake costing £4 and an hour of your time but can be charged anywhere between £5 and £5000! (Actually, the most expensive cake so far this year was sold for $850,000! (https://www.bakingo.com/blog/most-expensive-cakes-in-the-world/#:~:text=Masami%20Miyamoto’s%20Diamond%20Chocolate%20Cake%20%E2%80%93%20%24850%2C000)
So, remember this is a process that needs a strategy and action plan with a clear goal, ensuring you;
- Do your market research.
- Know your numbers.
- Plan the big picture – how much do you want to earn, what do you need to earn, how fast do you want to make your business the perfect business, what will stand in the way of this?
- Improve your communication skills so your customers feel appreciated and loved and not up against the wall.
- Communicate with conviction and confidence. (I know it’s scary increasing prices – as an example, one client wanted to stick with £95 per hour. On going through this process, I felt we could move to £145 per hour. Their business partner felt it should be that too heading towards £175 per hour. That was far too uncomfortable for my client who settled on £120 per hour. Not one customer questioned it. They knew they’d gone too low and will have to stay at that rate with existing customers now for another year at least. Lesson learnt – the hard way.)
- And please please please, keep consistent.
Lastly remember if someone says “No, thank you” as unpleasant and soul destroying as that can feel, losing the low paying customers, makes room for the ones that will value you.
I will let you in on a secret in my own business growth, in 2009 I was charging £35 for an hour’s coaching. I can remember working with my coach and being petrified to rise my prices to £75 per hour! And now I confidently charge £250 an hour and I’m happy to increase that next year too.
As always you aren’t alone in this process, through the Insiders, my books, courses and coaching I can help ensure this goes smoothly and help you increase profit. Let me know what you need so I can help.