I am not from the school of thought that believes in raising prices often. Yes, I am a coach and yes, I have raised my prices over time, but raising them was not my first response to making more money. I believe it is what you keep- not what you make- that matters. This means that if you can have good margins at lower prices, that should be a consideration in your formula. Here are a few reasons, however, that you should consider raising your prices as a response to market changes.
- Your margins have gone down, and your expenses have increased.
It is expected that increased expenses should be passed onto the customer and client. If your costs have increased, your prices may have to increase to match. Sometimes costs go up temporarily, for example, gas prices in the summer, but if there are permanent price increases from your suppliers and service providers, you have to increase proportionally to stay in business. This can be a tough thing for businesses to do. Alternatively, look for lower pricing in your costs.
- Your financial goals require a price increase.
If you are at maximum capacity and availability in your products and services, the only way to make more money is to increase your prices. For example, if you coach 20 hours a week, and that is your maximum availability, the increase from $100.00 an hour to $200 an hour is the only way you can make more. This increase needs to be attached to a goal, and you can do the math to figure out how much you need to go up. I’m not necessarily a fan of a 100% price increase, as I used in this example, but I AM a fan of increasing to meet your financial goals.
- Your expertise and value in the market demand it.
Finally, sometimes you have to raise your prices because your value demands it. If you have a waiting list for your products and services and cannot keep up with demand, raise your prices. As your expertise grows and you are able to perform at a higher level, your value in the marketplace also increases. Raising your prices to match your increased value is important to keep up with demand.
Raising prices can feel scary. But it is a necessary step for maintaining margin, making more, and addressing your market value. Happy Entrepreneuring!