Business owners are often afraid to increase their prices or billing rates. They’re afraid they’ll lose all their customers if they increase their prices or billing rates. They also feel sorry for their customers during economic hard times.
The inflation rate for 2022 was 6.45%. If you haven’t increased your prices or billing rates, you have elected to take a 6.45% pay cut.
Your customers are going to the store and buying their groceries for about 6.45% more than last year. After complaining a little bit, they buy them anyway. Many products and services have more elastic demand than we admit.
When your customers go to the doctor or dentist and they are presented with a bill for services, they pay the bill without question.
Have you improved your product or skills during the past year. I’m assuming you have. Shouldn’t you be compensated for that?
The experience of most businesses is their best customers stay with them after a price increase or billing rate increase, because they appreciate the business and want to support the business. The customers who complain about their bill and leave usually are the biggest complainers in general. Sometimes they are the highest-risk customers who don’t comply with directions. When they leave, they create space for other customers who appreciate what you offer.
A modest price or billing rate increase can have a disproportionate increase to your bottom line that more than compensates for any lost customers.
What if you were an employee? If you worked several years, improved your skills, and didn’t receive an increase in pay, wouldn’t you be angry and consider seeking other employment?
If a doctor or dentist had the lowest billing rates in town, wouldn’t you question their ability? Prices and rates are an indication of value.
When you go to high-quality stores, like Tiffany’s for jewelry, or Mercedes for a car, don’t you expect to pay high prices? Prices are a marketing positioning decision that communicates value.
When your customers take exotic vacations, have expensive cosmetic surgery or dentistry, or buy luxuries, like a new car, it’s an indication they can afford to pay you more.
You should be positioned as “the best in class”, worth high prices because of how your customers benefit from what you offer.
Think about it.
Shouldn’t you raise your prices or billing rates now?
To get a financial model of how a price or billing rate increase would change your cash flow and net income, write to me at mgray@profitadvisors.com.