Raising Prices without Ruining Your Business

The start of a new year brings many changes for small businesses, particularly in terms of evaluating pricing. It often becomes glaringly obvious that in order to successfully achieve another year’s financial goals, a price hike is necessary. But how does one do so without losing too many customers and actually hurting your business? Here are a few tips to make the transition as painless as possible for everyone.

Do it in Increments – Price hikes are a bit easier to take when they’re done in increments. Say you forecast that you’ll need to raise the price of your best-selling widgets from $3 to $7 in order to realize profits by the end of this year. Instead of jacking up the price the entire $4 all at once, consider rolling out smaller increases at certain intervals throughout the year until you reach your desired fee.

Communicate – It may be tempting to sneak the increase into next month’s invoice with nary a word, but trust me – your customers will notice. And they likely won’t be happy by the unexpected surprise. The most important rule when it comes to price adjustments is open, honest communication. Give your clients a heads up so they know what to expect and tell them why you have to make such a move. They’ll respect your honesty and you’ll experience much less fallout as a result.

Add Some Value – If possible, consider adding something of value to your customers to ease the blow of a price hike. For instance, if you provide a service try offering “bundles” or package deals that include a few extras in addition to what you already offer. Customers won’t mind paying more if they feel like they’re getting a little extra.

Prepare to Lose a Few Customers – It’s inevitable. A few customers will be upset about the increase and hit the road. Don’t freak out. Most people understand that price increases are a necessary evil and, provided the increase is reasonable and clearly communicated to them, will suck it up and pay the higher price to continue doing business with you.

With the cost of everything from gas to heating oil to health insurance steadily on the rise, there comes a time in the life of every business when raising prices is inevitable. However, how you do so can mean the difference between a slight hiccup or a mass exodus, so be careful. Keep your customers in the loop, be honest and do as much as you can to make the transition a smooth one and you’ll find yourself right where you need to be to enjoy another profitable year.

Labels: small business tips