Key points you need to know. Full transcript below.
Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur, and I’ve created this podcast to help you grow your business profits and understand your business numbers without judgment and without burying you in a whole bunch of jargon that you don’t need. Just actionable tips and case studies to help you grow your business. For show notes, go to the website, businessnumberspodcast.com.
In this episode, I want to share with you a few critical points from a presentation I did recently privately on how to raise your prices. I talked a little bit about this a few weeks ago in episode 53, but here’s a few extra points for you.
The problem with raising prices, well, there’s a few things.
One: you’re worried about what clients will say or do and so you put it off.
Next is that you don’t know when to do it, so you put it off.
And third, you don’t know how to do it, so you put it off.
You’re seeing a bit of a theme here. Basically, it never happens. And over time, the effect of that is that you have clients or customers that actually cost you money.
It actually costs you money to deliver the product or deliver the service that they’ve paid for. Because your costs will go up over time and if your prices don’t also, well, then that’s the inevitable conclusion.
The opportunity here, the positive benefits of potentially raising your prices are:
- more revenue for the same effort or cost
- bad clients or customers leave, your team’s happy, you’ve got room for better ones, better clients or customers
- you’ve seeded future price raises. So future price rises will be easier and you’ll have more money in future.
And ultimately you’ll have more profit, a happier team, and respect from your clients or customers.
So there’s some negative consequences of not doing it. And there’s some positive rewards for doing it.
So on to the steps now.
I’m not going to go through these in a huge amount of detail, because like I keep saying, I like to keep these episodes short, and just get you thinking about what you need to do and what might be a priority for you in your business.
So the steps.
The first step is to ready your mindset. You need to be okay with the idea that some clients or customers might leave, or you might be turning away future clients or customers. You need to be okay with that idea. That’s the main, MAIN block that people have.
We keep rationalizing away our fears and saying, ‘Oh, now’s not the right time’, or ‘I’ve got too much on right now’, but really the underlying thing is your mindset and it will stop you.
It will distract you with other things, other priorities, or say ‘Now’s not the time’, or you put it off. So you really need to ready your mindset before you start thinking about any of the How or When about doing this.
There’s a blog post on my website, and I think I’ve done an episode about it once or twice. If you just Google “profits collective lose customers”, that should take you to a blog post where it shows how you can still be more profitable when people flee your price rise.
So that’s the first step: ready your mindset.
Second step is to review your list of clients or customers that regularly buy from you. Because not everybody gets the same price rise. If somebody has just started being a customer, then now is probably not the right time to raise prices. Unless it’s unprofitable.
But people who’ve been buying from you or been a client for a couple of years and haven’t had a price rise- yep, they’re definitely overdue.
So that’s step number two, to review your list of clients or customers, because you’re going to treat them all a bit differently.
Third step is to choose when to do it. We’re not even getting into the How yet, we’re kind of baby stepping into this so that your mindset doesn’t get in the way. The third step is to choose when to do it.
Maybe it’s the end of the tax year and you can contact them and say, ‘Hey, we’re gonna raise our prices at the beginning of the new tax year, but if you prepay at least three months, you can keep the old price for the length of that prepayment.’ Maybe that’s a backup option you can give them.
Maybe there’s seasonal times for you and your client’s industry that are better or worse times to do price rises. Either way, there’s a bit of thought you can put into when to do it.
Once you’ve chosen when to do it, set a reminder in your calendar for the steps that you’ll need to do in advance of that.
Speaking about the steps: point number four here is to prepare how to do it and ‘prepare’ is the key word.
So if you’re going to send out emails, then prepare the email template. If you’re going to have phone calls with people, then prepare what you’re going to say and how you’re going to say on the call.
And this relates to step five. Step five is about “what if they resist?”
Not everyone’s going to say, ‘Yeah, okay, I’ve been thinking to myself that your prices are too low. By the way, I’d like to take that upgrade option that you’re giving me’.
Not everyone’s going to do that, but a surprising number of them will.
Some people are going to try and avoid the price rise. Wouldn’t you?
Generally, the main thing is to be firm with their first ask. Just in case they’re only kicking the tires to see what they can get away with, be firm and they’ll go ‘Okay, no worries.’ They might grumble a little bit, but they’ll do it.
And then you need to prepare your other options. Maybe you might have negotiation points that you can come back to. You go for a price rise up to $1,000 and then maybe you come back to $950. If they resist, you can negotiate back to it.
Maybe you change the timing when the price rise comes into effect.
Maybe you offer them a different prepayment option.
Maybe you step up the price rise, where it’s only a little price rise for the first three months and then they get to the full price rise after that.
There’s a few options here, but the main thing is: prepare them in advance. Especially if this is your first time doing a price rise and there’s some fears or mindset issues around that that you haven’t fully dealt with. If you’re on a call with someone and they say, ‘Well, no, I don’t want to do that’, then thinking in that moment, while being fearful or worried about losing them, you’re not going to do the best job for your business.
Unless you prepare, even practice. You can practice the communication, the initial call you can practice too, and then you can practice a few different objections that they might have just like you might practice objections on a sales call (for those of you that have sales calls).
So quick recap: we talked about the problem of raising prices. We’ve talked about the opportunity and the rewards that can come from it. Basically, on the one hand, you could keep putting it off forever and you eventually have clients or customers that cost you money. Or, on the other hand, if you do this and you do this well, this raising prices thing, you’ll have more profit, a happier team, respect from your clients/customers.
And the steps we talked about were: ready your mindset, review your client list or customer list, choose when to do it, prepare how to do it, and then prepare for if they resist.
(Every time I had that section when I was preparing the presentation and then even now talking to you guys about what if they resist, I can’t help this Borg picture pops into my head. I enjoy a bit of Star Trek occasionally, if you can’t tell.)
Anyway, I hope this was helpful. Raising prices is a very powerful thing and in some cases, for some businesses, it is a necessary thing that they put off too long and it’s causing them a lot of stress and strain.
So I hope this was helpful to walk through this. If you want more details, reach out to me. I’m happy to answer questions on a future podcast episode, or potentially talk about working together to help you raise prices if you need a bit of help with that. And with that, thank you for listening.
Before you go, two quick things:
- If this was useful, please give it a review and share it with a friend who it might help.
- If you want help from me to unlock growth and profits, and greater clarity around your numbers, book a call through ProfitsCollective.com and if we’re not a fit I’ll point you in the right direction.