Is it Time to Raise Your Prices?

Look around you. Labor prices have risen, the cost of materials have increased, your suppliers have upped their prices, and, most likely, so too has your competition. Are you going to stand pat?

Even in the face of ongoing price increases that surround your every move, chances are you still have some hesitation when it comes to raising the amount that you charge. You don’t need to be sold on the fact that you deserve every penny of what you work for, you simply want to be compensated for your efforts to the fullest extent possible. Yet, you are also concerned with the effect that any change to the normal course of your business relationships (read: price increases) will bring.

So, when is the best time to raise your prices? How about right now!

No Time Like the Present

What you charge is directly related to the demand for the services that you provide. The more need for what you offer and the fewer who can fill that need, the more you’ll be able to ask in return for your services.

In addition, if you have gained a reputation as being the best at what you do, you will be able to ask for more compensation for your work…and likewise, if you have a poor record with customers, you’ll be unable to get top dollar.

What does all that mean? Try using the opinions of your current customers to see where you stand in their eyes. Either ask them in casual conversation or provide them with a survey card, but field the question of where they rate your pricing on a scale between the extremes of “too high” and “too low.” If the number of complaints about your current pricing is less than 1.5 percent of your customers, it is a good indicator that your prices may be too low.

Timing is important as well. Ask yourself when you last had a price increase. Chances are it may be longer than you were aware of. Hesitancy to raise prices may be clouding your view of the calendar. Check to see when the people you do business with – materials suppliers as well as your labor – last passed on an increase to you. If they have, it’s probably time to adjust your prices upwards, too.

Don’t Nickel and Dime ‘em

Of course, you shouldn’t pass along every little increase that comes your way, or you would be in the position of adjusting your prices on a monthly or weekly basis. Absorb some of the smaller added costs that you incur and determine when they are sizable enough to merit having your customers pick up the higher prices.

If you decide that you’re pricing yourself too low for the market, be careful not to raise your prices to the other extreme. You may not end up with your intended result of more profit, but with fewer customers as the new higher prices scare them off.

Flat Rate Pricing

If you bill your customers on a time and materials basis, any price increase is readily apparent because your invoices will state both a material price and an hourly labor rate. A customer’s recollection of what you charged last time is all it takes to invite some objection to your new costs. And your crew member taking the service call is no doubt the one who’ll get the burden of any customer dissatisfaction.

By changing your billing structure to flat rate pricing, it’s easier to roll any of your rising costs that need to be passed along into a single rate that isn’t broken down into categories. By charging a flat rate for each type of job you perform, regardless of the amount of time and the amount of materials involved, you will also eliminate any haggling over exactly how many hours it will take to do the job – it won’t be a 3-hour job or a 4-hour job, it will simply be a job. With a set price.

Remember, in business, it’s the bottom line. It’s what you get to keep that matters. The more profit you make, the more you keep. If you think it may be time to keep a little more profit, maybe it’s time to raise your prices.

Job Pricing: Cutting Prices or Cutting Customers?

Trying to gain some additional business for your company? Think discounting your prices might be answer? The solution to improving your bottom line may very well be the opposite – raising your prices.

If you discount, you make less on each sale and have to recover that loss through increased volume. To recover a 10% discount requires more than a 10% increase in business. For example, if you reduce your price by 10% and your preset margin is 30%, you’ll actually need to increase your business by 50% to produce the same profit.

So, how much business could you do without if you in-creased your rate and lost some low margin customers?