No one ever likes to raise prices on their customers. There is the immediate fear that if you send them a letter and tell them their price has gone up, they are going to respond informing you they will find someone else. This is business. You have to raise prices. Personally, I prefer to raise prices annually based on the cost of living which is usually around 2%. It is rare for someone to complain if their mowing price has been raised from $35 to $35.70.
More importantly, prices should be raised based upon what you need to charge versus some arbitrary number. Assuming most everything else is the same in regard to expenses, it still makes sense to raise prices in line with the cost of living.
But many business owners in this industry avoid raising prices like the plague, until they are trapped and have no choice. They crunch their numbers and realize that the customer they are charging $35 should actually be getting charged $50 for that exact same service.
It’s obviously a lot easier to raise someone’s price from $35 to $35.70 versus raising it from $35 to $50. So what do we do?
Try and find a comfortable number you can raise their price – maybe from $35 to $42 – a jump in price for sure, but not all the way to $50.
We are still $8 down from where we need to be.
We need to suck it up for the next year or so until we can get that price where it needs to be. But there are some things we can do in the meantime.
Let’s assume that we have plenty of customers who’s prices should be raised from $35 to $50 but we can only get them to $42.
It’s time to make some changes. Find as many ways as possible to get lean – cut expenses, get your employees to work more efficiently, eliminate overtime – whatever you need to do to save money, do it.
Also, don’t forget about still growing your business. Moving forward, all new clients will need to be charged the proper amount of $50. Yes, you won’t close as many sales as you were in the past, but more than likely you were getting all those customers because your prices were so low.
Focus on getting the work done in less time. Make sure your employees are operating in a way that eliminates down time, wasted drive time, and lack of productivity while out in the field.