February 5, 2016 by Scott Howard
Last month, I did a quick list of 17 Ways To Increase Your Business Profitability and today we’ll start a deep dive into these, one at a time on the next several Fridays.
You really need to raise your prices.
I have talked to way too many businesses that are afraid to charge more in 2016 than they did in 2015.
Problem is, they have been doing the same thing for years. Not raising their prices.
Some have not changed their prices for 5 or 10 years.
First let’s look at why not.
You may think that you will lose customers if they notice that you are charging more for the same thing.
You might, but it’s not going to be significant,
You might think that inflation should be your guide on when it’s time to raise your price.
Problem is inflation numbers reported by our government do not accurately reflect the cost of running your business. Some prices are lower (gasoline) some are higher, (you name it) and as a result, you’re fooling yourself.
I have a friend that was losing money by making certain service calls because they were not charging enough. 10 years ago, the price was right, but not now.
I made them promise to raise their prices, which they are doing this year, finally.
Want to increase your business sales by 10% this year? Just raise your prices by 5% and you’ll automatically be half way there.
This works very effectively with companies that sell products and services to the same customers infrequently, like a heating and cooling contractor. But it will also work with companies that offer value beyond being the cheapest, like one of my favorite local coffee shops.
Perhaps you need to be creative if you are going to raise your prices. McDonald’s did this recently with a switch from their Dollar Menu to a 2 for 2 Menu.
Walmart which built their business dominance with the marketing slogan of Always Low Prices, changed to Save Money, Live Better. They charge more on some stuff, less on others but they are always raising their prices.
You really do need to raise your prices this year.